Banking royal commission: potential NAB criminal breaches outlined

ASIC accuses NAB of more than 100 potentially criminal breaches over a fees scandal, say papers the bank tried to keep secret.

Former NAB super executive Nicole Smith leaves the royal commission hearings. Pic: AAP

The corporate regulator has accused National Australia Bank of more than 100 potentially criminal breaches of the law over a scandal in which it charged customers fees without providing any service, explosive documents the bank tried to keep from public gaze at the financial services royal commission reveal.

Allegations against the bank are outlined in an Australian Securities and Investments Commission letter to NAB, dated October last year and headlined “Suspected offending by members of the NAB group”, and in other documents tendered to the royal commission today.

In the documents, ASIC accuses NAB of four potentially criminal counts of misleading, deceptive or false conduct and another 110 potentially criminal counts of failing to report breaches of its licence on time.

The documents show NAB has admitted to ASIC that it failed to file 84 notices of significant breaches within the 10 days required by company law.

The ASIC letter shows the regulator was “concerned” that NAB’s correspondence to customers over an incident in which they were charged so-called “plan service fees” for advice from a financial planner they did not have was misleading, deceptive and false.

It accused NAB of breaching two sections of the ASIC Act, both of which can attract criminal sanction.

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ASIC accepted that NAB had remediated customers stung by the wrongly-charged fees.

It is believed the regulator has not yet decided whether to settle the dispute with NAB, pursue civil action or go down the path of criminal prosecution.

In the letter, the regulator also slammed NAB over its behaviour relating to a separate group of people who were members of a corporate super fund, Masterkey Business Super or MKBS, but transferred to a personal fund after leaving their employer.

NAB continued to charge these customers the plan service fee but ASIC said it did “not accept NAB’s assertion that an agreement made between a former employer and and a plan adviser in respect of an MKBS employer plan creates an ongoing obligation to supply services to members who have left the employer plan”.

“Further, NAB has no knowledge of whether any services are in fact provided by plan advisers to these members,” ASIC said in the letter.

NAB has charged almost 63,000 MKBS members who had left their employer about $6.75m in plan service fees between September 2012 and September 2017, the letter reveals.

It again accused NAB of breaching the same two potentially criminal sections of the ASIC Act.

On November 3, 2017, ASIC wrote to NAB general counsel Sharon Cook regarding her conversation on that day with ASIC head of enforcement Tim Mullaly about the bank’s fee for no service scandal.

“The most recent position that NAB has put forward as the 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 said.

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

“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.”

The documents were tendered to the commission today after NAB’s counsel, Neil Young, QC, failed in a last-ditch bid to keep them secret.

“NAB emphasises discussions with ASIC have not reached agreement and have not reached conclusions,” Mr Hayne told the royal commission.

In its bid for secrecy, NAB lobbied Mr Hayne to consider that it was in the public interest to protect private individuals who may be implicated in the scandal, and in its commercial interest to protect sensitive information.

“It is to be noted that, it would be in the interests of NAB to pay the least sum available by way of remediation,” Mr Hayne said. “It would be in the interest of people charged fees in the instance where no service has been provided to be provided with adequate compensation.”

“For these reasons the application for non publication direction is refused,” Mr Hayne said. Counsel assisting, Michael Hodge, QC, who has been grilling NAB’s former superannuation chairman Nicole Smith over the bank’s tardy approach to compensation and its bid to retain the ability to charge largely useless fees to customers, told the royal commission of NAB’s slow and reluctant production of documents in response to the commission’s demands.

He said that after a blow-up yesterday during which Mr Young asked the royal commission to withdraw from publication the documents outlining ASIC’s discussions with NAB over the fees for no services issues, the commission would “never again” give advance notice of which documents it intended to give to witnesses.

Michael Hodge at bank inquiry hearings. Pic: AAP

Mr Young had claimed the NAB legal team had not seen the documents.

“I accept that it may be that the solicitors for the NAB somehow did not realise that they had access to those documents,” Mr Hodge said.

But he said it was not the fault of royal commission staff and that most of the documents were available to NAB on Sunday evening and more were available on Monday, when NAB could have made confidentiality applications for the documents.

“Everything has occurred according to the published guidelines,” Mr Hodge said.