“No, I have not, no,” Livingstone replied.
Orr told the court Livingstone had been given, at close of business the day before, copies to review of minutes for three CBA board meetings one over October 10 and 11, 2016; one on November 8, 2016; and another over December 5 and 6, 2016.
Livingstone went on to categorically state it was her best recollection that she had challenged Commonwealth Bank management in relation to money laundering and terror financing reports and details in a regulatory report that came to the October 2016 board meeting.
She said she had sought an understanding during this meeting of the regulator AUSTRAC’s perspective on all of this.
Former AMP CEO and CBA director Andrew Mohl emailed a number of directors with concerns following Livingstone’s appearance at the Hayne commission. Louise Kennerley
Over 500 words of clear and detailed recollection, Livingstone countered her testimony of the previous day, when she had said she had attended several board meetings in 2016 after joining the board and had had concerns about the style of the board, but had not formed judgments as she was a new board member.
She had told the courtroom on November 20 that she had had views that there was “a lack of challenge” from the board to management. “I think the urgency there and the degree of follow-up, in general terms, was not what I had been accustomed to.”
Orr asked Livingstone whether she had done anything about this concern. “Did you take any steps as a member of the board, did you take any steps to address the concerns that you had?”
“Well,” Livingstone replied, “as a new member of the board and three meetings in at that point, you’re still trying to get a feel for how the board works. You cant form judgments immediately on how a board functions after two or three meetings usually. So in fairness, you would generally wait up to six months before forming a view before forming a definitive view because you haven’t seen a full cycle of meetings, and activities of the board.”
Livingstone went on: “And you don’t also have the detailed knowledge of all of the issues at that point.”
Orr: “But you had seen enough of the way the board operated to form these concerns?”
Livingstone: “I had formed the concerns, yes.”
Orr: “And you didn’t take any steps to address those concerns at that point?”
Livingstone: “At that point I was still forming my view.”
Orr moved onto a regulatory report received by the CBA board on November 8, 2016. The report recorded that on June 22, 2016, AUSTRAC had sent a statutory notice to the bank for information and documents. A second statutory notice had been received from AUSTRAC on September 2, 2016. A third notice was received on October 14, 2016.
Livingstone told the court that by the time the second notice was received she was challenging management about why these notices were coming in from AUSTRAC. She also said that the head of AUSTRAC had joined a CBA board lunch (at which Livingstone was not present) in June 2016 and had not raised any issues of concern.
She told Orr that she “had had experience with AUSTRAC in a previous role”.
Livingstone had been on other boards including Telstra and Macquarie, but she did not reveal to the banking royal commission in which company of her many previous directorships she had experience with the financial transactions regulator.
“So it didn’t feel quite right to me that AUSTRAC would be comfortable with where we were, but management provided assurances that they were fully informed of the situation of in terms of our level of compliance.”
Of course it was almost a full year after the 2016 events that Livingstone was being questioned about that AUSTRAC had launched legal action in the Federal Court against CBA over 53,000 transactions.
That action by AUSTRAC on August 3, 2017, shook the bank to the core.
Within days of the AUSTRAC statement of claim filing in the Federal Court, Livingstone had been called to a meeting with then Treasurer Scott Morrison, who gave her the lowdown on how the government saw this massive breach of money laundering laws. Morrison told her “all options were on the table”.
Later that day, Livingstone announced short-term bonuses to executives would be cut and directors would take a modest 20 per cent cut to their fees.
Morrison whacked again a day later. He called the bank’s behaviour an epic fail and revealed he had told Livingstone so. The then Australian Securities and Investments Commission chairman, Greg Medcraft, slammed Livingstone, saying she had failed to mention anything to him about AUSTRAC red flags when they had spoken just days before or, in fact, for several days after AUSTRAC filed. For the conduct regulator, this was a serious concern.
All of this lay ahead in 2016 when Livingstone took on the CBA chair and sat in her first board meetings and it was in the past by the time Livingstone entered the box two years later in the royal commission.
But it was by no means forgotten by the chairman.
On November 21, 2018 day two of her evidence to the Hayne commission, when Livingstone delivered more clarity around her recollection of challenging CBA executives about AUSTRAC issues the money laundering matter was a deep stain on the bank.
Livingstone made it clear she had indeed challenged management.
In contrast to the day before, when she had told Orr that six months as a new director was required to form views, she said she had made her opinions crystal clear to fellow directors back in October 2016.
“I challenged management in relation to AML/CTF [anti-money laundering/counter terrorism financing] reports, and the details in the regulatory report, and sought an understanding of AUSTRAC’s perspective,” Livingstone told the hearing.
“I did not receive a satisfactory answer to my challenge, because it did not accord with my understanding of AUSTRAC. That response served to confirm the concern I had been developing, based on my experience as a non-executive director, that management at that time did not have the capacity to respond to what was, clearly, an escalating, significant and serious systemic control challenge. Management did not have the capacity, either because they couldn’t or they wouldn’t.”
Livingstone’s words in the commission were explosive particularly for former directors who had been around the board table in 2016, a year before AUSTRAC attacked with force.
Livingstone’s recollections to Orr only prompted more interest in what the chairman had done in the intervening year between challenging management in October 2016 over its handling of AUSTRAC queries and AUSTRAC’s court filing in August 2017.
By 2018, for many people all of this had merged into one big saga. But not for Livingstone, who would face the past again in sworn testimony from the witness box.
“No, I have not, no,” Livingstone replied.