Banking royal commission: ASIC files detailing alleged NAB criminal offences aired

Documents accusing NAB of criminal offences relating to its fee-for-no-service saga have been aired by the inquiry.

NAB CEO Andrew Thorburn. Picture: Aaron Francis/The Australian

The corporate regulator has accused National Australia Bank of at least three criminal offences and 19 civil breaches across half a dozen different courses of conduct relating to its fee-for-no-service scandal, documents released by the financial services royal commission reveal.

In an “outline of suspected offending by the NAB group”, sent to the bank in October last year, the Australian Securities and Investments Commission said the suspected contraventions were “serious and systemic” and “demand a significant regulatory response”.

The breaches are in addition to ASIC’s allegation that NAB (NAB) committed 110 counts of the criminal offence of failing to tell the regulator about a serious breach of its financial services license within 10 days, which was revealed at the royal commission last week.

National Australia Bank chief customer officer Andrew Hagger leaves the Federal Court, in Melbourne on Monday. Picture: AAP

NAB has paid or agreed to pay more than $100m in compensation to victims of the fee-for-no-service scandal.

In its outline, ASIC said NAB knew as early as 2010 that it was at risk of charging customers fees for services they never received.

One of its fee for no service rip-offs could date as far back as 2008 because there had been no review of the specific issue since 2004, the regulator said.

The ASIC paper reveals the issue was raised as a “medium” risk with NAB’s executive risk and compliance committee as early as April 2013, along with “concern that this may be a systemic issue”.

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Despite this, NAB executives “expected that this issue will resolve itself given FOFA [Future of Financial Advice] work underway”.

ASIC said there were at least 40 complaints about the rip-off between 2012 and 2015.

“NAB’s failure to provide ongoing services while continuing to charge clients fees for those services was widespread and affected a large number of clients over a period of many years,” the regulator said.

“Moreover, the failures have occurred across a number of NAB entities, meaning this was not an isolated problem, but a systemic failure of fundamental controls within the NAB group.”

ASIC accused NAB of at least three criminal violations of the ASIC Act by making false or misleading statements to its clients about two of the fees it charged, the “adviser service fee” and the “plan service fee”.

Former chair of NAB's superannuation trustee NULIS Nicole Smith leaves the Federal Court in Melbourne last week. Picture: AAP

In two of the alleged criminal breaches, NAB failed to tell members of one fund, MasterKey Personal Super, that they could turn off the plan service fee.

Nine of the alleged 19 civil breaches relate to the fundamental requirement that a financial services licensee deal “efficiently, honestly and fairly” with customers and obey the financial services law.

The bank is also accused of misleading and deceptive conduct that does not constitute a crime and breaching conditions in its financial services license.

It is believed ASIC’s investigation continues and has yet to reach the stage where the regulator will decide to pursue a settlement, such as an enforceable undertaking, pursue civil action or go for criminal prosecution.

Last week, the royal commission heard evidence of the extraordinary lengths executives at NAB’s wealth subsidiary, MLC, went to in an attempt to hold on to the plan service fee when it was not entitled to it.

The fee was charged in return for general advice from a financial adviser, but NAB proposed the bank could pocket the fee if it provided members who did not have an adviser with services such as access to the fund website and marketing materials.

Former NAB wealth executive general manager Paul Carter leaves the Federal Court in Melbourne last Monday. Picture: AAP

In separate correspondence, ASIC rejected this proposition.

“The most recent position that NAB has put forward as a basis for its remediation approach in these matters is a concept of measuring “customer/adviser interaction’ or assessment of whether the ‘spirit” of customer agreements was adhered to,” ASIC senior executive Louise Macaulay told NAB general counsel Sharon Cook in a letter dated November 3 last year.

“ASIC does not consider that this approach is appropriate to replace the express commitments given by NAB to its customers in service agreements,” Ms Macaulay said.

“We also note that the approach proposed by NAB is out of step with some of its major peers that have reported fees for no service failures and are close to finalising their customer review and remediation programs for these failures.”