The financial services regulator has confirmed it is “making compliance inquiries” into CBA's alleged mortgage fraud issue, flagging that money laundering is "a real emerging issue" for banks.
The Australian Securities & Investments Commission (ASIC) has told a parliamentary joint committee that it is currently undertaking “compliance inquiries” with Australia’s largest lender after the major bank self-reported to regulators and the authorities that it may have been the victim of mortgage fraud.
The parliamentary joint committee on corporations and financial services questioned several ASIC Commissioners (including outgoing chair Joe Longo) for its hearing on the Oversight of ASIC, the Takeovers Panel and the Corporations Legislation on Friday (6 March), in which the committee asked the corporate regulator about its work investigating loan fraud.
The committee noted a recent article from the Australian Financial Review (AFR) in which it reported that the Commonwealth Bank of Australia (CBA) believed up to $1 billion of home loans on its books may have been obtained fraudulently. (The major bank has not provided a public statement or released details on the matter.)
The concerns appear to be focused on money laundering - whereby criminals may be ‘washing’ money obtained through illegal means (for example, drug dealing, prostitution rackets, or modern slavery) by obtaining loans using doctored documents - in some cases, created by artificial intelligence (AI).
According to the AFR reports, the loans allegedly included “fake income statements” provided by “several accountants” to brokers, and were written through both the broker channel and the bank’s controversial introducer program.
Speaking on Friday, ASIC Commissioner Kate O’Rourke confirmed that ASIC had been provided with information on the matter and was “at the point of making compliance inquiries with respect to those issues”, adding that “conduct issues that would be of particular focus for [ASIC]”.
The Commissioner said that ASIC was “very keen” to remain connected with relevant regulators, such as the Australian Transaction Reports and Analysis Centre (AUSTRAC) or Police, in investigating any potential breaches of financial law. For example, under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), banks must identify and verify customer identities (a 'know your customer' requirement) before providing services in a bid to prevent financial crime and terrorist financing.
The regulator was also asked whether it was conducting similar inquiries into Westpac and ANZ, given some media outlets have reported that these two major banks have also allegedly self-reported suspected home loan fraud to the police.
National Australia Bank (NAB) has also been investigating loan fraud, after two former NAB bankers were charged earlier this year for allegedly participating in a loan fraud totalling over $250 million.
While ASIC took the question on notice, ASIC chair Joe Longo told the committee that there did seem to be “an emerging issue” of detecting loan fraud at the banks.
He told the committee that while fraudulent loan applications had historically been "a pretty immaterial number", he was concerned that they may be growing in prevalence.
“These recent reports... suggest something quite different; that maybe this is a real emerging issue with the banks, at the moment. But, until now, I don't think it has been," the ASIC chair said.
Indeed, last year, four people were arrested as part of an investigation into alleged money laundering at one of Bendigo and Adelaide Bank’s branches.
While investigations and inquiries are ongoing into the extent of potential home loan fraud at the banks, ASIC also flagged that there are incoming laws expanding money laundering laws to more industries - including accountants - to help better identify and mitigate money laundering and terrorism financing.
From 1 July 2026, anti-money laundering and counter-terrorism financing (AML/CTF) law will be extended to certain services typically provided by:
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real estate agents and property developers
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dealers in precious stones, metals and products
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lawyers
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conveyancers
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accountants
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trust and company service providers.
Additional virtual asset-related services will also come under AML/CTF law from 31 March 2026.
O'Rourke told the committee: "I think that extension of the money laundering requirements to a wider scope of people who have the obligation to report what they see - so conveyances, real estate agents, accountants and lawyers - is a very significant extension.
"And I think, in part, because of their facilitation of commerce, property and other really important commercial transactions where the risks that [the committee has] drawn out about money laundering; using dirty money and then repaying a mortgage, that's exactly the basis on which those extensions (as I understand) occurred to try and improve the visibility of that kind of misconduct."
While expanded AML/CTF laws (known as Tranche 2) has already led some lenders, such as Macquarie Bank, to pull back from lending to trusts and companies, as these will require additional verification steps for trust and company loans under Tranche 2.
However, Longo also told the committee that aside from money laundering obligations, he believed banks "need to get the basics right", flagging the record $250 million penalty that was handed to ANZ last year.
The penalty - which was the highest fine ever imporsed on a single insuttion in ASIC"s history as a regulator - was for widespread misconduct and systemic risk failures affecting the Australian Government, taxpayers and at least 65,000 retail bank customers.
"We continue to prioritise pursuing misconduct affecting consumers, businesses and the economy," he said.
[Related: Industry responds to introducer program compliance concerns]
