By Philomena O’Grady
“You might easily believe that the world is in the grip of a pandemic of corporate fraud and corruption. One after another, countries are launching anti-corruption campaigns or introducing new regulatory measures to combat attempts by dubious executives – aided and abetted by venal public officials – to steal money and undermine public ethics.”
Richard Fenning – Chief Executive Officer of Control Risks
As a result of the negative economic and social impacts of decades of fraudulent banking practices, there has been an increase in governments globally demanding integrity, honesty and accountability of their financial institutions.
In order to combat the serious social and economic ramifications of corrupt and fraudulent banking practices the International community is constantly seeking to implement new initiatives to further strengthening the existing AML/CTFA framework. Despite these new initiatives, one of the major impediments to success remains the lack of willpower by governments to ensure compliance within the existing AML/CTFA framework.
Australia’s Anti-money Laundering legislation was initially implemented in Australia in 1988 and amended in 2006 to encompass terrorist financing. Whilst there is an expectation that those employed in the financial markets act with integrity, honesty and accountability, evidence is emerging that Australian regulators have consistently failed to call banks to account for compromising financial integrity, as more and more victims of fraudulent banking practices are now coming forward and talking about their experiences.
The Commonwealth Bank scandal is evidence of widespread and systematic failure by Government to ensure financial market integrity, transparency and accountability and by all accounts is just the tip of the fraud iceberg. The seriousness of the allegations is confirmation of governments’ ongoing unwillingness to tackle decades of endemic fraudulent practices within the Australian financial markets which has acted to further erode and undermined public confidence.
Recently the Australian Government implemented changes to address these concerns, however despite this, Government continues to deny justice to victims of fraudulent banking practices with few, if any, complaints investigated by corporate regulators.
The lack of accountability has led to an increase in many Australian victims undertaking their own investigations in addition to instigating litigation against the Banks concerned, a trend that is poised to increase due to the lack of accountability and negligence of both the financial markets and Government.
Given an increasing number of these complaints fall directly under the ambit of the AML/CTFA legislation, especially those relating to “employee due diligence,” there needs to be accountability as why regulators failed to investigate complaints, instead relying on members of the public to take action.
The expectation that members of the public take action to address these fraudulent practices is not only out of “sync” with global expectations, but also acts to undermine the valuable work of the international community and FATF in ensuring global financial integrity.
The case below is one such case. It highlights that despite providing evidence, public servants employed by a number of Government departments failed to investigate, take the matter seriously or refer the matter to Interpol. Their actions have not only compromised global AML/CTFA effort but have also failed to protect both the Public Interest and the Rule of Law.
The case is centred on an individual who at the time of the alleged offences was employed by the ANZ Bank. ANZ’s Internal Investigations were advised in mid 2009 and in order to substantiate the complaint were provided with documentary evidence. The individual remains currently employed with the subsidiary of ANZ Bank in another country. The fraudulent conduct included:-
- Unauthorised share trading through three stockbrokers
- A forged an E-TRADE CHESS Sponsorship Transfer dated 6.6.2006
- Evidence highlighting the possible use of multiple identities running between two countries.
- Breaches of Privacy
In addition, ANZ’s actions of advising in January 2016 that ANZ had undertaken its own internal investigation in 2009
(Ref ht:869294) is totally incompatible with its own fraud policy of both referring internal fraud matters to the police and reporting internally and externally (as required) all incidents that are suspect. ANZ Fraud Policy Summary can be located at http://shareholder.anz.com/sites/default/files/fraud_policy_summary_anz_oct2016.pdf
In addition ANZ’s lack of accountability is incompatible with current AML/CTFA legislation and its own “Code of Conduct” which can be located at http://shareholder.anz.com/sites/default/files/code_of_conduct.pdf
Complaints were also lodged with the stockbrokers involved, Solomon Smith Barney (now Morgan Stanley Smith & Barney), Ord Minnett and E-TRADE. These complaints were not only dismissed without proper investigation, but in the case of Solomon Smith Barney no trading authority was able to be produced. Unauthorised signatures appeared on the trading authorities of documents received from both Ord Minnett and E-TRADE. Complaints were dismissed with little regard for “Know Your Customer” or “Employee Due Diligence” protocols or the fact that the perpetrator continued to be employed in the financial markets.
All four institutions were reminded of the mandatory requirement to lodge Suspicious Activity Reports (SAR’s) as there had been serious breaches of federal legislation indentified which included tax fraud. Despite the specificity of AML/CTFA legislation, a representative of Ord Minnett advised their organisation was under no legal obligation to report offences. The Attorney-General’s Department and Australian Securities and Investments Commission (ASIC) were immediately notified yet no action was taken by ether department to either ensure accountability or refer the matter to Interpol.
Evidence in this case seems to highlight that not only could there be an ongoing reluctance of financial institutions to lodge Suspect Activity Reports (SAR’s) but some areas of Government may not be taking AML/CTFA legislation seriously. Given these failings, repeated requests were also made for meetings with a number of Ministers whose portfolios were directly affected, however these were also dismissed.
The undermining of public confidence due to fraudulent banking practices has seen the Australian Government establish numerous Parliamentary / Senate Inquiries. Whilst these Inquiries were tasked with identifying and addressing issues pertinent to the undermining of public confidence within the financial markets, they have done little to quell either public concerns or the ongoing practices which have major economic ramifications.
Despite submissions received from members of the public highlighting the social and economic impact on victims, Government continued to ignore the growing list of complaints highlighting malfeasance and fraudulent banking practices http://www.aph.gov.au/DocumentStore.ashx?id=822a728e-f33a-4093-937c-642b9072055a&subld=407287
In response to ongoing corrupt and fraudulent practices the Government established the Senate Inquiry into Performance of the Australian Securities and Investments Commission. Whilst a submission outlining the abovementioned case was lodged the Senate Inquiry (Submission 273), the submission like many others made to previous Government inquiries was made “Confidential.” A request to make Submission 273 “Public” has been denied with no advice provided as to transparency or accountability.
The ongoing dismissal of this and similar cases highlights the fine line between Governments failure to act due to ignorance, as opposed to failing to act after being provided with evidence highlighting offences which go to the very heart of financial integrity.
This case seems to confirm Fenning’s belief that the pandemic of corporate fraud and corruption is aided by public servants whose negligence undermining public ethics?
Under the “Code of Conduct” public servants are required to act with integrity, diligence, ethically and honestly as well as comply with all Australian laws. Given this case and many others, are the actions of the various public servants who failed to act with the above code constituted incompetence, negligence or outright corruption?
Cases such as these, not only undermine public confidence and ethics, but they also raise serious questions about the ability of public servants to dismiss cases without proper scrutiny or investigation. Given that in this case, the actions of public servant involved have also compromised national and international security efforts, answers should be sought as to how these public servants were mandated with such powers.
Recently the Senate unanimously voted against the establishment of an Anti-Corruption body on the basis of Transparency International assessed Australia as “one of the least corrupt countries in the world.” Hansard No 9, 2017. 15.8.2017, p.5656.
With more and more Australian’s demanding integrity, honesty and accountability of their Government, bureaucrats, financial institutions and companies the issue of ”Ethics” “Conflict of Interest” and adherence to “Fiduciary Duties” remains contentious, with Government still failing to see the relevance. Examples of this include:-
- Traditionally government ministers have been able to secure either direct employment as lobbyists or with industry bodies after leaving office, including being lobbyists for the finance sector. It has been stated that “The laws are inadequate; it is nearly impossible to tell whether a minister has put the interests of a future employer ahead of their responsibility to the country”
- Accepting funding from Banks such as ANZ Bank and Commonwealth Bank Australia (CBA). http://transparency.org.au/get-involved/our-supporters/ impinges the ability of organisations like Transparency International Australia (TIA) to be seen as both independent and transparent. In addition, these organisations compromise their integrity when they fail to take on cases which are in the public interest and involve corrupt and fraudulent practices of their sponsors.
An example of such “conflict of interest” could be seen when TIA were unable to assist in raising issues pertaining to corrupt and fraudulent banking practices when Helen Edwards – Contributing Writer – https://news247worldpressuk.com/contributors/ and I had a meeting with Serena Lillywhite CEO of TIA on the 2 August 2017.
Given TIA’s reluctance to act in the “Public Interest” clearly shows the loyalty to financial sponsors at the expense of the “Public Interest” and National / International security concerns.
There are many lessons to be learnt from this case. It could be argued that the systemic failure of government to address fraudulent financial practices, adhere to Rule of Law, lack of accountability, corruption, conflict of interest, public service negligence and incompetence, raises serious questions whether Government has really grasped the full extent of the social, economic and the long term national and international security implications of allowing such fraudulent and corrupt banking practices to continue festering unabated in Australia.
The dismissal of this case without proper scrutiny or investigation should raise concerns within Government. Current policies fail to address discrimination and age related retrenchments, both of which have acted to decrease the availability of specialist skills sets in Australia. These skills sets are not only a valuable commodity but continue to be internationally sought after.
Given over seven years of phone calls, emails and submissions highlighting the national and international economic and security ramifications of this case, I wonder which Minister, Ministerial Advisor or public servant is going to accept responsibility for this case and others like it failing to be investigated ?
About author :
Philomena O’Grady is a Forensic Criminologist with a 16 year finance background. Philomena was also employed as Manager Partner Liaison & Support by AUSTRAC during its early inception years assisting Law Enforcement with the financial side of investigations. Whilst with AUSTRAC her expertise saw her present at a joint FinCEN / INTERPOL Conferences. Philomena has a number of degrees including Masters of Criminological Studies (LaT), Masters of Policing, Intelligence and Counter Terrorism (MQ), Masters of International Security Studies (MQ) and remains committed to ensuring integrity and adherence to Global AML/CTFA legislation.