A Senate inquiry has found that Commonwealth Bank financial planners have engaged in fraud, forgery, and predatory and misleading practices since 2003. This resulted in massive losses for thousands of customers including people’s life savings and homes.
By Kirk Leonard, Socialist Party
Continuing revelations point towards a deeper level of scandal that calls the entire financial system into question. There is evidence of a systematic cover-up by bank management while the government regulator has failed to act.
Commonwealth Bank Australia (CBA) is the largest of Australia’s ‘big four’ banks. In recent years it has continually smashed profit records and is currently rated amongst the top 20 most profitable banks in the world. Its financial planning operations are responsible for hundreds of millions of dollars of revenue every year. CBA is one of the most vital organs of Australian capitalism.
Corporate regulators, the Australian Securities and Investments Commission (ASIC), first wrote to CBA at the beginning of 2008 to raise concerns that there was ‘serious misconduct’ amongst financial planners that CBA wasn’t detecting or reporting.
The bank suspended and investigated a number of planners referred to by ASIC, but rather than sack them they promoted them! Some of the planners identified still work at the bank to this day.
Eight months later a whistle blower wrote to ASIC and provided evidence of fraud and a cover up. It took ASIC another 16 months to act. The whistleblower described trying to get ASIC to act as “like flogging a dead horse”. In the mean time CBA managers mounted further cover up operations.
ASIC’s limited and pathetic response coupled with CBAs defensive stance and insulting compensation offers triggered a Senate inquiry into ASIC. It was the Senate inquiry that began to reveal the true extent of the robbery committed by the bank.
CBA was not the only financial institution that was mentioned in the inquiry. Macquarie Bank was named as being involved in similar practices, while ANZ and UBS were also mentioned. All three have been referred back for ASIC to deal with.
One recommendation of the Senate inquiry was for a Royal Commission into CBA in order to get a fuller picture of the fraudulent and predatory practices the bank is using to rob peoples savings.
The federal Liberal government baulked at the idea, exposing their class-based hypocrisy. The evidence of corruption and criminal activity at the banks is much stronger and far worse than what was used to launch the Royal Commission into alleged trade union corruption.
Simultaneously the government pressed ahead with passing laws that weaken regulation for financial planners. In particular they removed specific customer protection and conflict of interest clauses. Last year the Liberal Party received almost $2 million in bank share dividends via one of its fundraising wings, the Cormack Foundation.
Predatory financial practices and outright fraud were central elements to the American financial crisis of 2007/08, which spread internationally. Since then bankers and politicians in Australia have argued that the Australian financial system is better regulated and much cleaner than the American system and therefore safe. Mounting evidence indicates the opposite.
ASIC has been exposed as a marionette controlled by big business politicians rather than a watch dog. The scale and the type of corruption, apparently with more yet to be exposed, coupled with the scandals rocking the political establishment, point to the need for fundamental system change.
Both the specifics of the scandal at CBA and the over-arching dynamics are results of the profit-motive inherent in capitalism. A democratic socialist society, based on public ownership and control of the banks and big industry, is the alternative to capitalism in Australia and across the globe.