“Alright, the numbers, they are terrific, there’s no doubt about that – 3.1 per cent. What does it actually mean for your Budget bottom line? Does it mean the economy and, therefore, tax receipts are going to be running faster than what even you predicted in the Budget?” (Listen here)
Newsletter – June 8 2018
Last year I brought you the breaking news – AUSTRAC launched legal proceedings against the Commonwealth bank, alleging “serious and systemic” breaches of anti-money laundering and terrorism financing laws. (Read here)
And not just one breach…53, 706 breaches.
Basically – drug syndicates, terrorist financiers and money launders freely used the Commonwealth Bank 53,706 times to legitimise their criminal activities – in other words, they washed the money clean.
Now, it was alleged the CBA failed to report cash transactions of $10,000 or more made through intelligent deposit machines – ATM’s – to AUSTRAC in time for assessment, as required by anti-money laundering laws.(Listen here)
These transactions that the bank failed to report has a value of $624.7 million
This was huge news and it sparked a number of class actions against the bank that are still ongoing.
Now, around the time these allegations came to light – Tabcorp had just settled a court case with AUSTRAC for the same allegations, failing to report in time to AUSTRAC.
AUSTRAC found Tabcorp breached the law on just over 100 times. They were charged $45 million.
In comparison, Commonwealth Bank breached the law more than 53,000 times.
Now, just a little maths for you – the maximum penalty for each of the 53,706 breaches could have been up to $18 million each.
If you times 53,700 by $18 million – you get $966, 600, 000, 000…that would have been enough to destroy the Commonwealth Bank.
As it turns out, the ultimate fine was a lot less as we learned this week – $702 million.
Whilst it might not be enough to break the bank, it’s by a long way the largest corporate fine we’ve ever seen.
For the nation’s largest bank, it works out to 25 days of profit. It’s like a person who earns $80,000 a year, being fined $5,500 – so it does sting.
Now, the question I keep asking – how did the crooks know about the flaws in the Commonwealth Bank security system when the bank says it knew nothing about it itself?
Now, on Money News I spoke to Home Affairs Minister Peter Dutton who says – “Clearly, the CBA has let shareholders down. And frankly, CBA has let Australians down”. (Watch here)
Now, the major point about this case is it strikes right in the heart of our national security.
The Minister made this point – “If it ends up in the hands of a terrorist cell or it ends up in the hands of a drug syndicates…there are very real human costs out of it.” (Listen here)
But some are saying the fine isn’t enough, but as I mentioned – this is the largest corporate fine in Australian history.
The Minister says “there’s obviously been a massive failure at the CBA to get the right culture in place, they breached their obligations under the law and they’ve paid a very heavy penalty for it.
“And it should be a very clear message to other banks and to other financial institutions that we do need people to comply with the law, they need to report case transactions.
“And we need to recognise that if the transactions aren’t reported then criminal syndicates, terrorist groups will then start to use the system to get around the reporting requirement.”
Now – this wasn’t the only major news with the banks this week.
The ANZ, Citigroup and Deutsche Bank – including six senior executives, two of which were the former heads of Citigroup Australia and Deutsche Bank Australia – have been charged with criminal cartel offences by the ACCC.
Now, the banks and individuals are alleged to have been arranging shares, to help boost their capital reserves, dating back to 2015.
Now, this case is before the courts and the charges will not be released until their court appearance in July – I will bring you more information as it comes to light – but what I can tell you is this case will have serious and lasting impacts.
I spoke to former chairman of the ACCC, Professor Allan Fels, on Money News and he says “It’s very big because of the fact that it’s banks, a major industry.”(Listen here)
“It will have far-reaching repercussions across the whole of corporate Australia to know that an alleged conspiracy to restrict quantity and put up price can put you in jail.”
The fact that these charges come as the Royal Commission is gearing up to it third round, it just more evidence of the need of more regulation in our banking sector.
But this has its own problems – the problem of more regulation is more caution from the banks, and that also has a knock-on effect.
Right now the housing markets in major capital cities are cooling. Banks are becoming more cautious about lending, when prices are falling. But they are even more cautious when they might be examined over the appropriateness of that lending, if it goes wrong.
For that reason the banks are now tightening their credit standards … which can lead to over-ambitious borrowers being surprised by the relatively small amount of credit available. This is especially true for investors and those who have borrowed with interest-only loans.
But the banks can’t go into their shells entirely, especially given a large proportion of their profit is derived from that residential lending. So while investment lending might be tight, the competition is still hot for traditional residential principal and interest owner-occupier lending. If you haven’t shopped your loan around for a while … it might be worth doing it now.
For all this and more, visit www.moneyaction.com.au
Interest rates on hold but can Australia avoid a recession? – Watch here
Money News –
Is Australia’s economy growing? – Listen here
Australia’s fastest growing sport, Professional Bull Riding, is days out from their Global Cup…they join me live in studio – Listen Here
Interviews and Stories for the past two week
Interviewed Annette Beacher, Head of Asia Pacific Research, TD Securities titled ” When will Interest Rates rise? .”
Interviewed Sarah Hunter, Head of Macro Economics, BIS Oxford Economics titled ” Where do you spend your money? .”