Banking royal commission: How ASIC went missing in action with the banks
By business editor Ian Verrender
Updated 25 Apr 2018, 1:09pm
Related Story: O'Dwyer dodges questions on delay of banking royal commission
Related Story: Barnaby Joyce says he was wrong to oppose a banking royal commission
Related Story: CBA customer dead for a decade but still charged fees, commission hears
First, the recriminations. Then the tough talk.
Barnaby Joyce's admission that he was wrong to oppose a royal commission into banks was quickly steamrolled by Treasurer Scott Morrison's resolute and defiant shift, quickly upgrading the corporate regulator's legal arsenal.
Admirable maybe, but somewhat belated. Worse than that, in his hasty attempt to take control, Mr Morrison has overlooked the fundamental reason for the shocking revelations taking place under the steely gaze of commissioner Kenneth Hayne.
It's not that the Australian Securities and Investments Commission (ASIC) is in need of added muscle. It needs to grow a spine.
ASIC is the law enforcement agency that shies away from enforcement, particularly in the top end of town.
From awful to shocking
Extraordinary deception. Atrocious behaviour. No concern about consequences. This week's evidence was consequential and now the political environment has shifted, writes Dan Ziffer.
Ask yourself this — when was the last time a major corporation or executive was hauled before the courts? If you're having trouble coming up with an answer, you're in good company.
In the past decade, our banks have been responsible for multiple breaches of the Corporations Act.
They've admitted to rigging interest rate and foreign exchange markets. They've repeatedly stolen from their customers. They've happily charged premiums and then refused payments to legitimate insurance claimants.
Since the financial crisis, they have forked out more than $1 billion in fines and compensation for their misdeeds. But not one senior banking executive has faced a court room for any of this.
A gun-shy regulator
Since its inception decades ago, ASIC has had the power to launch criminal and civil proceedings against big business. But for the past 15 years, it has deliberately chosen not to.
Instead, it's opted for what's known as "enforceable undertakings" — effectively a slap on the wrist and a hollow threat that it may take real action if it ever happens again.
Why? One explanation is that it became gun shy after suffering a series of humiliating court defeats prior to the global financial crisis.
But a more disturbing possibility is that it is increasingly concerned with its own financial performance. In fact, in recent years ASIC has become a significant source of government revenue.
Its data base, which holds company and director records, reaps around $720 million a year for the Federal Government through access fees, more than double the cost of running the regulator.
That's not all.
Following federal budget changes two years ago, the corporate sector — and particularly the financial sector — now picks up the $330 million tab for funding the corporate regulator.
"The banks are paying to ensure that ASIC has the resources and powers it needs to be a tough cop on the beat," Mr Morrison announced at the time.
Indeed, it does. But that raises an important question. Is ASIC's role to provide the Federal Government with revenue or is it an enforcement agency?
ASIC's green light to the banks
Photo: ASIC has had the power to launch criminal and civil proceedings against big business. But for the past 15 years, it has deliberately chosen not to. (AAP: Dean Lewins)
As shocking as last week's revelations were — charging clients, even dead ones, fees for not delivering any services — there's nothing new in any of it.
Back in 2006, AMP became embroiled in what then appeared to be the scandal of the decade. It was caught overcharging thousands of customers, switching them into expensive and poorly-performing products designed to enrich planners and the organisation, at the expense of clients.
Despite the obvious criminality — it's known outside the corporate world as theft — no-one faced charges and the AMP was never subjected to a civil damages case.
ASIC instead forced AMP to sign "enforceable undertakings".
If the highly-publicised action had any effect, it was to send a message to the financiers that financial planners and the wealth management industry could operate with impunity.
Perhaps that explains why our banks, obliged to immediately inform the regulator of breaches, routinely have taken years to do so. Or why the AMP and its board didn't think twice about meddling in a so-called independent report from law firm Clayton Utz on 27 different occasions.
Between them, the four banks and AMP in recent years have gouged more than $220 million from clients for services they never even intended to provide.
And the penalty for this theft? Just over a week ago, a few days before all this blew up in the royal commission, ASIC had the CBA, the worst offender by far, sign an enforceable undertaking for overcharging clients $118 million.
No court case. No-one personally held to account.
And it's part of a repeating pattern.
Less than 18 months ago, CBA signed an enforceable undertaking over its role in rigging foreign exchange markets. As part of the settlement it made a $24 million "donation" to a program to improve financial literacy.
So much for deterrents.
Ratcheting down the regulator
It wasn't always this way. The rot set in about a decade after ASIC was established in 1991, when then-chairman David Knott announced a new tactic. Rather than run criminal cases, ASIC instead would launch civil action against the top end of town.
Banking probe poorly judged
The Government's misjudgement on the need for a banking royal commission has come back to bite it, writes Michelle Grattan.
The burden of proof was lower, he argued, allowing for greater court success. And with a wider approach, the enforcement agency could then hone in on specifics on criminal matters.
Shortly afterwards, One.Tel — the telco brainchild of James Packer, Lachlan Murdoch, Jodee Rich and Brad Keeling — collapsed.
What ensued was one of Australia's longest-running civil court cases. The poorly run case was a disaster, costing the regulator $20 million in legal bills.
It went down in a highly publicised insider trading case against Citigroup and blew $30 million in an ill-fated attempt to prove Andrew Forrest misled investors.
If its reputation was tarnished, things only deteriorated further when former Telstra director and alleged comedian Steve Vizard struck a deal with ASIC over his use of confidential Telstra information.
He admitted the charges, but in exchange for a deal where he would only be subject to civil penalties.
If there were any doubts ASIC had gone soft, the judge in that civil case, Justice Ray Finkelstein, took it upon himself to double the penalty recommended by the regulator.
Similar comments were made by Justice Dowsett last month when he imposed what even he believed was a lax penalty on Storm Financial founders Emmanuel and Julie Cassamatis.
The pair, who helped destroy around $880 million for low income vulnerable investors, were fined just $70,000 each and banned from managing a firm for seven years.
"I am inclined to think that the penalty sought by ASIC is on the low side, having regard to the cases to which I have been referred," he told the pair.
Smaller fish to fry
ASIC boasts an impressive track record before the courts with success rates of up to 97 per cent.
There are two reasons for that. The first is that doesn't take on many cases. And the second is that it generally only goes for soft targets, small operators or individuals without enough money to fight a case.
In 2012/13, in the wake of billions of dollars in corporate collapses, it ran just 25 criminal cases and only 15 civil cases.
Last year, it charged 22 people with criminal offences.
As a consequence, investors have been forced to take matters into their own hands running class actions through law firms that take a huge slice of any winnings.
Effectively, ASIC has outsourced its enforcement role to the private sector.
If the Treasurer wants to beef up ASIC, perhaps he should think about appointing an experienced investigator to head up the organisation instead of the endless procession of bean-counters, investment bankers and corporate lawyers who have sat at the chief's desk.
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Jagen Nominees village, Bill Shorten, GetUp
4 months 1 week ago #3984
Australian jobs, and is the minister aware of any threats to these jobs?
Photo of MP Mr CIOBO (Moncrieff—Minister for Trade, Tourism and Investment) (14:43): I thank the member for Leichhardt for his question. As I've said on many occasions, we on this side of the House take very seriously the importance of an ongoing open framework for trade investment to make sure that we drive the Australian economy and we drive jobs. This has been a government that has consistently ensured it has opened up preferential market access across the world for Australian trade exporters and for those businesses that are looking for opportunities to export, and made sure that, in the process, they grow the Australian economy and they grow, of course, Australian jobs. As the member for Leichhardt knows, one of our key exports is in fact coal. It is our second-largest export, valued at more than $42 billion in 2016, and, indeed, is Queensland's largest goods export.
But the member for Leichhardt asks if there are any threats to the jobs that are supported by the trade industry. Unfortunately there are threats that are displayed with respect to these trade related jobs, and we see it from an inconsistency of policy. We've seen today a consistent record of inconsistency from the Australian Labor Party and the Leader of the Opposition, Bill Shorten. If there is one thing that's crystal clear to making sure that Australia's exporters and all of those tens of thousands of jobs in, for example, the coal industry can rely upon good, consistent government policy to keep those export markets open, it's that we need to make sure that we are consistent on policy.
We saw, for example, that last year, anticoal activists like GetUp! proudly boasted that they would be running legal challenges that delay, limit or stop all the major infrastructure projects. They boasted about stopping mines, about stopping rail and about stopping ports, all to try and stop coal exports. The fact is that groups like GetUp!, who boast about these things, have ties. It should be no surprise to members on this side that, when the Leader of the Opposition was head of the AWU, he was personally responsible for donating $100,000 to the GetUp! campaign. This is the same guy who was on the board of GetUp! at the time. So the Labor Party runs around—in particular, the Leader of the Opposition runs around—claiming faux sincerity and concern for Australian coalminers. But this is the Australian Labor Party and the Leader of the Opposition who donates $100,000 towards GetUp!, who's on the board of GetUp! and—guess what?—was actually involved, it appears, with Clean Event and, in particular, the holding company Jagen Nominees, and donated $50,000 to GetUp! only four months after he resigned from the GetUp! board. The simple fact is: there is no clearer example of a guy who's trying to fake sincerity than the Leader of the Opposition, who will say anything, do anything and then change positions afterwards. (Time expired)
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FBI office Australia
American Embassy: 011-61-2-6214-5600
American Consulate: 011-612-9373-9200
It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision—about whether, for example, to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms—is mortgage fraud. The FBI and other entities charged with investigating mortgage fraud, particularly in the wake of the housing market collapse, have broadened the definition to include frauds targeting distressed homeowners.
Fraud for profit:
Those who commit this type of mortgage fraud are often industry insiders using their specialised knowledge or authority to commit or facilitate the fraud.
Current investigations and widespread reporting indicate a high percentage of mortgage fraud involves collusion by industry insiders, such as bank officers, appraisers, mortgage brokers, attorneys, loan originators, and other professionals engaged in the industry. Fraud for profit aims not to secure housing, but rather to misuse the mortgage lending process to steal cash and equity from lenders or homeowners.
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Lawyer for CBA Exec on Pakula files says Extradite
4 months 6 days ago #3993
Mr Michael McGarvie's customers wrote that he knew about these Racketeering laws, and they're extraditable write the law firm that represents the CBA Executives of McGarvie;s and Jennie Pakula's and Howard Bowles' and Shirley Joseph's files. Elliot Sgargetta invites reporters to call him about the SEC Whistleblowers' incredible reports about all the information that all came true. .
Can Australians be extradited to the United States of America for violation of RICO?
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RICO Act and Extradition
Author: Nyman Gibson Miralis
Subject: RICO Act and Extradition
Keywords: Racketeering Influenced and Corrupt Organizations Act (RICO), United States Code (U.S.C.)
The Racketeering Influenced and Corrupt Organizations Act (RICO) was introduced into US federal law in 1970. Under title 18 of the United States Code (U.S.C.), the RICO statute stipulates that it is unlawful:
To invest income derived from a pattern of racketeering activity in an enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce (section 1962(a));
To acquire or maintain an interest in an enterprise through a pattern of racketeering activity (section 1962(b));
To conduct an enterprise’s affairs through a pattern of racketeering activity (section 1962(c)); and
To conspire to violate any of the three preceding offences (section 1962(d)).
The RICO statute lists a wide range of US federal and state criminal offences that amount to “racketeering activity”. Furthermore, a “pattern” of racketeering activity requires proof that at least two listed racketeering offences (also referred to as “predicate offences”) occurred within the last 10 years.
Extra territorial reach of RICO offences into Australia
A person who resides in Australia can still be indicted in the US for allegedly violating any of the RICO offences listed above, subject to some limitations. In the US, federal laws are construed to have only domestic application absent clear and express congressional intent that states otherwise. In RJR Nabisco, Inc. v. European Community, et al., No. 15-138 (June 20, 2016) the US Supreme Court held that this presumption had been rebutted with respect to certain applications of RICO’s substantive offences under section 1962.
Provided that the alleged “racketeering” or “predicate” offences applied to criminal conduct outside the US, then the substantive RICO offence also applied extraterritorially. This fact is determinative in relation to sections 1962(b) and (c). However, the Court noted that the RICO offence under section 1962(a) could arguably have domestic application only but declined to make a decision on the issue. The Court also assumed that the RICO conspiracy provision (section 1962(d)) could be applied extraterritorially because it relies upon the operation of a substantive RICO provision.
Some racketeering or predicate offences that have extraterritorial application include (but are not limited to):
Obstruction of official proceeding (title 18 S.C. section 1512(h));
Assassination of Government officials (title 18 S.C. sections 351(i) & 1751(k));
Hostage taking (title 18 S.C. section 1203(b)); and
Drug conspiracy and distribution (title 21 S.C. sections 846 & 963; Chua Han Mow v. United States, 730 F.2d at 1311-13)
Thus, the extraterritorial application of the RICO offences is highly dependent on the alleged predicate offences engaged in as part of an enterprise’s pattern of racketeering activity.
Extradition to the US for alleged violation of RICO
Since RICO offences may apply to a foreign national who has engaged in illicit conduct that occurred entirely outside the US, alleged defendants residing in Australia are exposed to extradition. Notably, there are still no Australian cases that have considered the extradition of persons who are specifically charged with RICO offences. Nevertheless, the US has been successful on a number of occasions in extraditing Australian residents for other criminal offences.
For example, in Riley v Commonwealth (1985) 62 ALR 497, the appellant unsuccessfully appealed against a decision for their extradition to the US. The appellant argued that the dual criminality principle was not satisfied. However, the High Court held that even though the US offence of “continuing criminal enterprise” was not known to the law of NSW, it still amounted to an ‘extradition crime’ under the Extradition (Foreign States) Act 1966 (Cth) (now superseded). Thus, the dual criminality principle was satisfied because the alleged acts constituting the US offence would, prima facie, also amount to narcotics and dangerous substances offences in NSW.
In Lobban v Minister for Justice  FCA 1361, the appellant was charged in the US for several offences including promotion of a sexual performance by a child, solicitation to commit aggravated child abuse and solicitation to commit lewd or lascivious battery. Lobban contested his surrender to the US on several grounds including one which argued that the Minister’s decision was ‘so unreasonable that no reasonable authority could ever have come to it’. However, Lobban’s grounds of appeal were all dismissed.
Consequently, the potential extraterritorial reach of the RICO offences means that Australian residents may be at risk of extradition to the US.
Nyman Gibson Miralis specialise in all aspects of extradition law, and have expertise in complex transnational investigations. If you require assistance, contact one of our expert criminal defence lawyers
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Retaliation against Witness Writ vs JPMorgan
4 months 1 day ago #3996
Howard Bowles' legal services board 'spied' on supporters of the Royal Commission and their tv shows, says Howard Bowles' customer Elliot Sgargetta.
BFCSA: AMP puts 300 financial advisers on notice, amid ASIC probe
Posted by Denise on Friday, 10 August 2018 in ROYAL COMMISSION URGENT
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AMP puts 300 financial advisers on notice, amid ASIC probe
Australian Financial Review Jul 9 2018 11:00 PM
AMP has put more than 300 advisers on notice that it may discontinue their licence to provide financial advice as the under-pressure wealth manager tries to reduce risks, amid a corporate watchdog probe and possible legal action.
The Australian Financial Review understands from multiple sources within AMP that the company's partnership managers have been telling some self-employed planners that they have as little as three months to find a new operating licence.
Without an operating licence, known as an Australian Financial Services Licence, planners are not legally able to provide financial advice to their clients.
AMP is under pressure after being singled out at the Hayne royal commission for charging clients fees for advice that was not given.
Other financial planning businesses came under heavy criticism for providing unsuitable advice with one business, Dover Financial, closing its doors and leaving 400 of its affiliated planners at risk of being unlicensed.
Partnership managers at AMP are meeting with advisers, examining their businesses and determining whether a practice is fit to stay with the wealth manager. If not, AMP will facilitate the planner's exit.
"It's our standard practice to continuously work with all our advice principals to help them create sustainable, high-quality businesses in order to best serve their clients," said an AMP spokeswoman in a statement.
AMP financial advisers were reluctant to speak publicly about any correspondence with practice managers, and one source said they had been "spooked".
AMP always 'needed control'
The Financial Review understands recruiters who specialise in placing financial advisers say they have been told by AMP, that the wealth manager will no longer take on sole practitioner planners.
But the AMP spokeswoman said that this was not the case adding that "we're still recruiting advisers into AMP and we offer a variety of different pathways – employed, aligned, direct – to best suit their careers".
According to data from Adviser Ratings there are a little over 5700 "one-man band" advice practices in Australia, compared with 245 planning businesses with 10 or more planners.
AMP has 335 single adviser-run businesses working under its licence, out of a total of 2600 financial advisers, the largest planner force of all major wealth management institutions in the country.
Paul Tynan, the chief executive of Connect Financial Services Brokers, which helps advisers wanting to buy, sell or merge a practice, said AMP has always "struggled with self-employed advisers".
"AMP has never had in its DNA to have fully separate advising groups. Their business model has always been that they needed control," said Mr Tynan, who spent almost 25 years working at the wealth management giant.
AMP runs a number of different financial planning units. Its salaried planners work under the iPac banner, while some self-employed planners come under the Charter Financial Planning and Hillross dealer groups.
'Ticking time bomb'
Mr Tynan said the wealth manager has always focused on its own AMP Financial Planning, which with more than 1400 planners is the largest group in the business, because of the control it gets from the Buyer of Last Resort clause.
BOLRs are legacy agreements where AMP guarantees to buy the business if the adviser wants to retire. AMP's BOLR agreements are priced at four times recurring annual revenue, which is well above the market price.
The agreement is a two-way street, in that if the BOLR clause is triggered the planner must hand back ownership of his or her clients back to AMP, and commit to a three-year non-compete clause upon leaving, creating a disincentive to leave the business.
Some industry sources speculate that these BOLR contracts could become a "ticking time bomb" for AMP, if large numbers of financial planners decide to exit the company amid evidence of malpractice heard by the banking royal commission.
Some advisers are understood to be concerned about the reputational risk of being associated with the beleaguered wealth giant.
This comes as the corporate regulator consults with the Commonwealth Director of Public Prosecutions over its "ongoing" investigation into AMP over revelations, unearthed by the Hayne inquiry in April, that the company charged fees for financial advice it did not provide and then misled the regulator about it.
ASIC sticking with probe
Australian Securities and Investments Commission chairman James Shipton told the House of Representatives economics committee last month that it would continue its probe, with potential civil and criminal outcomes for AMP.
An industry insider who did not want to be named said AMP may be concerned there could be compliance issues with sole traders, saying it might be too "risky" to keep them under the company's licence, with oversight being a problem.
In January this year ASIC issued a report looking at conflicts of interests and the advice offered through the big banks and AMP, recommending that advisers needed regular compliance coaching.
There also need to be "improvements in the advice licensee's audit processes, or providing training for advisers on conscious or unconscious bias when giving advice on products on the approved product list", said the report
ASIC last week announced that it would sue AMP for failing to take action against planners who "churned" clients into similar, new insurance policies so they could claim inflated commissions.
"By advising clients to submit new applications, the financial planners stood to receive higher commissions than they would have received under a transfer, while at the same time exposing the clients unnecessarily to underwriting and associated risks," the regulator said.
"ASIC alleges that this type of advice was inappropriate, and that the financial planners failed to act in the best interests of the clients and to prioritise the interests of the clients."
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