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Royal commission reveals allegations of bribery at NAB

 

 

Royal commission reveals allegations of bribery at NAB

allegations of bribery at NAB allegations of bribery at NAB
Reporter Comments 23
— 4 minute read

Several NAB employees were allegedly “bribed” by third-party introducers, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has revealed.

During the first day of public hearings, the commission focused largely on NAB’s introducer program and fraudulent loan applications, calling Anthony Waldron, NAB’s executive general manager for growth partnerships, as a witness to provide evidence.

Speaking under oath, Mr Waldron was asked in detail about NAB’s “introducer program”, which pays third parties a commission for referring names to the bank for loans.

According to Mr Waldron, the bank currently has around 1,400 introducers in the program. These can include those whose principal business is not mortgage broking (such as solicitors, financial planners, real estate agents, etc.) and are commonly used by lenders to source new leads.

However, between 2013 and 2016, the major bank reportedly had around 8,000 introducers on its books, and during this period, several instances of misconduct were identified.

It was revealed that in the period of 2013–2016, 45,960 home loans approved by NAB came through the introducer program, totalling more than $24 billion.

Based on the calculations that the bank was paying commission of 60 basis points to a referrer for every referral that was eventually drawn down (or 40 basis points for existing customers that took out a new loan over the value of $50,000), the court suggested that the bank therefore paid more than $100 million in commissions to introducers during this period.

The senior counsel assisting, Ms Rowena Orr QC, asked a range of questions to Mr Waldron to try and establish what controls were in place to ensure that referrers were not over-stepping their legal obligations or community expectations and touched on several instances of misconduct.

Going over the NAB response to the commission, Ms Orr noted that NAB had told the commissioner in a letter that its investigations [some of which are ongoing] had identified approximately 2,840 customers to date who may have been impacted by the inappropriate conduct. 

“An allegation of bribery”

However, the hearings later revealed that misconduct had also been identified in its branch network.

Ms Orr said: “You tell us in your statement that NAB receive anonymous calls to its whistle-blower program in September and October 2015, which were described as alerting NAB to potential misconduct by bankers in certain NAB branches.” 

Highlighting an email between NAB employees, it was revealed that a whistle-blower had alleged that NAB staff members were “charging NAB customers a fee for personal loans. These fees are allegedly made as cash payments under the table”.

It was revealed that a customer and a broker had highlighted the behaviour, which involved a branch manager and two customer advisers.

“This was not about the introducer program at all, was it? It was, in fact, an allegation of bribery,” Ms Orr said, to which Mr Waldron tentatively agreed: “Potentially, yes.” 

That branch manager was subsequently dismissed.

The hearing later revealed that in a separate issue, but in a similar geographical area, NAB had already begun looking into another suspected case of misconduct.

“Our Forensic Services team are continually doing reviews looking for misconduct,” Mr Waldron said. 

In this case, another whistle-blower was concerned with a “syndicate” comprising 11 people (six of which being branch managers) who were reportedly taking bribes.

The whistle-blower told NAB that these people were making up fake payslips, fake IDs and fake Medicare cards, and had reportedly “seen a little bit of evidence, and ha[d] also heard from others, in the local area market (one of them a branch manager at a different store, not involved) that they charged $2,800 bribery for each customer for home loans mainly, but also personal loans”.

The QC also went on to reveal that the customer adviser “went for a home loan and someone thinks he used a fake guarantee. They could not identify the person on the guarantee”.

The whistle-blower was reputedly recorded as saying that one customer recently said, at a particular branch, they told him he could borrow 800,000 but the valuation was only 450,000.

Ms Orr outlined that the whistle-blower alleged that “money exchanges hands in cash in envelopes — white envelopes, usually over the counter”. 

The money was then reportedly deposited at a separate institution to avoid detection.

It was alleged that the deposits were “happening on a daily or weekly basis and has been happening for a number of years”.

Ms Orr outlined that the whistle-blower suggested the issue had been raised before, but it still appeared to be happening, and also asked questions around the time frame in which NAB reported the alleged breaches of conduct to ASIC. 

Commissioner Hayne made several comments and statements over the course of the day, including the warning: “A part of what I’ve got to do eventually, I think, may be to assess what ADIs and other financial service entities have made of complaints and revelations.

“The industry is a large industry. Large participants. Lots of people. Things go wrong. It’s a human system, therefore things go wrong. Sometimes things go wrong through dishonesty. Sometimes things go wrong because of neglect, carelessness or just sheer coincidence. I understand all of that.

“There is a whole raft of law out there governing this industry. One thing that I may have to look at, I think, is what the attitude — either of the industry generally (if there were such a thing) or participants in the industry is, to the notion of obedience to the law. Obedience to the law that governs the way they conduct their affairs.

“There may be a difference (I don’t say there is), [but] there may be a difference between a breakdown in controls and an acknowledgment of breach of law.”

He continued: “Treat that as the soliloquy. It undoubtedly is, Mr Waldron, and deal with it as you wish. But I don’t want people ignoring the fact that these are ideas that are, at least, on the table.”

The commission convened at 4pm and will resume its hearing of evidence from Mr Waldron at 10am today (14 March).

More to come.

What do you think about the major banks? The last 12 months have been challenging for the big banks. Rising funding costs have continued to pressure margins, leading to pricing changes towards the end of 2017. Meanwhile, regulatory measures and higher capital requirements are forcing the big four to tweak their policies. 

Which lenders have continued to deliver excellent product and service, and which lenders have communicated the myriad changes best?

This is your chance to let us know what you really think in the Third Party Lending Report - Major Banks survey for 2018.

[Related: Royal commission ‘opens the banks up to class actions’: UBS]

Royal commission reveals allegations of bribery at NAB
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