Royal commission suggests criminal charges over 'widespread' fees-for-no-service scandals

The banking royal commission has suggested criminal charges should be laid against financial organisations that charged fees for no service.

The banking royal commission has asked the securities watchdog to consider criminal charges against a number of financial organisations swept up in fees-for-no-service scandals.

The issue of customers being charged for advice they never received, in some cases even after they died, was one of the most shocking revelations early in the commission and led to the first major scalp with the resignation of AMP boss Craig Meller.

In his final report released today, Commissioner Kenneth Hayne QC slammed the watchdog for its slap-on-the-wrist approach and said the collective $850 million in compensation to be paid by AMP, ANZ, CBA, NAB and Westpac to affected customers was inadequate.

He rejected NAB chief executive Andrew Thorburn’s claim that it came down to carelessness. Mr Thorburn had told the commission the money “wasn’t intended to be ours but it became ours”.

“The amounts of money that just ‘fell into the pocket’ of so many large and sophisticated financial entities, the number of times it happened, and the many years over which it happened, show that it cannot be swept aside as no more than bumbling incompetence or the product of poor computer systems,” Mr Hayne said.

The Australian Securities and Investments Commission had been too focused on getting refunds and “issuing its reports and press releases”, he said, adding “the conduct was treated as if it was no more than a series of inadvertent slips brought about by some want of care in record keeping”.

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Mr Hayne said in the cases uncovered by the commission, there was “a real question” whether criminal offences had occurred under section 1041G of the Corporations Act, which relates to “dishonest conduct in relation to a financial product or financial service” and carries up to $94.5 million in penalties.

“ASIC appears not to have considered the application of the criminal law in connection with fees for no service until a witness giving evidence to the commission was asked whether she had thought that taking money to which there was no entitlement raised a question of the criminal law,” he said.

As of August 2018, ASIC had begun “to examine whether a brief of evidence should be prepared and submitted to the Commonwealth Director of Public Prosecutions in connection with one entity’s possible contravention of section 1041G”.

Mr Hayne said he had written to ASIC in November to notify them of his belief that “at least two other entities may have contravened section 1041G” and “to consider whether criminal or other legal proceedings should be instituted”.

The financial institutions have not been identified.

“Examination of these issues by ASIC is still continuing, and it would not be right for me to anticipate the outcome of those deliberations,” he said. “Nor would it be right for me now to name the entities I identified in my communication to ASIC.”

In his recommendations, Mr Hayne said the law should be changed so that ongoing fee arrangements require “express written authority” from the client and must be renewed annually, as well as recording in writing each year the services that the client will be entitled to receive and the total of the fees that are to be charged.

The changes, which have been agreed to by the government, would apply to all clients, ending the grandfathered arrangements for pre-July 2013 clients under existing law.