AMP May Face Criminal Charges

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AMP Bank

Senior Council Rowena Orr QC says financial services provider AMP could face criminal charges for making misleading statements to the Australian Securities and Investments Commission (ASIC).

Misconduct findings

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (‘the Banking Royal Commission’) heard that AMP made a deliberate decision to continue charging fees for financial services when it knew that no services were being provided.

The Royal Commission heard evidence that AMP customers continued to be charged fees after terminating their arrangements with the financial services provider, and that junior staff had tried unsuccessfully to convince senior management to discontinue the unfair and unethical practice.

AMP and its related financial advice businesses were found to have misled ASIC 20 times between 2015 and 2015 regarding the nature and extent of its practice of charging fees without providing a service.

The company also provided a report to ASIC which purported to report independent findings by law firm Clayton Utz, when the report had in fact been heavily edited by AMP – going through 25 draft versions to make changes designed to mislead the regulators.

Ms Orr said the changes appear to amount to an attempt by the company’s most senior executives to cover-up fraudulent practices.

Criminal accountability

According to Ms Orr, AMP appears to have deliberately misled ASIC by characterising the Clayton Utz report as “external” and “independent”. She pointed out that the company made 20 “misstatements” in 12 communications with ASIC during a ‘fees-for-no-service’ inquiry.

Section 1308 of the Corporations Act makes it an offence punishable by up to five years’ imprisonment and/or a fine of up to $42,000 to deliberately attempt to mislead the regulator.

Any person who makes or authorises a “false or misleading” or “omits or authorises the omission” of matters that are misleading in a material respect may be guilty of the offence.

ASIC’s failure to prosecute

The Royal Commission has shown ASIC to be woefully unable when it comes to prosecuting serious criminal offences.

ASIC admitted that it prefers to negotiate with offenders rather than prosecute them, as it can take years and enormous resources to prove criminal offences.

The organisation said it has only prosecuted one financial adviser in the past 10 years, and has not issued a civil penalty orders against licensees since 2013.

The revelations support the widespread public perception that the wealthy frequently get away with serious crime while the less fortunate are increasingly criminalised.

Consequences for AMP

In the wake of the findings, AMP has lost $2.22 billion of its market value.

CEO Craig Meller has lost his job and executives have been advised to “seriously consider” their positions.

The Australian Council of Superannuation Investors (ACSI) has urged its members to take action against three AMP directors, and instructed its members to vote against director election and remuneration resolutions at AMP’s annual general meeting.

Government inaction

Liberal party ministers including Tony Abbott are now talking tough on financial crime, seemingly forgetting that are responsible for gutting the regulator in the 2014 budget.

The Abbott government’s 2014 budget resulted in $120 million of cuts to ASIC’s funding over four years, leading to the loss of more than 200 staff. At the time, the government called for greater self-regulation by the banking industry rather than more oversight.

In 2016, the Turnbull government restored the funding and boosted the regulator’s powers. These changes, however, also introduced a user-pays funding model, whereby those who require the greatest level of regulation, such as banks, pay more for ASIC’s funding. Many see this as a conflict of interest as the regulator is essentially being paid by those it is investigating.

Resisting a Royal Commission

In 2016, the Opposition started backing a Royal Commission into the banking industry. At the time, 65% of voters supported the idea and just 26% opposed it. Yet, the Coalition government refused to back the move.

The Royal Commission ultimately came about because the National Party pressured the Liberals to approve it. This pressure required Barnaby Joyce to lose his veto power when he stood aside as leader. At the time, Liberal Ministers called the inquiry “regrettable” and “unnecessary populism”, as the financial regulator was supposedly already sufficiently regulated.

“Along with many Australians, I can’t help but wonder how many customers were ripped off by this kind of misconduct in the two years it took the Government to relent and agree to Labor’s calls for a royal commission,” Mr Shorten stateds, calling on Malcolm Turnbull to apologise to those affected.

Greens senator Peter Whish-Wilson has called for major banks and financial planners to fund a victims compensation scheme. He pointed out that in 2008-09, the big four banks and AMP alone donated $3.8m to the federal Liberal and National parties, and Labor.

“On the one hand Labor and Liberals are now happy to criticise financial service companies for their conduct. On the other hand they have been just as happy to accept their donations”, he remarked.

“Political parties shouldn’t be profiting from the banks and the likes of AMP while victims are currently left uncompensated.”

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Zeb Holmes

Zeb Holmes

Zeb Holmes is a lawyer with a passion for social justice who advocates criminal law reform, and a member of the content team at Sydney Criminal Lawyers®.
Ugur Nedim

Ugur Nedim

Ugur Nedim is an Accredited Criminal Law Specialist with 25 years of experience as a Criminal Defence Lawyer. He is the Principal of Sydney Criminal Lawyers®.

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