At CBA, the mortgage customers pay higher fees than the meth-lab customers

by | Aug 30, 2017 | Despatch, Finance

Most self-respecting money-launderers charge ten per cent. At CBA they charged $22 a trade, that is $22 for every remittance to Hong Kong.

In other words, CBA – the winner of last year’s Australian Financial Review Innovation leadership award – charges its average Aussie mortgage-holder more in fees than its average Aussie meth-lab customer.

The real story of how the bank risked its reputation – then blamed it on a “computer glitch” is here, a first class investigation by Nathan Lynch of Thomson Reuters’ Financial Crime and Risk, Regulatory Intelligence division.

Smart Laundromat: The inside story of CBA money-laundering scandal

We don’t know how much of the $8.9 billion laundered by the bank was proceeds of crime. As most non-criminals don’t sit on milk crates feeding ten grand at a time into an ATM, let’s be generous and assume only 50 per cent of that money was laundered.

At a typical rate of 10 per cent, a money-laundering syndicate would have picked up $450 million to launder $4.5 billion. Let’s not forget these deposits are not in the least ‘sticky’, they don’t stick around that is, so the bank doesn’t make much of a profit. It is high-risk, low-grade business.

Now, for this paltry margin, CBA faces regulatory investigations in Malaysia and Hong Kong (both are underway according to sources). It faces a lawsuit from AUSTRAC, a class action from shareholders, a possible action against directors from corporate watchdog ASIC and an inquiry by APRA.

One wonders what APRA has been doing until now as the prudential regulator is supposed to receive quarterly risk reports from CBA and must have missed all the shenanigans. For its part, ASIC may, in a bid to play catch-up with AUSTRAC and the AFP, might even have a swing at director bans (at the apex of the white collar jungle, a ban is as savage as the death penalty; the shame, the shame).

Then there is the spectre that the US Justice Department may get involved as it did in the aftermath of the Beijing Olympics corruption claims swirling around BHP. Sources told michaelwest.com.au that US authorities had already approached the bank with an inquiry.

Foreign Bribery: Australia’s loss is America’s gain

If there is a US counter-party involved in the CBA transactions with Hong Kong, the CBA might find itself in the cross-hairs of US regulators too. Maybe even a distant transaction by CBA in US money markets might open the legal avenue.

Surely the bank would have been better off sticking to those good old fat and reliable residential mortgages.

The standard fee for withdrawing cash at an ATM overseas is $5 plus 3 per cent of the transaction value so, on a $10,000 CBA money-wash to Hong Kong, the fees were $22 but, on a $10,000 withdrawal by an ordinary (non criminal) Aussie customer in Hong Kong, the fees are $300 (plus the $5 per transaction).

Further to this risk and reward perspective, establishment fees on an Equity Unlock Loan for Seniors are $950. So it would take 43 illegal meth-lab transactions through the hole-in-the-wall at $22 a pop to almost equal the amount the bank makes from aged pensioners for the pleasure of “unlocking the equity” in their home and reaping interest rate charges from the consequent loan.

The motivation is hard to fathom. Just a catastrophic failure of compliance and risk, a failure which will cost shareholders dearly … besides the teeny-weeny hit to those responsible: directors and executives.

ABOUT THE AUTHOR

Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

3 Comments

  1. Avatar

    Great despatch Michael. Incredible that CBA let launderers use their infrastructure for such little benefit to the bank. Whose idea was that?? Most savvy banks have make a fortune off money launderers before getting caught.

    No wonder IDMs were such an apparent “success”. Laundering for Dummies.

  2. Avatar

    Great despatch Michael. Incredible that CBA let launderers use their infrastructure for such an insignificant benefit to the bank. Whose idea was that?? Most savvy banks have made a fortune off money launderers before getting caught.

    Shareholders should be doubly p*ssed.

    No wonder IDMs were such an apparent “success”. Laundering for Dummies.

  3. Avatar

    “director bans (at the apex of the white collar jungle, a ban is as savage as the death penalty”
    Hmmm, I’m a big fan of repeated scientific evidence being required in order to prove a theory, so I say we should run some experiments on the above statement just to see how it holds up.

QED

Case for Federal ICAC

Quad Erat Demonstrandum

Revolving Doors

Revolving Doors

Video Channel

The West Report

Support Us

subscribe to michael west media

[ Click to find out more ]

Michael West Email

Get Our Weekly Newsletter

Unsubscribe anytime.

Thank you! We'll also confirm via email.

Pin It on Pinterest

Share This