Criminal charges, jail time possible over fee-for-no-service scandal: Banking Royal Commission
Two financial giants face possible criminal charges — with executives even facing jail time — over the fee-for-no-service scandal which has swept up major banks, the royal commission reveals.
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Two financial giants face possible criminal charges with executives even facing jail time, the royal commission reveals.
The commission’s final report reveals commissioner Ken Hayne proposes possible criminal charges referred to the corporate cop, but the names of institutions have not been revealed as investigations continue.
It is in relation to the $850 million fee-for-no-service scandal that has swept up major institutions including AMP, ANZ, the Commonwealth Bank and Westpac.
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Under the scandal banks and wealth managers were found to be charging fees on people they gave no service to.
In some cases with the CBA, NAB and AMP fees were charged to dead people.
Mr Hayne in his report reveals the corporate cop was already considering charging another entity over fee-for-no-service breaches.
He says these could contravene section 1041G of the corporations act — dealing with dishonesty — which can attract up to 10 years’ in jail and substantial fines.
The commission says the fines could be “three times the value of the benefits obtained by the person” through their crimes.
“I invited ASIC to consider whether criminal or other legal proceedings should be instituted in respect of that conduct,” Mr Hayne said.
“Examination of these issues by ASIC is still continuing, and it would not be right for me to anticipate the outcome of those deliberations.
“Nor would it be right for me now to name the entities I identified in my communication to ASIC.
“There is no doubt that money was taken from clients. Nor is there any basis for doubting that, when taken, the taker did not intend to return it to the client.”
He said the cases concerned involved money being taken from the dead.
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“I consider that it is open to a jury to conclude, beyond reasonable doubt, that, in either of the cases described, the taker, in the course of its carrying on a financial services business in this jurisdiction engaged in conduct in relation to a financial service that was dishonest according to the standards of ordinary people and that the conduct was known by the taker to be dishonest according to the standards of ordinary people.”
At the same time, powerhouses including the Commonwealth Bank, AMP, National Australia Bank, ANZ, IOOF, Allianz, TAL and Youi have been referred to corporate police for assorted breaches.
A full 24 recommendations are made referring to breaches.
Mr Hayne cannot directly press charges but makes general recommendations for regulators — either the Australian Securities and Investments Commission and the Australian Prudential and regulation Authority — to further investigate.
Under many of the laws he makes, directions for the corporate cop can press heavy-hitting criminal penalties or lesser civil penalties, depending on what they find.
No executives were named in the report, meaning Mr Hayne is focusing his legal might on the institutions.
But if ASIC and APRA find criminal activity, they can charge individuals.
In the report, he blasts NAB superannuation trustee NULIS saying it “may have breached its duty to act in the best interests of the affected members”.
The corporate regulator and the commission have both claimed that NAB misled super fund members and wrongly took about $100 million in fees from hundreds of thousands of customers.
“The matter not having been drawn to the attention of the regulators so far, I will refer the matter to APRA to consider whether to take action,” Mr Hayne says.
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“The trustees did not pay sufficient regard to the financial interests of those members affected by adviser payments and, instead, prioritised the commercial interests of the NAB group or the interests of advisers, or more probably, both.”
He said this could breach section 52(2)(c) of the SIS Act and referred it to APRA.
Investigations to breaches of the SIS act can give rise to criminal charges in some instances.
Banking giant the Commonwealth does not escape unscathed either.
Mr Hayne says the CBA may have breached laws when it delayed transferring 13,000 super members to a cheaper MySuper account and saw them whacked with a huge amount of fees.
He was also critical of CBA subsidiary Colonial First State collecting certain commissions, breaching “best duty” provisions.
Wealth manager AMP is also under fire for conflicts of interests over the running of its super funds.
Mr Hayne criticises the way AMP’s supposedly independent trustee outsourced many of its services back to AMP, which created a conflict.
Mr Hayne refers them to ASIC and APRA for possible breaches of the super act.
Originally published as Criminal charges, jail time possible over fee-for-no-service scandal: Banking Royal Commission
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