The report is prepared to discuss about the issues or problems associated with the management of human resources. The topic will shed light on the cause of organizational failure as well as identify the individuals responsible for it, it’s probable impact, level of severity and how can it be responded to for the facilitation of organizational factors contributing to the failure experienced at the organization named Commonwealth Bank of Australia. The organizational failure is experienced at Commonwealth Bank of Australia due to gross negligence, which has made the organization neglect its duties, roles and responsibilities to conduct the conscientiousness. Due to this, there have been fraud activities along with scandals related to the laundering activities, which has been considered as a major issue that facilitated the failure at organization (Armstrong and Taylor 2014). The money laundering case has been the major cause of organizational failure and the report will illustrate about the various organizational behavior factors that have contributed to the failure. Lastly, there will be few responses provided post organizational failure to ensure successful business functioning again and preventing failures within organization effectively too. The financial institution also made an agreement to pay $700 million to manage the civil rights and other law related proceedings carefully related o the anti-money laundering and counter-terrorism financing laws and procedures (Bratton, J. and Gold 2017).
The bank staffs are considered as responsible for the fraud and money laundering activities because they did not pay any heed to assess the risks of money laundering and terrorism financing for the deposit machines while there was also lack of appropriate control measures required to mitigate the risks and ensure smooth business functioning as a whole too. The concerns are serious as it may affect the business functioning and revenue generation ability, furthermore lead to the business decline and loss faced in business as well. Few of the other stakeholders include the CEO of the bank namely Ian Narev, who have taken the responsibility on his own shoulder to respond to the scandal and ensure that the issue does not emerge again (Alfes et al. 2013). The topic will also focus on how the gross negligence form the bank’s side has ignored certain situations, due to which, the money laundering and fraud activities could have been prevented.
According to Allan (2018), there are multiple alternative paths to criminogenic knowledge and by researching through various materials and resources, it could be found that money laundering and fraud activities within the financial institutions are based on monetary transactions mostly. Allan (2018) also stated about the Routine Activity Theory that includes the various components such as the suitable target, crime, absence of capable guardian and motivated offender. The psycho pathological elements are involved, which often creates negative mindset among individuals and their preference for money rather than anything else (Allan 2018). Due to this, they are often found involved in criminal and fraud activities, which often motivates others too and results in achieving their target quite easily with the absence of a good leader. Based on the criminogenic knowledge, it should be important to appoint a responsible leader who could guide the team members, make them knowledgeable about the vision and mission of the organization, furthermore ensure successful business functioning with proper management of ethical values and preventing any kinds of illicit activities that might hinder the business performance (Marchington et al. 2016).
There are various behavioral factors associated with the business functioning and have been related to the level of contribution to the organizational failure at Commonwealth Bank in Australia. The behavioral factors are mainly associated with the negative attitudes and behaviors of individuals and wrong doings committed, which had lead to the decline in business and resulted in organizational failure. At the individual level, the staffs were not cautious enough about the significance of management team to focus on the level of commitment of staffs and the actions undertaken by them to prevent neglecting their duties and responsibilities (Purce 2014). There were evidences as well that showed that the Commonwealth Bank in Australia has been able to breach the Counter terrorism financing Act and Anti-Money laundering Acts in multiple occasions. Such was the impact that there was no such proper assessment of money laundering and terrorism financing, which furthermore deteriorated the company’s ability to introduce newer approaches and deal with the mitigation of the risks effectively as well (Reason 2017).
The intelligent system was not adopted properly, which created complexities for managing the risks while on the other hand, the company also was unable to provide 53,506 as a significant portion of threshold transactions to Austrac within the assigned time frame. The company consistently did not focus on complying with the counter terrorism and money laundering programs that are associated with the monitoring of transactions for more than 778370 accounts of clients. Due to this, there were issues associated with the reporting of suspicious activities within the company and this finally resulted in inability to mitigate the counter terrorism and money laundering risks as well (Yi and Gong 2013). The bank breached certain laws, rules and regulations, which showed that the deposit machines were used by the customers to manage transactions up to $20000 and later most of these were used illegally for bad purposes by the cyber criminals associated with the drug trafficking. The bank though provided evidences regarding technical issues associated with the machines, which lead to coding errors and technical disputes, contributing to the organizational failure (Robbins et al. 2013).
As stated by Burke (2017), it could be understood that the employees working with the company totally missed out certain things and thus did not understood the severity of the issue faced while managing these activities. The employees were also unknown to the fact that the security system might not be ineffective and it could get easy for the cyber criminals nowadays to gain access to the company’s portal and conduct these fraud related activities quite easily (Burke 2017). The employees’ values and personality did not reflect how the issues could be overcome and because of this, the issues emerged at the organizational level and with the company’s inability to abide by the laws, rules and regulations, the issue became much more complex. The article presented by Burke (2013 shows that change is needed and it will be possible for the organization by putting stress on the staffs and ensuring that the right actions are taken and duties are not neglected to bring change within quick time. According to the information provided by the employees, it was understood that there were several technical issues, due to which, the money laundering and fraud activities emerged though they were also responsible for breaching certain rules, which if not done, might have been controlled with necessary actions undertaken (Garg 2013).
Within a group, often conflicts emerge due to difference in views and opinions, which often creates a negative culture and ineffective working conditions that can affect the employee performance as well as make them feel lesser interested in carrying out their tasks properly, Thus, maintenance of a proper culture where communication is fostered should be essential for managing the subculture and create flexible working conditions. This would also give rise to better performances of employees and allow them to commit fully to the organization, thereby managing the control systems with ease and efficiency (Hora and Klassen 2013). Thus at the group level, communication must be facilitated and the manager should also allow hem to share their useful thoughts and opinions for making a perfect decision in the end, furthermore undertake necessary actions and allow the workers of Commonwealth bank to conduct due diligence with proper acquisition of information about any kids of suspicious activities related to money laundering and frauds consistently (Burke 2017).
First of all, the bank failed to identify that the network consisting of deposit machines has been utilized by the drug syndicates for laundering a huge amount of money from Commonwealth Bank in Australia. The main stakeholders are the investors or shareholders, suppliers, managers, employees and customers. The customers are primarily focused on, because being a customer focused services, Commonwealth Bank has always aimed at targeting the right market segments comprising of people and deliver services accordingly to meet their needs and preferences. The money laundering and terrorism activities to acquire the deposit machines could result in huge loss of money along with poor management of civil rights, responsibilities (Hadjiemmanuil 2013). These are serious areas of concerns that may allow the cyber criminals and draw in money from the clients’ money where all the important information are stored at the financial institution in Australia. This can be problematic and the issues may arise again and again once the cyber criminals gain access to the database and website portal, due to which, the organizational failure has emerged (DeYoung et al. 2013).
The post failure responses include overcoming the challenges associated with the money laundering and fraud activities at Commonwealth Bank in Australia. The issues and challenges can be overcome with the implementation of a principle based AML system that is grounded by scientific principles. To resolve the issues, focusing on digital payment related issues is essential, which can not only allow for prioritizing on the money laundering risks, but will also check the new payment methods such as mobile wallets, e-payments, etc (Rejikumar 2015). The utilization of third party utilities could also enable shared services utility model usage to facilitate KYC compliance and monitor the transactions to prevent violation or breach to certain rules and regulations. The bank could also implement an AML or fraud platform to create a centralized control; furthermore align the risk based approaches with the corporate objectives. This would also facilitate adoption of analytics and manage detection of fraud activities at earlier stages through proper filtering technologies and network visualization, furthermore ensure faster processing of transactions and monitoring the occurrence of fraud and money laundering activities at different stages of business operations (Commbank.com.au 2018).
After the debacle at Commonwealth Bank, the KYC and CDD, i.e., customer due diligence should be engaged with the business functions to understand the linkage and ultimately benefit the business owners, furthermore manage legitimacy of business and ensure that the sources of money are managed properly. The monitoring of transactions could be effective for identifying the anomalies and allow the backend systems to screen the transactions, furthermore determine the counterparties with whom the customers should be dealing with (Allan 2018). The financial intelligence in Australia has sued the Australian bank for 53,700 breaches of law and accused it for failing to report on the huge amounts of transactions made. The money was used for illicit purposes such as for managing the operations related to drug import and export along with transfer of money to domestic accounts too. Another syndicate involving many foreign officials deposited a huge amount of money with fake names for the accounts created (Yi and Gong 2013). The most suitable measure undertaken is to pay a civil penalty of $700 million for the settlement of the case. Other post failure responses could include providing necessary training programs for the employees to improve their skills, knowledge and expertise, while at the same time, foster better communication and create limitations on cash deposits to ensure that any lump sum amount of money beyond the limit, when deposited, should be checked and monitored along with its purpose (Commbank.com.au 2018).
Conclusion:
The report was prepared to discuss about the money laundering and fraud activities that were associated with the financial institution named Commonwealth bank in Australia. The organizational behavioral factors were assessed that contributed to the fraud activities and money laundering issues faced by the organization. Lastly, the post failure responses were provided including management of KYC process, providing penalty and managing a good culture and structure to ensure smooth transformation of business and regaining its good brand name and image again.
References:
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Allan, D.M., 2018. Insiders versus outsiders—alternative paths to criminogenic knowledge. Organised crime research in Australia 2018, p.35.
Armstrong, M. and Taylor, S., 2014. Armstrong’s handbook of human resource management practice. Kogan Page Publishers.
Bratton, J. and Gold, J., 2017. Human resource management: theory and practice. Palgrave.
Burke, W.W., 2017. Organization change: Theory and practice. Sage Publications
Commbank.com.au. (2018). Personal banking including accounts, credit cards and home loans – CommBank. [online] Available at: https://www.commbank.com.au/ [Accessed 31 Oct. 2018].
DeYoung, R., Kowalik, M. and Reidhill, J., 2013. A theory of failed bank resolution: Technological change and political economics. Journal of Financial Stability, 9(4), pp.612-627.
Garg, A., 2013. Service Recovery Paradox in Indian Banking Industry: An Empirical Investigation. The South East Asian Journal of Management, pp.108-122.
Hadjiemmanuil, C., 2013. Special resolution regimes for banking institutions: objectives and limitations.
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Marchington, M., Wilkinson, A., Donnelly, R. and Kynighou, A., 2016. Human resource management at work. Kogan Page Publishers.
Purce, J., 2014. The impact of corporate strategy on human resource management. New Perspectives on Human Resource Management (Routledge Revivals), 67.
Reason, J., 2017. The human contribution: unsafe acts, accidents and heroic recoveries. CRC Press.
Rejikumar, G., 2015. An empirical study on antecedents of perceived service recovery quality in e-banking context. The Journal of Internet Banking and Commerce, 20(3).
Robbins, S., Judge, T.A., Millett, B. and Boyle, M., 2013. Organisational behaviour. Pearson Higher Education AU.
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