Contributed by Joe Montero
The ink has hardly dried on the final report (tabled on 4 February 2019) from the Banking Royal Commission, and the latest Westpac scandal breaks loose.
The bank has been caught, continuing to be involved in international money laundering transactions. In total, more than 23 million of them are involved, which goes to show, this is no accident.
A big portion of these transactions are associated with corporate tax evasion. Some have been linked to child exploitation in the Philippines.
Australia expected that the damning Royal Commission reported would to lead to some action. It didn’t. What we got, was the banks being given the green light to self-regulate. Never mind that they were already self-regulating, and that this helped ensure the existence of a cartel that could collectively engage in bad behaviour.
This went out a clear message. The banks can carry on business as usual.
A new Westpac scandal hardly a surprise, and you can bet that this is not the only bank behaving in this way.
The bad behaviour only came to light after many small shareholders, and some large ones, revolted began an ongoing revolt in December last year, compelling the Stock Exchange to look more closely into the bank’s practices.
Westpac had failed to inform AUSTRAC about the transactions in question. This is a direct breach of legal obligations. There may even be a legal process that could cost the bank up to $1 billion in fines.
But there is no guarantee that even this will happen, or that if it does go to legal process, there will be no more than a gentle slap on the wrist. Either way, the lucrative cheating business will go on without a pause.
A big problem is that the whole matter is being treated as the failure of certain individuals, instead of being a systemic problem. So a couple of figureheads can fall on their swords and be put to pasture, to live lives of luxury, thanks to generous golden handshakes.
Worse still, is that it pretends nothing in fundamentally wrong, that once a few names have departed, business can continue as always.
A positive not is that at least this case has brought home one thing. Only citizen vigilance and action will bring the wrongdoings of the banks to light.
This won’t bring a lasting solution. Doing this requires bringing the banking industry under public control and breaking up the cartel.
Deregulation was supposed to allow the operations of the market to bring about a more efficiency and create miracles for the economy. It didn’t.
And it was promised that in a deregulated market, those running the banks would be forced to behave well to their customers, or go out of business. It didn’t do this either.
Experience has proved that deregulation has failed and that there must be a big shift in the opposite direction.
The best way to break the cartel would be to nationalise the four banks and bring them under public control Short of this, a national publicly owned bank, with a mandated purpose to set high service benchmarks, ensure the real needs of the economy are met, and act as a lever to force better behaviour from the private banking sector.
Secondly, the creation of a much bigger network of community owned and controlled banks could be assisted by the government. This would not only act as another pressure for better behaviour. It would make the banking sector more democratic, by giving a say to those who are the owners and customers.
This does not mean that the four banks should be left off the hook for their wrongdoing. On the contrary. It is important for Australia to see justice being done. A government that is ethical and has the backbone to take the necessary steps, will garner the support of the nation for change.
The problem is that we don’t have such a government. It is not enough for the prime minister to say “these are some very disturbing transactions involving despicable behaviour.” What is he going to do about it?
Pressure must be kept up.
Westpac’s actions have brought about investigations by the Federal Police, the corporate regulator (Australian Securities and Investments Commission) and the prudential regulator (Australian Prudential Regulation Authority).
We know from experience, that there will be counter pressure to minimise the impact. Even if this is not the case, questioning the present system is not part of the brief of the investigations.
Only public pressure and exposure has the chance of forcing a real difference.
Legal firm Phi Finney McDonald has announced the possibility of a Westpac shareholders class action. This is part of keeping up the pressure and maintaining the spotlight on the issue.