By Dr George Venturini
On 5 May 2015 The (Melbourne) Age reported that A.N.Z. would reimburse $30 million for miscalculated interest on credit card cash advances, affecting millions of customers.
On 25 May 2015 A.S.I.C. banned a former representative of Macquarie Equities Limited after he engaged in unauthorised discretionary trading on his clients’ accounts and created false records. Macquarie Equities had reported the conduct to A.S.I.C.
On 24 July 2015 A.S.I.C. reported that N.A.B.’s wealth management business would pay $25 million in compensation to 62,000 customers after a system error on its navigator wrap platform relating to estimation of income and tax. N.A.B.. Wealth appointed PricewaterhouseCoopers to review the process.
On 15 October 2015 A.S.I.C. permanently banned an adviser of a Westpac subsidiary for transferring funds from clients’ accounts without authorisation, falsely creating documents including emails and bank statements, and perpetuating the false documents on client accounts.
On 19 October 2015 A.S.I.C. announced that C.B.A. would refund $7.6 million to 8,400 C.B.A. customers for failing to provide advertised fee waivers and other benefits of services package. C.B.A. had discovered the error and had reported it to A.S.I.C. in 2014.
On 29 October 2015, after A.S.I.C. surveillance, Westpac offered to refund premiums to 10,600 insurance customers who had paid for insurance cover they did not need. Customers were charged for loan protection insurance when they did not have a loan and did not intend to be covered.
On 12 November 2015 A.S.I.C. announced that A.N.Z. would provide some $13 million in compensation to 200,000 customers after it failed accurately to apply bonus interest to progress saver accounts for a number of years. The refund payment included an additional amount to recognise the time elapsed since the initial breach. A.N.Z. discovered the breach after a customer complaint and reported it to A.S.I.C.
On 25 November 2015 A.S.I.C. announced that the C.B.A. would refund approximately $80 million to some 216,000 wealth package customers as compensation for failing to apply fee waivers, interest concessions and other benefits since 2008. The refund payments included an additional amount of interest to recognise the time elapsed since the relevant benefit was not applied. C.B.A. had discovered the breach after a customer complaint and had reported it to A.S.I.C. in 2014.
On 10 December 2015 Macquarie Securities (Australia) Limited paid a penalty of $ 110,000 for allegedly contravening one of the A.S.I.C. market integrity rules 2010 and the Corporations Act. The penalty was for failing to prevent a non-designated trading representative from submitting trading messages.
On 18 December 2015 A.S.I.C. permanently banned a former Western Australia branch manager after the individual was convicted and sentenced for nine accounts of stealing as a servant and one count of gaining a benefit by fraud for making unauthorised withdrawals from various bank accounts in a friend’s name, totalling $515,000.
On 15 January 2016 The Sydney Morning Herald reported that two traders dismissed by A.N.Z. for inappropriate behaviour were suing the bank for tens of millions of dollars, claiming a rampant environment of sex, drugs and alcohol was condoned among senior staff on the dealing floor. A.N.Z. said that the staff were dismissed for serious breaches of its code and it would “be vigorously defending both their court applications.”
On 20 January 2016 Westpac paid $1 million after A.S.I.C.’s concerns about credit card limit increase practices. A.S.I.C.’s concerns included the bank’s failure to make reasonable inquiries about some consumers’ income and employment status before increasing their credit card limit.
On 2 February 2016 The Australian reported that the Commonwealth Bank of Australia had to date offered nearly $3 million to people affected by its financial planning scandal as part of its open advice review, and paid more than $2 million to victims of shoddy advice, with more than 6,000 cases still in the programme.
On 4 February 2016 The Sydney Morning Herald reported that two C.B.A. staff were allegedly complicit in an elaborate Ponzi scheme worth $76 million. The alleged leaders of the scam were due to face court in February 2017 and had indicated they would plead not guilty to almost 100 fraud and deception offences.
On 4 February 2016 A.S.I.C. banned a former N.A.B. adviser for seven years for engaging in misleading and deceptive conduct including forging client’s signatures on change of adviser forms and receiving the remuneration that flowed from processing these false forms. An appeal to the Administrative Appeals Tribunal was to be lodged.
On 16 February 2016 A.S.I.C. banned a former director and responsible manager of a Macquarie subsidiary for six years for breaching his duties in 2011 as an officer of a responsible entity of a registered management investment scheme. The mis-conduct included creating fake emails to extract confidential information from his fund’s competitors. An appeal to the Administrative Appeals Tribunal was to be lodged.
On 3 March 2016 A.S.I.C. banned a former N.A.B. adviser for five years for engaging in misleading and deceptive conduct, including falsely representing that he was a member of a superannuation fund to obtain unauthorised information about a member’s account. An appeal to the Administrative Appeals Tribunal was to be lodged.
On 4 March 2016 A.S.I.C. started legal proceedings in the Federal Court against A.N.Z. for alleged unconscionable conduct and market manipulation in relation to the A.N.Z.’s involvement in setting the bank bill swap reference rate, which affects commercial and personal loan rates. A.S.I.C. alleged that A.N.Z. traded in a manner intended to create an artificial price for bank bills on 44 separate days during the period of 9 March 2010 to 25 May 2012. A.N.Z. rejected the allegations and said it would vigorously defend the legal action. It said that A.S.I.C. had advised that it had no concerns about the bank’s current market practices.
On 7 March 2016 the former chief medical officer of C.B.A.’s insurance arm, CommInsure, made claims about a culture of dishonest and unethical practices to avoid payouts to sick and dying people. The chief medical officer revealed that doctors were pressured to change their opinions, outdated medical definitions were used to deny payouts, and medical files disappeared from the internal filing system. Mr. Ian Narev, C.B.A.’s chief executive, said: “I’m aware … and we’ve discussed individual cases where the outcomes that the customers have received for policies that they took out have not been good enough.” Allegations of deleting files “would be completely inconsistent with the culture that we are building at the Commonwealth Bank and inconsistent with the way that we run the bank.”
On 7 March 2016 A.S.I.C. found that A.N.Z. had breached responsible lending laws in making offers of overdraft facilities to its customers and ordered it to pay penalties totalling $212,500.
On 15 March 2016 A.N.Z. paid $4.5 million as compensation for breaches in the delivery of financial advice.
On 17 March 2016 A.S.I.C. imposed additional conditions on Macquarie Bank’s Australian Financial Services licence for breaches relating to the handling of client money between March 2004 and 2014. The breaches raised issues including failing to deposit monies into a designated client trust account; and making withdrawals which are not permitted from such an account. Macquarie filed an application for review of the decision and asked for stay of the new conditions pending the review. It said that it treated client money with the utmost seriousness and self-reported the incidents.
On 30 March 2016 A.N.Z. announced it would refund approximately $5 million to 25,000 customers after it failed properly to apply some fee reductions and fee waivers.
On 4 April 2016 A.N.Z. told a parliamentary inquiry that for 2014-15 it reported three breaches of the internal dispute resolution requirements under the code of banking practice to the code compliance monitoring committee, and six such breaches in 2013-14. Two breaches for 2014-15 were self-identified and one was raised with A.N.Z. by the committee.
On 5 April 2016 A.S.I.C. started legal proceedings in the Federal Court in Melbourne against Westpac for unconscionable conduct and market manipulation in relation to Westpac’s involvement in setting the bank bill swap reference rate in the period 6 April 2010 and 6 June 2012. It was alleged that Westpac traded in a manner intended to create an artificial price for bank bills on 16 occasions during the period between 6 April 2010 and 6 June 2012. Westpac denied the allegations and said it would defend the claims.
On 5 April 2016 a subsidiary of Westpac Banking Corporation paid penalties totalling $493,000 after A.S.I.C. found it had breached important consumer protection provisions relating to the repossession of motor vehicles, including failing to provide customers with default notices before commencing enforcement proceedings to repossess mortgaged vehicles; and failing to provide customers with legally required information setting out their rights within the required time-frame after it repossessed mortgaged vehicles.
On 6 April 2016 it became known that a former A.N.Z. planner had been gaoled for more than six years – between April 2009 and December 2015 – for stealing almost $1 million from an elderly client to feed a gambling debt. A.N.Z. promised to reimburse the victim. Meanwhile an appeal was lodged.
On 8 April 2016 the Leader of the Opposition, Bill Shorten, announced that, once in government, Labor would establish a Royal Commission into the banks. The announcement began an 18-month campaign from the Opposition on the issue, thus increasing pressure on the Turnbull government.
On 3 August 2017 the government’s financial intelligence agency, AUSTRAC, had accused the Commonwealth Bank of vast breaches of money laundering and anti-terrorism financing laws. It alleged that criminal gangs had laundered about $70 million through C.B.A., including through its network of smart ATMs, which allow anonymous cash deposits. Once warned of the risk, C.B.A. had failed to act. That had happened on six occasions when the bank learned that customers may be financing terrorism. C.B.A. had failed to refer the allegations to authorities. In total, AUSTRAC charged that C.B.A. had breached the anti-money laundering and counter-terrorism financing act 50,000 times.
On 13 March 2018, before the Royal Commission, National Australia Bank staff was found to be involved in a bribery ring to benefit from an incentive programme to sign up new customers. The bribery ring involved multiple branches, forged documents, fake payslips and Medicare cards, with bribes being paid in cash to secure loans. Senior Counsel assisting the Commission, Ms. Rowena Orr Q.C. said that a whistle-blower was recorded as saying: “Money exchanges hands in cash in envelopes, white envelopes, usually over the counter. The money is deposited at C.B.A. so N.A.B. cannot detect the deposits. [It was]happening on a daily or weekly basis and has been happening for a number of years.”
On 19 March 2018 the Royal Commission heard how little A.N.Z. did to check the general living expenses of customers who have been sent to the bank from mortgage brokers. The admission prompted criticism that it may be breaching responsible lending laws by failing to verify the financial situation of those applying for home loans. The week of hearings also produced evidence of irresponsible lending by C.B.A. and Westpac.
On 16 April 2018, before the Royal Commission, Mr. Anthony Reagan, the head of financial advice for A.M.P., admitted that he had lost count of the number of times the company misled A.S.I.C. over the practice. The witness conceded that there were reasons for concern about the company’s internal practice.
On 17 April 2018 A.M.P. made surprising admissions to the Royal Commission over two days of hearings. A.M.P. began with revelations that it had a deliberate policy of charging customers fee for services they never received. Correspondence produced before the Royal Commission showed that A.M.P. was aware that customers were being charge 90 days for financial advice it had no intention of providing. It was initially a mistake, the records suggest, but A.M.P. did not want to stop the practice because it was profitable.
On 18 April 2018, before the Royal Commission, the Commonwealth Bank admitted that it is the worst entity in Australia for charging fees for financial advice which was never received by customers. Counsel Assisting the Commission, Mr. Mark Costello, was questioning Ms. Linda Elkins, from C.B.A.’s wealth management arm Colonial First State when the startling admission was made. (P. Karp, N. Evershed and C. Knaus, ‘A recent history of Australia’s banking scandals,’ 19 April 2018, theguardian.com).
During the first two weeks of its hearings the Royal Commission was presented with the most outrageous examples of financial institutions’ shameless fleecing of their clientele. Nothing of this was new to Dr. Evan Jones who for years has been writing about the systematic malfeasance which extends throughout the Australian society. (E. Jones, ‘The Clayton’s Banking Royal Commission,’ 8 December 2017; ‘The Clayton’s Banking Royal Commission (Part 2): More of the same,’ 23 December 2017; ‘The Clayton’s Banking Royal Commission (Part 3): The root of the problem,’ 1 February 2018).
Perhaps even Dr. Jones would be surprised by the activity of A.M.P. Beginning in 1849 as the Australian Mutual Provident Society, managing life insurance, AMP has evolved over almost 170 years to be a publicly listed, global wealth manager.
ANZ accepted an enforceable undertaking to remedy a poor compliance culture and pays hundreds of millions in settlement to Opes Prime investors.
In 1998 A.M.P. demutualised and listed on the Australian Stock Exchange. A.M.P. Bank opened for business and the A.M.P. Foundation was formed. In 2009 A.M.P. and China Life Group formed a strategic partnership; in 2011 A.M.P. and A.X.A. Asia Pacific merged, and the new A.M.P. and Mitsubishi U.F.J. Trust and Banking formed another strategic partnership. In 2017 A.M.P. and United Capital formed another strategic partnership. Having grown thus fast in retail banking in Australia and internationally, with strong partnerships in China and Japan and investments around the world, the main activities of A.M.P. are in financial advice, retail superannuation, corporate superannuation, self-managed superannuation funds, insurance, banking and investment management.
During the first week of the Royal Commission hearings it was found that Australia’s largest wealth manager corporation charged clients fees for advice that they had not received, lied to the Australian Securities and Investments Commission about it twenty times and then doctored a so-called ‘independent’ report prepared by lawyers at Clayton Utz, a leading Australian law firm, into the matter. A.M.P. was at pain to explain to the Royal Commissioner that it ‘prioritised shareholders’ interest over clients.’
The senior counsel assisting the Royal Commission, Ms. Rowena Orr Q.C. said that A.M.P. and its advisers had misled A.S.I.C. twenty times from 2015 to 2017 about the nature and extent of its fees-for-no-service practice.
Evidence presented to the Royal Commission found that A.S.I.C. – as a matter of practice – relied more on negotiation with licensees than taking direct action and using courts for ‘public denunciation’.
Evidence tabled at the hearing showed that ASIC was quite slow in launch prosecutions. In particular:
– A.S.I.C. has never prosecuted anyone for failing to report a breach within the current 10-day limit, given high evidentiary standards needed and to give licensees more time to investigate the breaches,
– A.S.I.C. has not instigated one civil penalty order in the past five years,
– A.S.I.C. has only succeeded in getting two licence suspensions and two licence cancellations since 2013,
– A.S.I.C. has launched one criminal case in the past ten years,
– A.S.I.C. has launched six civil penalty cases against licensees since 2013, when new legislation came into force allowing this course of action, and
– Since 2008 A.S.I.C. has issued 229 bans against financial planners, 46 per cent have been permanent. (S. Letts, ‘AMP could face criminal charges for misleading ASIC, baking royal commission told…,’ 2018-04-27, abc.net.au).
On its part, the Commonwealth Bank had been charging fees for long dead people, for advice that they had never received. One heard a scarifying story about a Westpac financial adviser telling a nurse to sell her house so she could pool her superannuation in a bed-and-breakfast-adventure, an advice which was illegal under the superannuation law. One was told of some 353 employees of N.A.B. having falsified forms of superannuation holders.
Delivering her closing statement counsel assisting the inquiry Ms. Rowena Orr Q.C. said that the C.B.A., N.A.B. and Westpac, too, were facing the courts over multiple breaches of the Corporations Act.
Ms. Orr said that, on the evidence available, it was open to the Royal Commissioner to find that the conduct of the C.B.A., and five of its advice licensees, contravened the Corporations Act by failing to ensure the advice was provided efficiently, honestly and fairly.
“It is also open to the commissioner to find that the conduct in question was attributable to a cultural tolerance on the part of C.B.A. and its advice licensees of risks and conduct that were potentially detrimental to clients, but which were to the financial advantage of C.B.A. through its advice licensees.”
The case against Westpac centred on appalling advice provided by a number of its financial planners, while N.A.B. faced more scrutiny on the widespread practice of falsifying customers’ signatures on investment documents.
All the banks were facing charges relating to the failure to take reasonable steps to ensure that advisors complied with the Corporations Act.
The attitude of the ‘regulatory agencies’ was easily attributable to the practice of ‘retiring’ from the so-called public service – the Commonwealth Treasury or the Reserve Bank of Australia, for instance – and immediately upon ‘retirement’ taking up very senior governance and executive positions with the very same banks that they formerly ‘regulated’. Business economists, often recruited from those government agencies, would become highly paid employees of the A.N.Z., C.B.A., N.A.B., or Westpac. Better still, they would find very comfortable positions with the ‘custodians’ of the ‘four banks’, such as Bank of America, J.P. Morgan, Macquarie Bank, T.D. Securities and – of course – Goldman Sachs & Co. (J. Menadue, ‘The bank’s PR gloss and descent from heaven,’ 27 April 2018, johnmenadue.com).
Over the previous weeks public outrage had mounted as damning revelations had emerged from hearings conducted by a royal commission into financial services. The country’s four big banks and A.M.P., a major finance firm, are now notorious for levying fees for no services, knowingly charging fees for up to a decade after customers have died, and giving misleading financial advice that caused people to lose their homes.
With weeks of hearings still to come, it already had been proven that the financial giants manipulate interest rates, forge customers’ signatures or require them to sign blank documents and lie repeatedly to corporate regulators. It is also clear that regulators have permitted them to continue their predatory activities.
None of these abuses can be explained, as politicians and the corporate media have sought to do, as the activities of individual rogues, corrupt officials and super-greedy financial advisers. Such practices are the inevitable result of business models, set from the top, designed to extract ever-greater profits, aided by the complicity of successive governments, both Coalition and Labor, which have protected the banks for decades.
After forty years of restoration of ‘good government’ against the alleged amateurship of the Whitlam government, ‘the experts’ had very little to show except for their platitudinous slogans: ‘Liberty, human rights and the free market’, ‘continuity and change’ and – recently – ‘Job & Growth.’ Oh, yes, and: ‘Innovation.’ It is a long word, not the catchiest, perhaps, but easy to remember!
Such is the sickening theatre of neo-liberalism Downunder.
Continued Saturday – The five pillars of financial crime (part 1)
Previous instalment – The restoration of malpractice (part 3)
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.email@example.com.
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