Australian banksters up there with world’s worst

Let’s recall the revelations of the Banking Royal Commission so far, via UBS:

Fraud and Bribery

Counsel Assisting, Ms Rowena Orr, QC: “I want to put to you is that NAB knows, & you know, that there were unsuitable loans, there was false documentation, there was dishonest application of customers’ signatures on consent forms & there was the misstatement of some loans in loan documentation.

The whistleblower is recorded as saying: ‘One customer recently said at a particular branch, they told him he could borrow $800,000, but the valuation was only $450,000. The whistleblower said the money exchanges hands in cash, in envelopes, white envelopes usually over the counter. Money is deposited at CBA, so NAB can’t detect the deposits’. Now, this is the information provided by the second whistleblower. Is that right?”

Mr Waldron, NAB – “That’s correct”

Counsel Assisting, Ms Rowena Orr, QC – “And the whistleblower tells NAB that these people are making up fake payslips, fake ID, fake Medicare cards … They charge $2,800 bribery for each customer for home loans”.

Failure to verify customer income

Counsel Assisting, Ms Rowena Orr, QC – “And it wasn’t just the fact for Mr Meehan, that had submitted more than 50% to a single lender; it was also the fact that the particular lender that he had submitted them to was Westpac because Aussie [Home Loans] had formed the view that the credit assessment processes at Westpac were more lax than at other lenders; is that right? Aussie had formed the view that the fact that they [Westpac] were just requiring a letter of employment, as opposed to payslips, would be something that brokers would become aware of to be easier to provide the documentation that was necessary. And do you mean, by that, a letter of employment is an easier document to falsify?”

Lynda Harris, Aussie Home Loans – “Yes”.

Failure to assess customer expenses

Counsel Assisting, Ms Rowena Orr, QC – “The first issue I think that’s worth mentioning this across home loans…it’s a lack of questions & verifications about expenditure. When we ask for copies of their assessment, is that it looks much more likely that a benchmark has been used than they looked at the consumer’s actually expenditure, which can vary considerably from a benchmark figure. There is also very little evidence that expenditure has actually been verified in any way.”

Mr Ranken, ANZ – “ANZ recognised there were instances where it lacked evidence to show that genuine inquiries had been made”

Failure of internal controls

Counsel Assisting, Mr Dinelli – “The remediation paid demonstrates that processing errors occur across a variety of credit products. They occur predominantly by reason of the application of automated processes, but human errors left unchecked often underlie them.”

Mr Van Horen, CBA – “It was the error we made in our serviceability calculation and the mapping the data flows … without overstating it, doomed to fail … having robust change processes, I think, was our failing and it’s clearly an area of ongoing work.”

Failure to report misconduct to ASIC

Counsel Assisting, Ms Rowena Orr, QC – “NAB knew enough to sack five employees for dishonesty and for conflict of interest, is that right? It knew enough by November to sack people for those reasons. Are you telling me it didn’t know enough to tell ASIC that there was a problem?”

Add the BBSW, forex, insurance and money laundering scandals and the only thing left that Australian banks have not corrupted is financial advice. Oh wait, from the AFR today:

In the late 1990s, it was impossible to talk to the chief executives of the big four banks without hearing of their lofty dreams to transform their institutions into financial supermarkets – a one-stop shop for all the banking, insurance and superannuation products their customers could possibly desire.

…But all four banks discovered that their pipe dreams of generating large revenue streams by manufacturing their own investment products in-house, and then using their extensive branch networks to sell them to their customers, were extremely difficult to translate into reality.

Faced with disappointing earnings streams, the banks had to find other ways to squeeze sufficient profits out of their funds management businesses…

Namely, charging customers for breathing. Also at the AFR:

AMP, CBA, NAB and Westpac have admitted making payments that were outlawed five years ago under reforms designed to clean up conflicts in financial advice.

…Vertical integration is a hot topic for the inquiry given five of the major groups operate this model, and corporate regulator Peter Kell, who also gave evidence to the commission on Monday, said it was “inherently conflicted”.

…AMP admitted paying so-called “prohibited conflicted remuneration”…Commonwealth Bank subsidiaries Count Financial and Financial Wisdom admitted its advisers also received prohibited conflicted remuneration…NAB admitted providing free support services to advisers who recommended particular bank products…

They were also charging customers “fees for service” that were never delivered, at The Australian:

Financial services powerhouse AMP has admitted to misleading the corporate regulator at least 10 times over a seven-year-long rort, under which it charged tens of thousands of customers fees for services they did not receive.

AMP initially told the Australian Securities & Investments Commission that the “fees for no service” were charged by mistake. But yesterday the company ­admitted to the financial services royal commission that some of the bogus charges were deliberately levied and it had not been honest with customers.

The royal commission yesterday also heard that AMP — sometimes described as the fifth pillar of the financial system, after the big banks — had since 2009 developed “serious compliance concerns”, a phrase used by ASIC to include fraud and dishonesty, about 81 ­financial advisers.

Here is one answer, from Chanticleer:

The awful revelations about the propensity for companies to lie to the regulator and the willingness of financial planners to put their interests ahead of customers ought to prompt royal commissioner Kenneth Hayne to make findings about the remuneration practices at the upper levels of the major banks and AMP.

…One solution available to Hayne, which is probably being considered by Byres, is to demand that boards of directors use their power to cancel or amend deferred bonus payments. These clawback provisions have rarely been used in Australia.

I’ve studied in detail the intense corruption of US banking behind the GFC and there is nothing above that would not fit right in.

The Royal Commission is now in danger of under-delivering solutions because Australian bank corruption is so systemic that tackling it is like trying to swallow an elephant.

Comments

  1. A long list…and you can add to this list pretty grievances like opening bank accounts for known criminals, financing such with no evidence of any legal income, facilitation of large scale money laundering, plus selling useless insurance to the poor and vulnerable…
    And yet the executive class like that criminal Narev wander back to their lives with filthy bonuses and preach about governance, culture and the need for wage restraint. Aaaaaaassrgh!!!!

  2. Given the list above it will be interesting to see the outcomes of the commission. I say this knowing the judicial system is also corrupt. The banks will simply pay them to water down the findings.
    Is it all paid for on taxpayer money ?!?!?

  3. Know IdeaMEMBER

    The world’s worst? No, no, no, you have got it all wrong. They are the world’s best. The envy of the world. They can do what they do with impunity, take full and knowing advantage of moral hazard, and never ever see the inside of a prison. This defines banking perfection. Australia is the number one banking jurisdiction, without doubt. Where the rule of law applies only to those without control of sufficient capital.

    But for this to operate as it has requires, in my view, the world’s most financially illiterate, greedy and gullible proletariat. In fact, I am not sure how to measure those characteristics other than by observing bankster behaviours.

    • Spot On.
      If the Commission into the Unions uncovered only 1/2 of what RBC has uncovered so far we still would have been hearing Scomo, St Mal, Tones, The Asbestos Queen, the Belgian Mug, Mitch the Mug, Mateo the Mug that Kiwi inbred Mug.. hammering the Unions on how corrupt they are.
      Not a single person will go to jail. All these fckrs broke the law and no one will face the law.
      I can’t hear our politicians being outraged on this.

    • Jumping jack flash

      Exactly what I was thinking.

      We have the biggest, baddest, bankers in the world!

      Its just a matter of perspective. Someone’s “worst in the world” is another’s “most bad-ass in the world”.
      Everyone gets so righteous when there’s an RC going on.

    • “But for this to operate as it has requires, in my view, the world’s most financially illiterate, greedy and gullible proletariat.”

      I can’t go that far, though we aren’t free if guilt. The great con was to have a single metric by which all could be judged well, increasing property prices. As long as the bubble was fed all was well. The idea that an affordable house, with work that allows you to spend time with family and friends talking about nothing in particular was scuttled. The adverts still occasionally allude to it, but the reality differs greatly.

  4. astrolinMEMBER

    Am I right in believing if the ALP win they will extend the inquiries into the Banks? They really should be referring back to Turnbulls answers in Question Time when he was telling the nation there was no need for an expensive Royal Commission because the existing regulatory framework was adequate. It was only some Nationals that forced his hand and threatened to vote with Labor for a Royal Commission. Well done to Williams, O Sullivan and Co. But the Nationals don’t look so great being in Coalition with the Liberal Party who worked so hard to stop these corruption revelations ever seeing the light of day. The sector needs a return to pre Campbell inquiry regulation levels and a government owned bank that we once had in the Commonwealth Bank. We were told how inefficient it all was back then but we now see “efficiency” is an enabler for the disturbing practices we are learning of each and every day. It will be difficult for millions who trusted the system to avoid paying some sort of price as a result of the financial deregulation seen since the 1980s and these resultant practices. We shall see what we shall see. Clearly we need a government owned bank to restore trust, accountability and stability to the financial sector – public ownership, as Tony Benn said, is democratic control.

    • matthew hoodMEMBER

      I would think it shouldn’t be to hard to have Australian Post fill the void.

    • Labour was pushing for all that but I think even Labour is now scared. This is big. We are just coming to realisation that our banks did what the Yanks did 10 years ago. And they did it because our banks, like the merican banks, also understand that the law does not apply to them.
      IN the meantime we will be told we need to tighten our belts..

    • I highly doubt Labor will do much either. Before the US election I thought Trump had the best interest for the country and was genuinely looking for change but several years later he has become exactly the same as every other politician. In other words, Labor, Liberal, whoever, they are just a front and are not really running the show, their masters (bankers etc) are really in charge so I doubt there will be much difference in the royal commission no matter who is elected.

      • That’s right. Plus, CEOs are expendable. Depending on the level of public outcry, the system can throw a few of them under the bus and, while the dumb public is busy celebrating the superficial victory of justice, continue with the business as usual.

        Too easy.

      • Sorry Dan he wasn’t the same as the other politicians, he was worse. And that should have been apparent before the election. Sanders was the real hope but he was dudded in a rigged Democrat primary whose sole purpose was a Clinton coronation.

      • One difference I thought in Labors Royal Commission proposal was to allow for each and every bankster victim to testify. The pared back Turnbull one does not allow for that, instead it only allows a limited number of victims to testify in a more “case study” type approach

  5. Can we get an article that lists all the best and driest smackdowns delivered during the commission? Like from yesterday’s post “The Commissioner – “An available point of view may be that there is a trade-off between administrative convenience and obeying the law. Now that’s a very awkward trade-off”.
    Pure gold.

    • Omg great idea. A YouTube video for sure. One where the comment is made, the camera looks back to the person being interviewed, and randy Ortiz RKOs them with wrestling commentary in the background.
      https://youtu.be/3XwKepsOjKA

    • Good is a point of view, RC.

      Somebody forgot to give a memo to the RC that they were not meant to make Australia look like Zimbabwe so soon after the South African debacle. With the reference to the rule of law and stuff, you know.

      Well, the truth will come out in one way or another.

    • A YouTube channel devoted to people reading them out would also be a hoot. You’ve got to find the antithesis of the financial and political classes to do it. Maybe bikies, preferably with criminal records, who then comment that they wish they could get away with that type of stuff. Riffing further, perhaps QLD can introduce a law where two or more people in suits are not allowed to congregate in order to minimise criminal activity.

  6. There is normally soft slaps on the wrist in the name of “monetary stability”, while the banker walks with his/her vault full, and on to the next gig.

    We all want effective measures put in place, but in Oz it just won’t happen. If it does I’ll be amazed. I trust them less than pollies, and energy companies.

  7. On the side of the Article I just got popup ad from Escobar Bank offering 2.45% interest.

  8. Some Notes:
    As first witness, Peter Kell, deputy chairman of the Australian Securities and Investments Commission, amplified ASIC’s views of what has gone wrong.
    promises made up front to customers that don’t match the treatment that customers receive “post-sale”.
    customers being charged – and paying for – services not actually received.
    Commissioner Hayne described it even more pithily by suggesting there were 3 different propositions involved –
    “selling what you can’t deliver,
    selling what you won’t deliver,
    and selling what you don’t deliver”.
    “It is clear from our experience that the firms in question prioritise fee revenue from their advice business over the provision of services to their clients,”
    “The systems that underpinned the ability to collect revenue are significantly more developed than the systems that ensured that the client received the advice services.”
    financial advisers to clients with self managed super funds fail the legal requirement to properly consider the best interests of their clients in an astonishing 90% of cases.
    AMP executive Anthony Regan “deliberate commercial decisions rather than mere ignorance or inadvertent failures of process or systems.” fees for no service, for delays or failures in informing AMP had continued to make false or misleading statements to ASIC about all this until as recently as last year.
    AMP’s disturbingly regular practice of blaming inadvertent errors of process rather than admitting to deliberate business decisions to continue to charge fees.
    At times, this also meant AMP correspondence incorrectly informing ASIC the fees had been terminated while knowing this was not true.

    Some of these breaches resulted from the “buyer of last resort” (BOLR) policy, which allows advisers “sale back rights” to AMP for around four times the revenue of the business, including allowing “books of clients” to be sold within AMP. Once sold back to AMP, these “orphan” clients often did not get any ongoing personal advice despite being charged ongoing fees, sometimes for a “grace period” of three months, sometimes for longer.

    the practice of providing fees for no service has been an industry-wide problem.
    So who knew what when and what has been done about it.
    For the tens of thousands of clients of the banks and AMP charged for services – basically financial advice – not received, the individual costs might not be large, certainly not ruinous.
    Most people did not even realise they were being wrongly charged due to the process of continuing automatic deductions from their accounts.
    financial catastrophes inflicted on many people when they received “inappropriate” or fraudulent advice – individual disasters only apparent in the wake of the global financial crisis. thousands of “independent” advisers ripping off their hapless clients who usually had even less redress against them than against the banks.
    banks’ move into wealth management and its dubious practices that mean they are now the ones in the dock and with the deep pockets to pay for their sins – apparently of both omission and of commission.

  9. HnH, the single lesson you should draw from your detailed study of US banking is that solutions will most certainly be under-delivered

    • And nobody except 1 fall out guy goes to Jail. Can we make it Ian Narev who takes the bullet please?

      • I say any of those CEOs post Rudd/Gillard. They feasted on that carcass of rooted policy.

      • No, the mortal enemy of the banker is not a mere gun, it is the nail gun.

        So, Ian Naren should get nailed, by extension.

      • @Red_dumpling

        Nobody expects The Inquisition! And whilst the problem with the inquisition is that at some point you run out of witches, in our case, we haven’t even started yet. I say, burn a few and then consider diversifying. I’m sure we can find a few other “industries” to release some magic smoke out of.

        I say fight FIRE with fire! 😀

      • LOL. As if. It’ll be some poor teller who looked the other way once because they were too busy frantically rowing to rock the boat any.

        Narev will sail into the sunset, on the back of his giant bonus, and the next big payday screwing someone somewhere else.

    • Mr. Daley’s morals, while lacking, still sit there and would prevent him from reaching his true potential within Australian banking. The T1000 is a far better example of a fictional creation that could prosper at our esteemed financial institutions. It’s only flaw is that it possesses too much personality for the workplace culture it would find itself in. The more compassionate members of the animal rights movements any even try to free the T1000 from such a cruel and twisted environment.

  10. DarkMatterMEMBER

    Unfortunately, the malfeasance of the sociopaths who run the Banks extends far beyond the petty skimming of a few points of interest rates, forging loan documents and reaming the pensioners. Not even mentioning the bizarre “interest” rates of their credit cards which would shock a mafia cappo.

    A few years back the A_Z bank pulled off a job similar in scale to the Great Train Robbery. There was a forestry scheme in SA which many people in the bush used as a type of retirement fund. It was a tripartite agreement with a trustee, a forest management company and a milling company. The investors funded the trees, and when harvested, they were milled and everyone got a cut. This had been running since the 1960’s at least, without incident. Back around the GFC time, Gunns acquired SAPFOR – the forest management company, and coincidentally took a loan from the A_Z bank, and then went belly up. Whocudanowd? Of course the A_Z bank decided that it was entitled to the $90m worth of trees SAPFOR was managing, and the poor bastards in the bush could lose all their life savings. That’s fair I suppose.

    So, with the help of a high powered law firm, this matter was waltzed through various courts for about 5 years. Every time there was a dissenting judge and the case got bumped up to the next level. Finally, it went to the High Court and surprise, surprise, the other shoe dropped – in a matter of hours the High Court found in favour of the Bank, and that the investors were foolish to think they ever had any right to the trees they paid for.

    In fact, the High Court judge – French I think it was – made up a little joke based on his penchant for Bob Dylan. ….

    The answer my friend is not blowin’ in the wind

    “AET submitted that this Court has recognised that there should be no
    reluctance in inferring the existence of an express trust…To eschew historical
    reluctance is one thing. To construct intention out of straws plucked from textual
    and contextual breezes, some blowing in different directions, is quite another.”

    So… this sensitive and caring judge transfers the life savings (about $90m all up) of some battlers to a conniving, rapacious bank, and uses Bob Dylan (people’s poet and defender of the downtrodden) to make fun of their misfortune. Sadly, since the High Court is the final say for justice in Australia, we can’t question their decision. Nor can we even speculate on whether the elites are running their own private Old Boys Club. Nevertheless, if it walks like a duck and quacks like a duck, it’s probably a …..

    Many people lost everything in that bit of financial skullduggery. In some cases, lost all their property and now live pretty much hand to mouth on the pension. For someone over 60 to lose all that, they can never start again. Its game over. I know about this because it happened to a family member up in the bush.

      • https://hallandwilcox.com.au/trust-isnt-easy-the-high-court-confirms-that-a-trust-will-not-be-readily-inferred-in-contractual-co/

        The High Court has made it clear that an express trust will not be read into documents in which the intention to create the trust does not exist.

        Secured creditors and liquidators should keep this in mind when considering arguments that company assets are held on trust for others.

        On the other hand, parties who believe they have a beneficial interest under a trust should be ready to back this up with clearly drafted agreements that demonstrate an intention to create an express trust.

      • DarkMatterMEMBER

        Apart from the legalese, the big problem here was that it looks like the bank saw an opportunity to exploit a legal loophole and make a killing. If nobody else saw the risk here for 60 years and people saw it as a legitimate investment, doesn’t that mean that there is a risk with all investments that the banks and lawyers can take the lot? Perhaps investment is only suitable for people with 20 years in the law?

        Korda & Ors v Australian Executor Trustees (SA) Limited [2015] HCA 6

        WHAT YOU NEED TO KNOW
         On 4 March 2015, the High Court handed down a unanimous judgment finding that no trust was to be
        imputed over timber and land sale proceeds arising out of the sale of certain Gunns forestry plantation
        assets.
         The Court emphasised that the question of whether an express trust exists must be answered with
        reference to intention. In the absence of an explicit declaration of that intention, the process of
        ascertaining the parties’ intention involves construing relevant documents and other dealings in their
        regulatory and commercial context.
         An express trust will not be imputed simply because a court considers that it is an appropriate means of
        protecting or creating an interest.

        Background
        SEAS Sapfor Forests Pty Ltd (Forest Company)
        developed plantations of pine trees and SEAS Sapfor
        Harvesting Pty Ltd (the Milling Company) was
        engaged by the Forest Company to provide felling and
        milling services and to market and sell the timber from
        the plantations. The Forest Company raised funds
        from time to time by issuing covenants to investors
        (Covenantholders) under various prospectuses. The
        Respondent, Australian Executor Trustees (SA) Limited
        (AET) is the trustee for Covenantholders. The
        purchase of a covenant conferred upon
        Covenantholders the right to the net timber proceeds
        attributable to their interest in the particular planting
        year for which they applied. Some Covenantholders
        were also entitled to a payment in relation to the value
        of land upon clear felling of the timber or cessation of
        the covenant.
        In 2008, Gunns Limited acquired the Forest Company
        and the Milling Company. In March 2012, the relevant
        plantations were sold in their entirety – in particular,
        AET, the Forest Company and the Milling Company
        (among others) entered into an agreement for the sale
        of trees, resulting in the payment of $33,999,998 to
        the Milling Company (Tree Sale Proceeds) and two
        agreements for the sale of land, resulting in payment
        of the $53,356,000 to the Forest Company (Land
        Sale Proceeds). In September 2012, receivers Mark
        Korda and Bryan Webster of KordaMentha (the
        Receivers) were appointed to Gunns Limited and
        each of the Forest Company and Milling Company.
        AET filed an Originating Motion in the Supreme Court
        of Victoria on behalf of the Covenantholders, seeking
        declarations as to its rights to the Tree Sale Proceeds
        and Land Sale Proceeds. The key issue in the case was
        whether the Tree Sale Proceeds and Land Sale
        Proceeds were held on trust by the Forest Company
        and Milling Company for the Covenantholders, as AET
        contended.

  11. Australia is true to its convict past. As a country we carp on about corruption in other countries yet we must have one of the most corrupt societies outside of Asia and the 3rd world. You see it in our councils to our largest businesses, unions, political parties and our institutions that are meant to overlook us, on a daily basis. Our banks have been knowingly stealing from their customers, big business has been bribing overseas officials etc, our councillors are busy lining their pockets via corrupt property development changes and nothing EVER happens.

    It amazes me that more isn’t been said in the media about the complicity required from the top levels in the banks for this to have gone on for so long.

  12. If Straya’s bankers had been any less able than their international peers that would have been a concern. They operate by the same motives: whatever it takes, rent seeking, unethical pursuit of profit, and they all connect with each other.

  13. One would think if one sector like banking has such a perverse “culture of corruption” and anti social activity how far spread this ethos spans. The next thing to consider would be what enabled it all and whom drove that agenda.

    Its not like neoliberalism was predominantly a two tier society template.