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The restoration of malpractice (part 2)

By Dr George Venturini

Australia’s ‘big four’ are not merely big, they are massive. Their combined assets in 2013 stood at $2.86 trillion – or roughly twice the size of Australia’s national income.

They are four of the five largest Australian companies by market capitalisation, together representing more than a quarter of the market. According to a 2012 report by the International Monetary Fund, the big four controlled 88 per cent of residential mortgages and 80 per cent of deposits. By contrast, the biggest six American banks held 30 per cent of total deposits in 2013.

It is not just banking: at the same time of the diagramme, the big four owned 53 per cent of life insurance premiums, and accounted for 57.3 per cent of retail investment funds through bank-owned platforms.

An interesting question was then and remains nowadays: if they own so much of Australia’s economy, who owns the big four?

According to a 2012 report by the International Monetary Fund, ‘major banks are highly interconnected, as they are among each other’s largest counterparties.’ But that connection is far from direct. Part of it has to do with banks borrowing from each other, rather than owning large parts of each other.

A 2016 study of the Australian bank network by the Reserve Bank of Australia found that more than half of outstanding authorised deposit-taking institutions ‘exposure’ in this sense is to the big four. Because they have so much of the money of the entire system already, when they need temporarily to borrow, there are few other banks they can go to, so they have to go to each other. And that makes for a very cosy, but rather unhealthy relationship. (Analysis: Who really owns the ‘Big Four’ banks in Australia?).

There are ‘custodians’, and in fact the same four names appear as the top four shareholders in each of the four banks. According to the big four’s annual reports for 2013, here is who owned ordinary shares:

H.S.B.C. Custody Nominees (Australia) Limited controls: 16.91% of Westpac; 16.83% of N.A.B.; 18.48% of A.N.Z.; 14.80% of C.B.A.

J.P. Morgan Nominees Australia Ltd holds: 12.75% of Westpac; 12.03% of N.A.B.; 14.40% of A.N.Z.; 11.57% of C.B.A.

National Nominees Limited owns: 9.93% of Westpac, 10.14% of N.A.B.; 11.76% of A.N.Z.; 8.5% of C.B.A.

Citicorp Nominees Pty Limited has: 4.94% of Westpac; 4% of N.A.B.; 4.15% of A.N.Z.; 4.47% of C.B.A.

H.S.B.C., J.P. Morgan, National Nominees, and Citicorp all frequently show up together among the top 5 or to 10 shareholders in many Australian publicly-traded companies.

‘Custodians’, by definition, hold customers’ securities for safekeeping, in addition to offering other services such as account administration and collection of dividends and interest payments, for a fee. They are not active participants in decision-making. It would be wrong to imply that by having a 17 per cent stake in Westpac, for example, H.S.B.C. also has 17 per vote of the vote: as a custodian, H.S.B.C. only processes the proxy votes of the customers for whom it holds the shares, and these customers could be large sovereign wealth funds, or a board member of Westpac, or a family-owned business in Melbourne or Sydney. Discrepancies in proxy voting do occur, and many uneducated investors are not even aware they can cast votes. But in principle, H.S.B.C., in a custodian role, acts only as the messenger, not the decision-maker.

As a wholly owned subsidiary of H.S.B.C. Bank Australia Limited, the custody nominees business held more than $700 billion in assets. It is not only in the ‘big four’. The sheer size of its investment capital means that it frequently shows up among the top 5 shareholders for a large number of Australian companies. In fact, H.S.B.C., J.P. Morgan, National Nominees and Citicorp all frequently show up together among the top 5 or top 10 shareholders. They simply represent a very large amount of money, all of which has to be parked somewhere.

On a different note, however, that 17 per cent stake H.S.B.C.’s custodian arm has in Westpac could, in theory, represent just one person, or four big investors, buying through a variety of mutual funds, each of which has H.S.B.C. as their custodian. It is a stretch, and it would have to be a very rich group of individuals, but it is possible. Unfortunately, it is practically impossible to track down the identities of those underlying shareholders through the various financial structures which hold shares for each other and on behalf of each other.

But can these hidden shareholders control what Westpac does?

The company pointed out that as of 3 October 2013, there were no shareholders who had a ‘substantial holding’, i.e., in which “they or their associates” had control of 5 per cent or more of the vote. N.A.B. stated the same. Westpac explained that shareholders such as H.S.B.C. Custody Nominees (Australia) Limited (16.91 per cent of total shares) ‘may hold shares for the benefit of third parties’, the definition of their role as custodians. Furthermore, Westpac stated that it is ‘not directly or indirectly owned or controlled by any other corporation(s) or by any foreign government.’

But the top 20 registered shareholders held 52.42 per cent of Westpac’s ordinary shares; and that is, for sure, a controlling stake. The word ‘nominee’ or ‘custodian’ pops up in 11 of them. There was an independent wealth management group, a closed-end fund, an investment management firm, and so on. Who is behind the actual shares would be, again, practically impossible to determine?

But the same names showed up among the top 20 for each of the ‘big four’ banks, with some variation.

Thus, the top 20 registered shareholders held 52.42 per cent of Westpac ordinary shares; and that was a controlling stake.

The interconnection between the four banks may be even more pervasive, if even less direct. A.N.Z.’s C.E.O. since 2007 has been Mr. M. R. P. Smith, O.B.E., B.Sc. (Hon) who has been with H.S.B.C. for most of his 30-year career prior to joining A.N.Z.

Recently, his skills, experience and expertise have been described as follows: Mr. Smith is an international banker with over 30 years’ experience in banking operations in Asia, Australia and internationally. Until June 2007, he was President and Chief Executive Officer, The Hong Kong and Shanghai Banking Corporation Limited, Chairman, Hang Seng Bank Limited, Global Head of Commercial Banking for the H.S.B.C. Group and Chairman, H.S.B.C. Bank Malaysia Berhad. Previously, Mr. Smith was Chief Executive Officer of H.S.B.C. Argentina Holdings S.A.

Mr. Smith joined the H.S.B.C. Group in 1978 and during his international career he has held a wide variety of roles in Commercial, Institutional and Investment Banking, Planning and Strategy, Operations and General Management.

H.S.B.C. is the largest ‘custodian’ in the four big banks in Australia.

H.S.B.C. Custody Nominees (Australia) Limited controls: 16.91% of Westpac; 16.83% of N.A.B.; 18.48% of A.N.Z.; 14.80% of C.B.A.

It may be preposterous, indeed amount to drawing a longbow to pursue the following road. But, consider where it may lead!

A company was incorporated in Kuala Lumpur, Malaysia in August 1975 for the purpose of banking and finance, in the area of personal banking services, with a market capitalisation of around RM 14 billion and total assets of RM 134.8 billion as at 31 March 2017. It employs 11,000 persons. The founder was one Tan Sir Azman Hashim. It is now known the AmBank Group, founded in 1975 as Arab-Malaysian Development Bank. It now has 175 branches throughout Malaysia. It is controlled by AMMB Holdings Berhad.

AmBank Group trades under a number of brands, including AmBank, AmInvestment Bank, AmInvest, AmBank Islamic, AmGeneral Insurance and AmMetLife. AmBank is the key brand.

The current Group chairman, still Tan Sri Azman Hashim, had an interest of 14.01 per cent in AMMB Holdings as at 30 June 2014.

The single largest shareholder in AMMB Holdings is Australia’s A.N.Z. Group with an interest of 23.78 per cent.

In 2006 Amcorp’s interest in AMMB Holdings was reduced to 18.8 per cent from 32.9 per cent after the Tan Sri Azman sold 300 million shares to ANZ Group. (AmBank from Wikipedia on 17.05.18).

According to A.N.Z. provided information, the bank has had “a presence in Malaysia since 1971. In 2012 [it] opened a Branch office in the Labuan International Business and Financial Centre.

The Branch complements A.N.Z.’s existing Representative Office in Kuala Lumpur and its partnership with AmBank Group, one of the largest banking groups in Malaysia. The A.N.Z.-AmBank partnership includes customer referrals between the banks, the creation of new products and services and joint cooperative deals for large regional companies and Malaysian conglomerates. It provides A.N.Z. customers with local support and advice, as well as a full range of banking products and services to meet their working capital, trade, debt and equity capital markets requirements in Malaysia.”

As at 18 May 2018 A.N.Z. still held at least a 23.8 per cent stake in AmBank Group.

A.N.Z. advertises that “through [its] presence in Malaysia, [it] connects customers across 33 countries worldwide, including nine in ASEAN: Laos, Cambodia, Malaysia, Singapore, Vietnam, Indonesia, the Philippines, Myanmar … and Thailand.”

Further, “The A.N.Z. Representative Office in Kuala Lumpur has no products to sell in its own right and is not permitted to undertake any commercial banking activity” (from ANZ in Malaysia, as at 18 May 2018).

Back some two years: on 1 January 2016 Mr. M. R. P. Smith was succeeded by Mr. Shayne Elliott, B.Com., as A.N.Z. Chief Executive Officer and Executive Director.

Mr. Elliott’s presence on the world of banking is less shining than that of Mr. Smith. Nevertheless, he is described by the A.N.Z. itself as having “over 30 years’ experience in banking in Australia and overseas, in all aspects of the industry. [Mr. Elliott] joined A.N.Z. as ‘C.E.O. Institutional’ in June 2009, and was appointed Chief Financial Officer in 2012.

Prior to joining A.N.Z., [Mr. Elliott] held senior executive roles at EFG Hermes, the largest investment bank in the Middle East, which included Chief Operating Officer. [EFG Hermes Holding S.A.E. – Egyptian Financial Group Hermes Holding Company, is an Egyptian investment bank present in the Middle East and North Africa region and specialises in securities brokerage, asset management, investment banking, private equity and research. In other words, it is the much despised ‘Arab money’ of the Fraser, Howard & Co. ‘Tirath Khemlani operation’] Mr. Elliott started his career with Citibank New Zealand and worked with Citibank/Citigroup for 20 years, holding various senior positions across the U.K., U.S.A., Egypt, Australia and Hong Kong. … Mr. Elliott is actively engage[d] in the promotion of Australian economic growth, social progress and public policy development through membership of the Australian Bankers’ Association (which he also Chairs) and the Business Council of Australia.”

Mr. Elliott is director of A.N.Z. Bank New Zealand Limited, since 2009, and of A.N.Z. Holdings (New Zealand) Limited, since 2012.

(From information presented by A.N.Z. and accessed on 24 May 2018).

Next: on 28 March 2016 the Australian Broadcasting Corporation went on air with a 4 Corners programme titled: State of Fear: Murder and Money in Malaysia.

It was presented by Sarah Ferguson and reported by Linton Besser.

It was, as the A.B.C. pre-announced, “a story of intrigue, corruption and multiple murders, stretching from the streets of Malaysia’s capital Kuala Lumpur, to Switzerland, France and the U.S. as well as Hong Kong and Singapore, all the way to Australia’s doorstep.”

Words such as the following could be heard:

“He said ‘You know I can’t talk much, he said, because my phone might be bugged'”.

The money involved is astonishing.

“The person who made the gift must be extremely rich to be able to just give away US$681 million.”

“The fact that it’s going to the personal account of the Prime Minister is unprecedented.”

And the escalating scandal is threatening to bring down Malaysia’s Prime Minister.

“This charge sheet was the smoking gun.”

Four Corners reporter Linton Besser had investigated two sets of extraordinary allegations of bribery and corruption: one involving a massive arms deal; the other, the Malaysian sovereign wealth fund. It was a story which made headlines around the world.

Linton Besser was heard as asking:

“Hello Mr Prime Minister, ABC Australia. I’m wondering if you can explain the hundreds of millions of dollars in your account?”

Linton Besser’s pointed questions would land him and cameraman Louie Eroglu in serious trouble.

“I’ve been placed under arrest … we are waiting for some legal advice but at the moment it looks like they intend to charge us.”

On that 28 March 2016 Four Corners revealed new allegations about the staggering sums of money which have surprisingly flowed into the bank accounts of Najib Razak.

And as the scandal grew, so did the crackdown on the Malaysian Government’s political opponents.

“They’re just threatening people now and it’s very effective.” (Levied on 17May 2018)

Now, who is Najib Razak mentioned in 4 Corners?

He is actually Dato’ Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, until very recently the Prime Minister of Malaysia. His tenure as Prime Minister has been marked by economic liberalisation measures, such as cuts to government subsidies, loosening of restrictions on foreign investment, and reductions in preferential measures for ethnic Malays in business. After the 2013 election his government was marked by the pursuit of a number of its critics on sedition charges, the imprisonment of opposition leader Anwar Ibrahim following a conviction for sodomy, the implementation of a Goods and Services Tax, and an ongoing scandal involving the state investment fund 1Malaysia Development Berhad (1MDB) which led to rallies calling for Najib’s resignation, spearheaded by the grassroots movement Bersih. 1MBD was founded in 2009 by Najib Razak, who chaired the fund’s advisory board until 2016. These protests culminated in the Malaysian Citizens’ Declaration by Mahathir Mohamad, Pakatan Harapan and NGOs to oust Najib Razak. Najib’s response to the corruption accusations was to tighten his grip on power by replacing the deputy prime minister, suspending two newspapers and pushing through parliament a controversial National Security Council Bill which provides the prime minister with unprecedented powers. Najib’s various subsidy cuts contributed to soaring living costs, while fluctuating oil prices as well as fallout from the 1MDB scandal have led to a steady depreciation of the Malaysian ringgit.

In the Malaysian general election held on 9 May 2018 Najib’s Barisan Nasional was defeated for the first time in the nation’s history, winning 79 seats out of 222 in the Dewan Rakyat. Najib accepted the results of the election and promised to help facilitate a smooth transition of power. (From Wikipedia on 17.05.18).

There are ramifications of the multi-billion-dollar scandal which brought Najib Razak and his United Malays National Organisation (U.M.N.O.) which had governed Malaysia since its foundation in 1963. (R. Latiff, Explainer – The multi-billion-dollar scandal that brought down Malaysia’s grand old party, 11 May 2018).

The charge of misappropriation of US$ 4.5 billion from 1MBD, deeply involving by Najib Razak, is under investigation by the U.S. Department of Justice and other countries such as Switzerland and Singapore.

During the past three years, the scandal has led to arrests, the closing of several banks, and the seizures of multi-million-dollar assets around the world.

The case has dogged Najib Razak since The Wall Street Journal reported in August 2015, that about US$ 700 million in 1MDB funds flowed into his personal account. U.S. Department of Justice lawsuits later showed that he received transfers of more than US$1 billion from 1MDB. Najib Razak denied any wrongdoing – of course.

By accident more than coincidence, less than two weeks after the airing of State of fear, Mr. Graham Hodges, the A.N.Z. Bank deputy chief executive was grilled over A.N.Z.’s alleged knowledge of more than $US1 billion flowing into the AmBank accounts of Prime Minister Najib Razak by Labor Senator Deborah O’Neill at a parliamentary inquiry on the impairment of customer loans. “This pall is cast across the entire banking sector and in particular the ANZ Bank.” Senator O’Neill told the inquiry.

Mr. Hodges defended A.N.Z.’s representatives who have sat on the board of its partially owned Malaysian subsidiary AmBank, which is embroiled in a corruption scandal centring on Prime Minister Najib Razak.

A.N.Z. still owns 24 per cent of AmBank and until recently had three board members while former A.N.Z. executives are AmBank’s chief financial officer and chief risk officer. (Will Australia get drawn into the Malaysian financial scandal?, 4 July 2018, sbs.com.au).

Until late 2017 Mr. Shayne Elliott, A.N.Z. chief executive sat on the AmBank board, while A.N.Z. institutional banking boss Mike Whelan had also resigned in recent months. Ms. Suzette Corr, the A.N.Z. head of Human Relations, remains on the board of AmBank. Mr Hodges said he would soon join the AmBank board.

Mr. Hodges said that the bank was limited in what it could do to address the AmBank scandal because it was only a part owner of the bank.

“It is a more nuanced issue to be honest. Clearly the directors on that board are not allowed to talk about what is going on. We don’t control that bank,” Mr. Hodges said.

“As an ANZ executive and one [who] is about to join the board, are we happy with that? Certainly not,” added Mr. Hodges. “But that is different to implying the culture or the integrity of someone is lesser because they sat on that board.” (S. Danckert, ‘ANZ grilled over Malay corruption scandal,’ The Sydney Morning Herald, 04.04.2016).

On 28 March 2016 the Four Corners episode State of fear had reported that A.N.Z.’s extensive business in the South Pacific led to it having the highest exposure to the Mossack Fonseca & Co. global tax avoidance scandal.

Mossack Fonseca’s success relied on a global network of accountants and prestigious banks which hired the law firm to manage the finances of their wealthy clients.

Using complex shell company structures and trust accounts Mossack Fonseca services allow its clients to operate behind an often-impenetrable wall of secrecy.

Banks are the big drivers behind the creation of hard-to-trace companies in tax havens. One of the most frequently mentioned is H.S.B.C.

A.N.Z. appears in 7.548 of the Mossack documents.

More than 1,000 Australian links to companies have been found in the data leak including the passports of hundreds of Australian citizens connected to companies as directors, shareholders and beneficial owners. (Panama Papers and Mossack Fonseca explained, The ABC, 2016-04-04).

On 17 May 2018 search conducted by judicial authorities in three condominium properties owned by Najib Razak led to the seizure of some 284 boxes filled with luxury items, currencies, jewellery which would be loaded on five police trucks. (‘Malaysia: Bags of cash, jewellery seized from Najib’s properties; ‘Malaysia’s ex-PM Najib questioned over 1MDB scandal,’ 22 May 2018, Al Jazeera English; see also: ‘Malaysia files criminal charges against Goldman Sachs and two former executives,’ 18 December 2018; ‘Malaysia seeks [$10.7] billions in reparations from Goldman Sachs over 1MBD rort, ’22 December 2018).

Continued Saturday – The restoration of malpractice (part 3)

Previous instalment – The restoration of malpractice (part 1)

Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at George.venturini@bigpond.com.au.


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  1. Joseph Carli

    The banks are like smoke shadows…no apparent substance..but still visible and depending on the chips incinerated, the stench is unbelievable!
    “Wars, plague, famine, banckruptcies…good growing weather for the Morgan Bank”..(John Dos Passos ; “USA” ).

  2. DrakeN

    Thank you Dr. Venturini for these essays into financial and political incest.

    As with biologic inbreeding, evidence of deterioration in the viability of these organisms eventually becomes apparant.

    The “commercial-in-confidence” collusive and anti-competetive behaviours of the major financial is a topic to be avoided at all costs in the commercial media; owned and controlled, as they are, by players in the same satanic games.

    We, the hoi polloi, are but pawns in their machinations.

    ” ‘t was ever thus.”

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