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Rather than side with the brothel’s discrimination claim, the court found that the bank had a rational basis for believing its services could be used to facilitate money laundering.
The case involved Gotham City, a licensed South Melbourne brothel, and companies associated with the business, which had held accounts with Bendigo.
The plaintiffs said the bank had discriminated against the business because it operated in the lawful sex industry and had failed to properly follow its own anti-money laundering and counter-terrorism financing (AML/CTF) processes before closing the accounts.
The court rejected those claims, however, finding the decision to close the brothel’s accounts was made to manage potential money laundering risks arising from activity across the accounts.
The court did not find, however, that the businesses had actually laundered any money. Rather, Bendigo had a “rational basis” for assessing that its banking services could potentially be used for money laundering.
Private ATMs and 24Hr Lube
The court heard that Bendigo had identified a number of transactions it considered unusual or suspicious, with its transaction monitoring system generating five AML alerts between June and September 2024.
As a result, an AML investigator within the bank’s financial crimes reporting team carried out an investigation of the plaintiffs and flagged certain ‘suspicious activity’ in the account.
Among the transactions flagged was a $6 million bank cheque withdrawal, as well as a $50,000 cash withdrawal in $100 notes reportedly intended for overseas travel and a foreign cash debit of more than $88,000.
There were also 99 electronic payments totalling $945,066 from a business trading as 24Hr Lube.
The operation of private ATMs at the brothel was another concern for Bendigo.
The court heard that the business regularly withdrew around $50,000 at a time to replenish its own machines, which were used by customers to obtain cash.
At the time, the bank was concerned that once the cash left its control, it had limited visibility over where it went.
While Bendigo did not claim the activity was evidence of actual criminal activity, it said that the transactions formed part of a wider pattern of unusual activity that presented a potential money laundering risk.
Bendigo’s submissions to the court said: “The Bank submits that the evidence overwhelmingly establishes a rational basis for it to be satisfied that [the plaintiffs] was potentially laundering money.
“The Bank emphasises the word ‘potential’ here: it is the risk of money laundering, not the actuality of it, that the AML regime requires the Bank to identify, mitigate and manage.”
Court rejects discrimination claim
Central to the plaintiffs’ claim was that Bendigo’s treatment of brothels under its AML/CTF policies amounted to discrimination.
Under an earlier version of its AML/CTF program, Bendigo classified brothels as “Prohibited Customers”. That changed in December 2024, when they were instead classified as “Prescribed High Risk Customers”.
As a result, the brothel would not be prevented from banking with Bendigo by nature of its trade, but would still be subject to enhanced due diligence.
It was shown, however, that some internal documents continued to describe the businesses as “Prohibited Customers.” The court found this was an error, but concluded it did not ultimately drive the decision to close the accounts.
The court therefore accepted that the businesses’ lawful sex industry status was a protected attribute, but rejected the argument that it was a substantial reason for Bendigo’s decision to close the accounts.
“I accept the Bank’s submission that it had a rational basis for the Exit Decision on the basis of potential money laundering,” the Victorian Supreme Court in its findings said.
“I am therefore satisfied that the transaction activity on the Personal Accounts and the risks associated with the large and frequent cash withdrawals were a rational basis for the Bank’s assessment of the money laundering risk.
“Accordingly, for all of these reasons, the plaintiffs have not established their second central question of fact. The plaintiffs’ attributes were not a reason of substance for the Bank making the Exit Decision.”
[Related: Former director jailed over $1.75m company fund transfers]
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