Earlier this year, the Commonwealth Bank announced it had set aside $375 million for possible penalties arising from charges by the Australian Transaction Reports and Analysis Centre (AUSTRAC) in relation to money laundering. Today, the bank and AUSTRAC announced they had agreed to a penalty of just under twice that, $700 million, as part of CBA’s settlement with the regulator over years-long problems with its management and reporting of cash-deposit ATMs.
The bank will also pay some loose change to cover Austrac’s costs — $2.5 million. The result is about on par with earlier estimates based on speculation AUSTRAC wanted $1 billion, which probably accounts for why the CBA’s share price lifted after this morning’s announcement.
The Commonwealth now has the honour of the two largest penalties in Australian corporate history: this one, and the $1 billion indefinite extra capital penalty imposed on the bank on April 30 by the Australian Prudential Regulation Authority (APRA) after the review of the bank’s culture by the financial regulator. Directors and senior management, starting with former CEO, Ian Narev have also departed the CBA this year in an unprecedented clean-out — until the clean-out at AMP, where the chair, CEO, directors and senior managers have gone.
Late last week, the Australian Competition and Consumer Commission (ACCC) also launched an extraordinary prosecution relating to cartel conduct by the ANZ and two global banks, Deutsche Bank and Citigroup, with a third, JP Morgan, involved but with immunity. Cartel conduct is a crime that results in people going to jail– and companies forking out for large fines.
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In contrast to AUSTRAC, APRA and the ACCC, the ongoing refusal of the bespoke corporate regulator ASIC to challenge major financial institutions — preferring instead to negotiate enforceable undertakings in response to serious misconduct because it values the strength of the financial sector as a whole as much as it values enforcing fair conduct — looks ever more pathetic.
For the government, the real problem when it comes to misconduct in the economy is trade unions. On Friday, Jobs Minister Craig Laundy seized on the lifting of a court order preventing publication of the fact that the ACCC had secured a $1 million fine against the CFMEU, which is about a tenth of one per cent of the fine that the CBA will pay. Of course, on the dozen-odd occasions high-profile prosecutions against unionists have fallen flat, the media releases from Laundy, his predecessor and his colleagues, have been missing. Remember, the government set up not one but two new bodies to go after unions, and had a royal commission along the way. One of those bodies ended up being run by a lawbreaker who was forced to quit; the other is now hopelessly discredited due to its role in a confected case against a union for a donation to GetUp when John Howard was prime minister.
And remember that ASIC had its funding cut by the government in 2014 and again in the budget last month.
Even assuming for a moment that every now-abandoned prosecution, every lurid claim, every half-baked allegation against unions — no matter how internally contradictory (the AWU, too ready to do deals with employers that didn’t deliver for its workers; the CFMEU, too militant in its dealings with employers trying to deliver for its workers) — was true, the consequences for the economy are trivial. Despite the marauding brutality of the monsters of the CFMEU, wage growth in construction in the year to March was 1.8%, compared to the average across industry of 2.1%. In mining, wages growth was 1.5%. One can only imagine the frightening damage the combined CFMEU/MUA will inflict — wages growth might reach the average of the rest of the economy.
Bank misconduct is, shall we say, a different beast. It starts with the venality of routine exploitation: fees for services never provided; the dead charged for advice they’d never hear except by ouija board. It escalates to shattered lives of misled and exploited consumers and lost life savings and poorer retirements courtesy of underperforming, overcharging super funds. It detours into systematic misleading of regulators and rotten, complacent internal cultures, before climaxing with helping drug dealers and terrorists move money around and, if the ACCC is to be believed, cartel activity.
Thankfully, at least, there are independent regulators that understand the impacts of corporate misconduct. At ASIC, and within government, it’s a different story.