Banking royal commission: Whistleblower alleges cash for loans bribery ring at NAB
The banking royal commission has heard sensational allegations of a cash for loans bribery ring at National Australia Bank branches in western Sydney as the first round of public hearings kicked off.
The commission heard from NAB executive Anthony Waldron, who was grilled over fraudulent loan applications through the bank's Introducer Program, where professionals are paid commissions for referring home loan or personal loan customers to the bank.
A NAB internal email from October 2015 read out by senior counsel assisting the Commission Rowena Orr, QC, outlined whistleblower allegations about five branches in greater western Sydney involving 11 bank staff, including six branch managers.
They were accused of fraud, including making fake payslips and false documents including Medicare cards.
"One customer recently said they told him that he could borrow $800,000 when his property was valued at $400,000.
"The whistleblower said the money exchanges hands in cash in envelopes, white envelopes, usually over the counter.
"Money is deposited at the CBA so NAB can't detect the deposits. (It's) happening on a daily or weekly basis and has been happening for a number of years."
The whistleblower also alleged that bank staff were being promoted for "smashing" their home loan targets, but the numbers were false because they were based on fake documents.
A customer adviser at the bank was accused of applying for a home loan using a suspected fraudulent guarantee.
Another internal email from April 2015 showed that allegations of fraud were made against one of the branch managers in the alleged bribery ring.
The branch manager was suspected of colluding with an introducer to manipulate the bank's sales incentive scheme to get higher bonuses for writing more home loans.
Another sacked employee was accused by a whistleblower of taking a bribe which she later returned.
Five sacked — including two branch managers
In late October 2015, the bank launched an internal fraud investigation into the allegations and in November sacked five bank staff, including two branch managers.
Ms Orr said the misconduct involving the Introducer Program had occurred from 2013 to 2016 and involved about 60 staff and 2,300 loans.
One of the sacked branch managers was accused of being dishonest about their relationship with an introducer, with the introducer's address the same as the branch manager's immediate family address.
NAB internal documents tendered during the commission showed NAB introducers had a target of $2 million a year in loan referrals and $10 million for commercial lending.
Nearly 46,000 home loans worth more than $24 billion were referred to NAB by introducers over those three years.
Commissioner Kenneth Hayne estimated that NAB would have paid out about $100 million in commissions during that time.
Mr Waldron admitted that some introducers were gym owners who referred loan customers to NAB in breach of the program rules.
"We weren't as strict as ensuring they came from industries we were comfortable with," Mr Waldron told Ms Orr in response to a question.
Commissioner scathing about reporting delay
The banking royal commission also criticised NAB for not disclosing fraudulent behaviour by its bankers and third parties to the corporate regulator within the legal deadline.
NAB did not report the significant breach to the Australian Securities and Investment Commission (ASIC) within the 10-day deadline under the Corporations Act.
Instead, NAB reported the behaviour to ASIC in February 2016.
Commissioner Hayne was scathing about the delay when questioning Mr Waldron.
"It knew enough by November to sack people for those reasons. [Are] you telling me it didn't know enough to tell ASIC there was a problem?"
Mr Waldron said he could not offer a reason for the delay.
The bank sacked 20 staff in New South Wales and Victoria last year, and disciplined more than 30 others over the Introducer Program.
In a letter to customers released just before the hearing began on Monday, NAB boss Andrew Thorburn said the bank acknowledged it had not done the right thing by customers in the past and that conduct was regrettable and unacceptable.
Credit cards Australia's biggest financial problem
Commissioner Hayne was stern towards the bankers in Monday's hearing. He directed Mr Waldron to be careful in his responses to questions from Ms Orr.
"There's a world of difference between 'would have' and 'I know'," he said.
"I'll be much assisted if you confine yourself to what you know or you can point to in the documents."
The commission also heard from consumer advocate Karen Cox from the Financial Rights Legal Centre in Sydney.
She told the hearing that credit cards were Australia's biggest financial problem.
"The whole time I have worked at the Financial Rights Legal Centre, credit cards have been the number one issue with the exception of about three years around the global financial crisis, when home loans became the biggest concern for a short time," she said.
Banks slammed for lack of disclosure
During the opening of the first round of public hearings, Ms Orr slammed some of Australia's banks for their "less comprehensive approach" to requests for information about misconduct from Commissioner Hayne.
Ms Orr said Aussie Home Loans, which is now owned by the Commonwealth Bank, submitted a brief response of just eight paragraphs in relation to its fraudulent brokers and broker arrangements.
Ms Orr also said the CBA failed to provide enough information about the misconduct it had been involved in.
"CBA's first submission adopted a high-level and general approach, which meant that it did not disclose the totality of the conduct that it has engaged in in relation to consumer lending over the last 10 years that constitutes misconduct or conduct that falls below community standards or expectations," she said.
"Much of the information provided by CBA in its second submission was not in a form which made it possible to easily understand the type and the scale of CBA's misconduct events over the past five years."
Ms Orr also said data from ASIC showed Australian banks had paid nearly $250 million in compensation to almost 540,000 home loan customers since July 2010.
The refunds were made because of issues relating to fraudulent documents, administrative errors or breaches of responsible lending laws.
Ms Orr said so far the commission had received 1,894 public submissions, with more than two-thirds of submissions concerning the banking industry.
She said home loans were a particular focus of complaints, with more than half of all new home loans now organised by a mortgage broker.
"Some Australians have expressed concerns about both financial services entities and brokers falsifying documents to obscure the true circumstances of consumers in order to obtain larger loans for the consumer," she said.