NAB is facing hundreds of civil charges and a potential fine above $500 million over a scheme that led to bankers, as well as tailors and gym owners, making millions in commissions from potentially dodgy home loans.
In a statement to the stock exchange, Australia's fourth-largest bank revealed the Australian Securities and Investments Commission (ASIC) had today commenced civil proceedings relating to 297 loan applications between 2013 and 2016.
"ASIC claims that by receiving information from introducers that went beyond 'spot and refer', NAB breached the Credit Act," chief legal counsel Sharon Cook wrote.
"We take this legal action seriously and will now carefully assess the allegations."
The so-called "introducer" scheme, exposed at the banking royal commission, paid money for introducing customers to NAB, if the customers went on to take out loans.
Between 2013 to 2016, NAB's introducer program generated 46,000 loans worth $24 billion.
The introducers were meant to be third parties, such as accountants and real estate agents, with financial links to future customers.
The introducers' role was to hand-off a "spot and refer" introduction to an NAB banker.
Royal commission hears of fraudulent behaviour
However, the royal commission heard that just four introducers, including a gym owner and a tailor, were responsible for referring the bank $139 million worth of loans, and many more were deeply involved in getting loans approved so the commission would be paid.
The generous payments induced dodgy operators — including a jailed NAB staff member — to falsify documents and pay cash bribes to get loans approved.
ASIC's charges relate not to the whole program but to the conduct of 16 bankers accepting loan information and documentation from 25 unlicensed introducers in relation to 297 loans.
The regulator alleges NAB breached s31(1) of the National Consumer Credit Protection Act 2009 (National Credit Act), which prohibits credit licensees from conducting business with parties engaging in credit activity who do not have an Australian credit licence.
ASIC is asking the court to find that NAB breached the National Credit Act and to impose a civil penalty on NAB for doing so. The maximum penalty for one breach of s31(1) of the National Credit Act, during the time of contravention, was 10,000 penalty units, or $1.7 to $1.8 million, leading to a potential maximum fine of $505-535 million.
In May, Nine reported that Andrew Matthews from NAB's Seaford branch in Victoria defrauded the bank of $640,000 and was jailed for eight months, with a further 28 months suspended.
Matthews, who was based at NAB's Seaford branch, approved 129 loans that falsely claimed his friend was the person who had "introduced" the customers to the bank and was therefore entitled to a commission of 0.04 per cent of the loan amount. The County Court heard the friend had no knowledge of the banking industry and had never met the customers.
In July, the regulator banned former NAB branch manager Rabih Awad from providing financial services for seven years over loan fraud, including giving false payslips, letters of employment and entering false referee contact details in the bank's lending systems in multiple home loan applications.
In August, former NAB branch manager Mathew Alwan pleaded guilty in the Local Court of NSW to one count of 'intention to defraud by false or misleading statement', an offence under the NSW Crimes Act.
An ASIC investigation found that Mr Alwan dishonestly made false and misleading statements to NAB in relation to 24 home loan applications between 2013 and 2015.
NAB stopped accepting new introducers to the program in March and it will be dead by October. Some of its major rivals continue to operate similar schemes.This article was first published by https://www.abc.net.au
Author: Daniel Ziffer