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Calls for bigger penalties to ‘end financial sector crimes’

Apr 20, 2018

"More than 300,000 Australian customers have been ripped off to the tune of $216 million by financial advisers." Source: Pixabay

Consumer group CHOICE has ripped into Australia’s financial services industry, calling for corporate regulator ASIC to be given “new enforcement powers and access to bigger penalties to end financial sector crimes.”

“With latest estimates finding more than 300,000 Australian customers have been ripped off to the tune of $216 million by financial advisers who charged fees for no service we need to give the regulator tougher powers”, Tom Godfrey, a CHOICE spokesperson said in response to reports coming out of the Banking Royal Commission.

For weeks, the commission has heard evidence from some of Australia’s largest financial institutions, who admitted they had knowingly misled ASIC, whilst, amongst other crimes, ripping their clients off by charging fees without providing services.

Earlier this week, a senior Commonwealth Bank of Australia (CBA) executive admitted that the bank would be a “gold medallist” if the banking regulator handed out medals for charging fees while providing no service.

The commission heard about CBA’s practice of charging customers fees when it did not actually provide them with financial advice, and heard that the bank knew as early as 2012 that it was continuing to charge customers of its Commonwealth Financial Planning business fees, even though they didn’t have a financial planner advising them because the advisers had left the business. But it took a further two years for the bank to inform the regulator, ASIC, of the regulatory breach of charging fees for services not provided.

“CBA’s reluctant admission its staff took fees from customers without providing a service, is a yet another example of a company that feels no compulsion to comply with the current laws,” Godfrey said.

“This demonstrates that the penalties for non-compliance are too low. Currently, fines for misleading the regulator are as low as $21,000, a small price to pay in the context of potentially millions of dollars of profits.”

Meanwhile, AMP, Australia’s largest wealth management business, admitted that it not only charged fees without providing services to customers, but then misled ASIC on as many as 20 occasions when the watchdog investigated the breaches.

“It’s clear the likes of AMP and CBA feel no compulsion to abide by the law and that’s why the law needs to change and we need to see bigger penalties,” CHOICE CEO Alan Kirkland said.

“Bank executives have fought tooth-and-nail against changes designed to help Australian consumers like the Future of Financial Advice (FoFA) reforms and the need for a Royal Commission.

“Following the damning revelations in the Royal Commission this week, it’s clear they have put profits well ahead of people and it’s time they throw their support behind tougher laws.”

Kirkland took a final jab at the industry whose collective reputation has taken a severe beating in recent weeks, saying that with so many banks confessing to breaking the law, the industry “can no longer rely on the tired ‘few bad apples’ defence.”

In related news, the Banking Royal Commission claimed its first executive scalp today, with AMP chief executive Craig Meller resigning.

According to News.com.au, Meller has apologised “unreservedly” for AMP’s conduct, which was uncovered at the inquiry this week, saying he was “personally devastated” about AMP’s claims of charging clients for advice they never received.

The Financial Sector Union of Australia (FSU) supported Meller’s move, saying “he made the correct decision to resign following the reprehensible behaviour within AMP revealed to the Royal Commission.”

According to an FSU statement, “The FSU believes systemic cultural problems in many of our financial institutions are created by senior management and company boards, not by workers further down the food chain who are under constant pressure to produce ever increasing product sales.

“The Royal Commission has revealed how consumers can be caught out when financial services entities link remuneration and bonuses to revenue from sale of products.”