We have previously written about ASIC's new enforcement philosophy of 'why not litigate' which arose in response to the Hayne Royal Commission. However, the past few months have seen increased levels of enforcement activity and investigation by several other government regulatory bodies as well as class actions. In this article, partner Selina Nutley details some of the more recent significant actions and announcements.

ASIC

According to recent comments by ASIC Chair, James Shipton, ASIC—

• has commenced four civil cases arising from the 13 matters referred to it by the Hayne Royal Commission, including significant actions against NAB subsidiaries, MLC Nominees (MLC) and NULIS, alleging it charged fees for no service, and 297 breaches of the National Consumer Credit Protection Act in relation to its mortgage introducer program. MLC and NULIS have admitted to 255 of those breaches, and will be subject to a penalty hearing before the Federal Court in due course
• has referred two criminal matters to the Director of Public Prosecutions
• expects to imminently file two further civil cases arising out of the Hayne Royal Commission
• has instituted proceedings against Bendigo and Adelaide Bank plus Bank of Queensland, alleging unfair contract terms
• will increase scrutiny and enforcement action this year—
  • against auditors and superannuation funds. As discussed in another article in this edition of Fundamental, the costs associated with such investigations and enforcement action will at least partially be funded by a levy imposed on the industry
  • in relation to non-financial risks, such as corporate governance, compliance and operational risks.

More recently, ASIC released data confirming AMP, ANZ, CBA, Macquarie, NAB and Westpac collectively paid $749.7 million in compensation to customers, as at 31 December 2019, arising from two major reviews undertaken by ASIC starting in 2015. Those reviews related to the provision of non-compliant advice and fees for no service misconduct. ASIC has provided details of the compensation paid by each bank.

Australian Transaction Reports and Analysis Centre (AUSTRAC)

In November 2019, AUSTRAC commenced civil proceedings against Westpac alleging Westpac breached its obligations under the Anti-Money Laundering and Counter Terrorism Financing Act (AMLCTF Act) on 23 million occasions.

Some of the breaches AUSTRAC has alleged include that Westpac failed to—

• carry out appropriate due diligence on customers sending money to the Philippines and South East Asia for known child exploitation risks
• pass on information about the source of funds to other banks in the transfer chain
• keep records relating to the origin of some of these international fund transfers.

Westpac self-reported the breaches, and since AUSTRAC commenced proceedings, has released several statements outlining immediate and longer-term responses, which include structural and staffing changes.

The maximum penalty which may be imposed against Westpac is in the range of $1 billion.

Australian Prudential Regulation Authority (APRA)

APRA is reportedly considering taking action against Westpac executives about alleged breaches of the AMLCTF Act. The Banking Executive Accountability Regime allows APRA to disqualify boards and executives where they have failed to uphold and enforce the duties imposed under legislation. It also allows APRA to apply to the court for the imposition of fines up to $500 million.

Class actions

In addition to the above actions brought or contemplated by various government agencies, new class actions have been announced against NAB and CBA alleging excessive fees and failure to act in account holders' best interests and also against AMP for failing to provide objective financial advice.

These proceedings are in addition to the previously filed class action against AMP and one being investigated against Suncorp.

Conclusion

The pursuit of investigations and enforcement by these regulatory bodies, along with significant proceedings involving Australia's major banking institutions, sends a clear message that financial service providers need to ensure their house is in order.