The Commonwealth Bank has been accused of "serious and systemic" breaches of anti-money laundering and terrorism financing laws that could leave it exposed to massive civil penalties.

Key points: $8.9b deposited through CBA's intelligent deposit machines before the bank conducted a money laundering risk assessment

$8.9b deposited through CBA's intelligent deposit machines before the bank conducted a money laundering risk assessment AUSTRAC alleges that 53,700 transactions that should have been reported to it were not

AUSTRAC alleges that 53,700 transactions that should have been reported to it were not CBA accused of failing to report suspected money laundering to AUSTRAC

The Australian Transactions Reports & Analysis Centre (AUSTRAC) today launched civil proceedings in the Federal Court alleging that the Commonwealth Bank failed to comply with the law on 53,700 occasions.

The allegations follow an AUSTRAC investigation into the CBA's use of intelligent deposit machines (IDMs) between November 2012 and September 2015.

The maximum penalty for each of the 53,700 contraventions is up to $18 million.

The potentially massive penalties would dwarf a $45-million fine imposed on Tabcorp earlier this year for failing to comply with anti money laundering and terror financing laws.

The IDMs used by the Commonwealth Bank are designed to accept deposits by both cash and cheque.

According to the statement filed by AUSTRAC, deposits are automatically counted and instantly credited to the target account which can be located domestically or internationally.

The statement noted that IDMs can accept up to 200 notes per deposit, or up to $20,000 per cash transaction, with no limit to the number of transactions made per day.

"Suspected money laundering was conducted through CommBank accounts by way of cash deposits, many through IDMs, followed immediately by international and domestic transfers," AUSTRAC alleged.

CBA is accused of failing to report cash transactions of $10,000 or more made through intelligent deposit machines to AUSTRAC in time for assessment, as required by anti-money laundering laws.

The transactions in question had a total value of around $624.7 million.

AUSTRAC is alleging that the Commonwealth Bank did not take any steps to assess the risk of money laundering or terrorism financing via IDMs for three years after they were rolled out.

In that time, around $8.9 billion in cash was deposited via IDMs before a risk assessment was carried out.

Failure to report suspicious transactions

AUSTRAC is also alleging that after CBA became aware of suspected money laundering it failed to report suspicious matters and did not monitor customers for money laundering risk.

AUSTRAC acting chief executive Peter Clark said the civil action send a clear message about the potentially high cost of failing to meet anti money laundering laws.

"By failing to have sound systems and controls in place, businesses are at risk of being misused for criminal purposes," he said.

"AUSTRAC's goal is to have a financial sector that is vigilant and capable of responding, including through innovation, to threats of criminal exploitation.

"We believe this can be achieved by working collaboratively with, and supporting, industry. We will continue to work in this way with our industry partners who also share this aim and demonstrate a strong commitment to it."

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Discussions over an 'extended period'

The Commonwealth Bank has confirmed the civil proceedings by AUSTRAC and that discussions had been underway "for an extended period".

In a statement, the CBA said it was cooperating fully with AUSTRAC to improve compliance with anti-money laundering and terrorism financing laws.

"We take our regulatory obligations extremely seriously and we are one of the largest reporters to AUSTRAC," the statement said.

"On an annual basis we report over 4 million transactions to AUSTRAC in an effort to identify and combat any suspicious activity as quickly and efficiently as we can.

"Money laundering undermines the integrity of our financial system and impacts the Australian community's safety and wellbeing.

"We will always work alongside law enforcement, intelligence agencies and government authorities to identify, disrupt and prevent this type of activity."

CBA said it is reviewing the nature of AUSTRAC's civil proceedings and will "have more to say" on the specific allegations later on.

Follow Peter Ryan on Twitter @peter_f_ryan.