SYDNEY -- Australian Treasurer Scott Morrison warned that financial sector executives responsible for widespread breaches of corporate law could face jail, as a powerful judicial inquiry heard more evidence of misconduct by the country’s top financial institutions.
Morrison’s comments on Wednesday were made after executives at AMP Ltd, Australia’s largest wealth manager, admitted a day earlier it had lied to the corporate regulator for almost a decade to cover up its practice of charging thousands of customers for services they did not provide.
In further testimony to the so-called Royal Commission on Wednesday, AMP executives admitted that it had charged users of online platforms for advice fees despite not receiving the permission required by law.
“What has occurred here and what has been admitted to in the Royal Commission by AMP is deeply disturbing,” Morrison told reporters. “This type of behavior can attract penalties which include jail time. That is how serious these things are.”
The government-backed Royal Commission into Australia’s banking sector is just a couple of months into what is expected to be a year-long investigation and public grilling of senior executives in the country’s financial sector.
The inquiry will be able to make wide-ranging recommendations including legislative changes and criminal or civil prosecutions.
Under questioning, executives of the country’s largest bank, Commonwealth Bank of Australia (CBA), on Wednesday also said CBA was the worst of the country’s big banks when it came to charging fees for services it did not provide.
The inquiry heard CBA took more than two years to inform the Australian Securities and Investments Commission (ASIC) of the issues.
“We apologize for the length of time it has taken,” said Marianne Perkovic, head of CBA’s private banking unit.
ASIC which has been criticized for lacking clout amid a series of corporate scandals, said that it was cooperating with the inquiry and that it had done 18 “examinations” of AMP staff related to the misappropriation of fees.
“Making false or misleading statements to ASIC can result in civil and criminal sanctions,” the regulator said in a statement.
A similar inquiry in 2001 that looked into the collapse of the country’s second-biggest insurer, HIH Insurance, led to criminal convictions and prison sentences.
“AMP is deeply disappointed that its advice business has charged customers fees where service has not been provided and for misleading the regulator in this regard,” an AMP spokeswoman said in an emailed statement. “We apologize unreservedly to our customers, our regulator and the community more broadly,” she said.
AMP shares fell 2.2 percent on Wednesday, after sliding 4.4 percent the previous day. The broader market was up 0.4 percent on Wednesday.
The center-right government agreed to call the inquiry in late 2017 after years of scandals in Australia’s financial sector, including interest-rate rigging, accusations that some institutions withheld legitimate insurance payouts, and accusations of money-laundering.
It is currently focusing on the provision of financial advice by AMP and the four largest banks: CBA, Australia and New Zealand Banking Group, National Australia Bank and Westpac Banking Corp.
Over the past decade, AMP, the four largest banks and others have paid A$383 million ($297.40 million) in compensation for the misappropriation of fees or for losses caused by bad advice, the inquiry heard on Monday.
In coming months, the inquiry will turn its attention to large insurers and pension funds.