Recent revelations from the banking royal commission – Editor
Heavy penalties are on the table for banks caught lying and taking fees for no service
Angry customers want jail for bankers, as well as better banking practices (LUIS ASCUI/AAP)
An article in the Jan-Feb issue of ERA Review  expressed pessimism about whether the terms of reference and duration of the current Royal Commission into the operation of the financial system will achieve the reforms that are needed. Apart from the issue of the necessary reforms, the very recent revelations of wrongdoing by big financial corporations also raises the issue of the likely penalties for their misbehaviour.
According to a recent article in The Conversation by Dimity Kingsford Smith and Alex Steel , both ASIC (the Australian Securities and Investment Commission) and the Director of Public Prosecutions will have no lack of evidence to pursue civil penalties and criminal cases.
What AMP and CBA did
Ref 2 states the situation succinctly: “AMP and CBA have admitted they failed to provide information and report breaches to ASIC as required by the Corporations Act. Misleading Australian government agencies is also a criminal offence under the Act and the Commonwealth Criminal Code.”
“As well as dealing truthfully with ASIC, all entities licensed to offer financial services must act “efficiently, honestly and fairly” and take reasonable steps to ensure their employees do likewise.”
“It is not hard to see how taking clients’ money without providing a service is not efficient, honest or fair. ”
Civil penalties could involve disqualification for up to 20 years as a corporate officer and/or a large fine running to hundreds of thousands of dollars.
Officers of a corporation are duty-bound to act with diligence and care in the company’s best interests, and to behave honestly. An intention to cause the corporation to break the law cannot be in the corporation’s interests.
For more general offences, criminal penalties could range from 12 months in jail for misleading ASIC to significant penalties for conspiracy to defraud.
Policy under neoliberalism
In a recent article within the Crikey business section by Bernard Keane , attention has been drawn to deeper issues about policymaking in Australia than just flaws in the structure of the finance industry. According to Keane, understanding banks’ systematic ripping off of customers and their equally systematic role in trying to hide it from the regulator, as purely the result of individual venality and a corporate structure that incentivised it, can lead to treating the symptoms rather than the causes. He concludes:
” Market concentration (giving greater power to companies), learned helplessness by government (weak regulation), the distortion of policymaking by corporate interests (political donations), the use of carefully contrived but notionally objective evidence ( “independent reports” that are far from independent), are all features of how we’ve been doing economic policy under neoliberalism. They’re all features of our policy- making process, not flaws. Only the reforms aimed at addressing that process will achieve genuinely systemic change.”
Contempt for the regulator
Another recent article in the Crikey business section by Bernard Keane and Glenn Dyer  reveals how utterly contemptuous of the ASIC Australia’s biggest financial firms can be.
According to these authors:
“AMP evidently thought nothing of lying to ASIC. As teased out at yesterday’s hearing, AMP lied to ASIC over 20 times about charging fees for no service – in particular, trying to convince the regulator it was just an “administrative error” rather than what it was: a deliberate policy undertaken by senior management in full knowledge it was against the law. They even initially lied to the victims when they decided to refund some charges.
“The reason some of the most senior people in AMP did this is because they were totally unafraid of ASIC, which lacks both the punitive options to make companies and individual executives and directors fear its wrath, and the willingness to use them. Despite the stunning revelations that had emerged from the royal commission so far, ASIC’s new chairman, James Shipton, appointed by (the Federal Treasurer) Morrison, is still talking about letting major financial corporations fix their own culture, while the regulator will merely “stand ready” to act. There’s no point in giving a wet lettuce-wielder like Shipton more power if he’s simply not interested in using it. ”
And lastly, the authors conclude:
“the regulator needs to be able to come after the likes of AMP and the big banks with billion-dollar fines and the threat that executives and board members could wind up doing a stint behind bars if they’re not forthcoming to investigators. And it needs a chair and executive willing to use such powers. ”
ERA Review, vol 10, no 1, pp 26-28 “Latest financial inquiry will fall short of what is needed”.
The Conversation, 19 April, 2018 “Heavy penalties are on the table for banks caught lying and taking fees for no service”
Crikey, 19 Apr 2018
“The royal commission isn’t exposing flaws in the system – this IS the system* https://www.crikey.com.au/2018/04/19/flaws-exposed-in-banking-royal-commission-are-systemic/
Crikey, 18 April 2018 “AMP treated the corporate regulator with contempt – understandably”