Let’s play a guessing game.
This country is a bit of a paradise for white-collar crime.
What country is this man talking about? Nigeria? Belize? Turkmenistan?
And who said it? Someone from the Greens? Someone from the Dandenong Socialist Alternative (nee Alliance)? Someone from Uniting Care Australia?
Nope. Greg Medcraft – Chairman of ASIC.
That’s right. The head of the body charged with overseeing the financial sector – the person in charge of setting and enforcing the rules that govern the entire financial system reckons Australia is a paradise for white collar crime.
“The penalties, particularly civil penalties, in Australia for white-collar offences are basically not strong enough, not tough enough. All you’re doing is giving them a slap on the wrist [and] that is not deterring people.”
Does that worry anyone else? Seems like a huge problem to me – if Australia’s head regulator is basically throwing up his hands and saying we can’t do diddly-squat to prevent white-collar crime.
It certainly rang some alarm bells in Canberra. And the government took decisive action. They got Finance Minister Mathias Cormann to lean on Medcraft and get him to pull his head in.
The government can’t afford to have loose cannons like that pinko Medcraft going “off message” like that.
Medcraft retracted his statement.
Phew. Crisis averted hey?
Let’s be clear. Financial regulation in Australia is a shambles. And has been for years. I’m amazed anyone has any faith in it all.
Scandal after scandal emerges. Not on the fringes of the financial sector, but at it’s heart. CBA and ANZ have been caught with their pants down in recent times, but none of the majors have much to be proud about.
Here’s a few examples:
But they continue to run with the line that it’s just a few ‘rouge operators’ tarnishing their otherwise immaculate ethics.
Garbage. There’s a culture and a system that actively cultivates these ‘bad apples’. That deliberately grooms them and promotes them into senior management and gives them offices with a toilet.
Take the recent CBA financial planning scandal. Hundreds of people had their financial futures ruined by shonky advice that pushed them (often against their knowledge) into financial products that were woefully unsuited to their circumstances.
And how many individuals have done jail time? How many individuals have even copped a fine?
Many have even been giving promotions and allowed to advance through the banking career ranks.
Only the ‘institution’ of CBA had any fallout to deal with. $52 million for its 1100 victims.
And that’s not just for ripping people off, but for spending 4 years trying to cover it up.
But this is an organisation that paid Ralph Norris – the CEO through these scandalous years – $16 million a year.
$52 million is nothing. Barely a slap on the wrist. Just a small cost of doing business. It’s spread across the organisation (i.e – the shareholders are left picking up the bill) and will probably be written off in tax anyway.
There’s a bit or reputational damage, but what are you going to do? Take your money to ANZ and get wrapped up in the next Timbercorp scandal?
The whole system is corrupt.
And the bankers laugh and laugh.
There was a small triumph of common sense this week when some rouge senators got together to block the government’s attempt to unwind the FoFA legislation – which shamelessly sought to overturn consumer protections in favour of banking interests.
The FoFA legislation was all about shining a light on the ‘vertical integration’ of the wealth industry.
80% of financial planners are owned by the big four banks. Yep, 4 in 5.
And who’s products do you think they’re flogging?
Now it’s pretty common for manufacturers to own or help manage the distribution networks.
For example, if I walk into Super City Toyota, I expect the salesman to sell me a Toyota. I don’t expect him to wax lyrical about the benefits of other models. “Have you considered a Mazda, sir? They make great cars.”
But then it’s very clear I’m shopping in Toyota’s distribution network. There isn’t a huge sign that says, “Independent Automotive Advice”. They’re not pretending to sell me personalised automotive solutions to suit my own unique driving circumstances. They’re in the business of selling Toyotas.
But this is exactly the scam that’s running in financial planning. They’re flogging a particular set of financial products, under the guise of independent advice, with no disclosure of the kick-backs and commissions they receive.
FoFA tried to shine a light on these arrangements, as well as some other radical measures like getting planners to disclose their fees (I know, crazy right?)
But the government had plans to undo it all.
And why would the Coalition attempt such a shameless shafting of the public interest?
In 2011-12, they donated $1.7 million to the major parties, not counting anything that might have been directed through individuals or lobby groups. The next biggest industry was energy, all the way back at $0.66 million.
Now you don’t make that kind of investment without expecting something in return.
And before any Labor hacks start getting all holier-than-thou on me, the financial industry usually likes an each way bet. Labor are hooked on exactly the same sugar.
And this is why financial regulation in Australia is such a shambles, why ASIC is such a toothless tiger, and our head regular thinks Australia is a paradise for white collar crime.
Our politicians have sold us out.
They’ve let the financial industry write it’s own rule-book, prostituting the public interest for a couple of million dollars.
And we’re all the poorer for it.
I’ll keep my financial future in my own hands thank you very much.