ASIC Grilled on Banking Code of Practice and Crypto Scandal

The Banking Code of Practice was originally designed to safeguard consumers from bad banking practices, however since the first code was issued, there has been a continual watering down of these protections, effectively rendering the code meaningless.

Currently, ASIC is conducting a review of the code. During the recent Senate Estimates, I inquired whether certain protections would be included, such as protections against de-banking, ensuring access to cash, and maintaining in-person banking services at branches.

Unfortunately, the responses provided were not encouraging. If this review fails to restore consumer protections to the Banking Code, One Nation will pursue a legislated response by way of a mandatory code.

Additionally, I inquired about ASIC’s handling of the recent crypto scandal, where Australian investors lost hundreds of millions of dollars due to ASIC failing to advise of the risks. This contrasts with the Mayfair scandal, where ASIC’s enforcement action actually caused the company and their investors to undergo a loss that would not have occurred without ASIC’s actions.

Transcript

Senator ROBERTS: Thank you for appearing today. Last estimates I raised a series of concerns regarding the Banking Code of Practice, and Ms O’Rourke was very forthcoming in her answers; thank you for that. At one point, Ms O’Rourke, you said you would update me if there was any progress on the negotiation for the new banking code. Could you provide an update now, please, in respect of these four matters. Is ‘prudent and diligent banker’ still in there? It’s a meaningless phrase.  

Ms O’Rourke: Yes, we had that discussion at the last hearing, about the code of practice. I’m happy to update in relation to the discussions we’ve been having. To step back a moment—  

Senator ROBERTS: On those specific four points: is ‘prudent and diligent banker’ still in there?  

Ms O’Rourke: I think, prior to that particular question, you said, ‘What’s the state of play?’ The state of play is that there’s not yet a final code that has been finalised by the ABA to put to us for approval. The answer is that it’s not yet determined whether or not that phrase ‘prudent and diligent’ will or will not be in the final code. Can I give a little bit more detail?  

Senator ROBERTS: Sure.  

Ms O’Rourke: It is in the existing code. In the draft code published by the ABA last year, in relation to which we’ve had a consultation process, there was a proposal to narrow the application of ‘prudent and diligent’ to very specific circumstances and for other circumstances to rely on other legal provisions. That has been something through the consultation process we have had submissions in relation to, and it is something we have been speaking to the ABA about. The ABA is still considering its position, and there isn’t a final outcome.  

Senator ROBERTS: Is there a guarantee of face-to-face banking services?  

Ms O’Rourke: That is not in either the existing code or the proposed code from the ABA. Like I say, there is no final position in relation to what the final code will look like but that’s one that’s not been proposed, nor was it particularly raised in the submissions we received.  

Senator ROBERTS: This is not a comment aimed at you, Ms O’Rourke, but we’re not interested so much in whether or not something was in there or will be in there; we’re interested in—purely, that’s something we believe is necessary. Is there a guarantee of access to the King’s currency of cash?  

Ms O’Rourke: The current code does not have that, nor does the proposed code. 

Senator ROBERTS: Is there a guarantee not to debank a customer for competitive or social reasons like, ‘We don’t agree with your politics’?  

Ms O’Rourke: That’s not in the current code nor is it proposed to be in the revised code.  

Senator ROBERTS: I believe you took on notice the debanking issue, but the response only answered ‘other matters’. Has ASIC considered the debanking issue? It’s a device by which the banks harm the business of their competitors and manipulate the markets to their financial advantage—as they have, for example, with cash in transit. This says misuse of market power to me. Has ASIC considered the debanking issue?  

Ms O’Rourke: ASIC has been part of discussions around the cash-in-transit issue you referred to. I’m not sure whether you’ve had an opportunity to speak to other agencies, including the RBA, Treasury or others involved on the government side, or, indeed, if you’ve had opportunities to speak to the ABA or others. We’re more interested observers than participants in relation to cash in transit. We don’t have any regulatory hooks or provisions that particularly go to the provision of cash or its transportation.  

Senator ROBERTS: What about debanking?  

Ms O’Rourke: Similarly, there is no requirement to bank or to take steps in relation to debanking in relation to which we could take action.  

Senator ROBERTS: On the crypto scam: Senator Hume asked some very fine questions today. Your testimony was that you were aware of this scam for quite some time, yet the scam companies Infinity CapitalG, Topmarketcap, Iron Bits and Richmondsuper were added to the scam list just yesterday. Why did it take so long to get those companies onto the scam list?  

Ms Court: As I said in my answers to Senator Hume, when that information came in to us it was for the purposes of a continuing criminal investigation at that time. At that time, in August 2023, we didn’t have up and running the investor alert list we have now; that commenced in November 2023. We hadn’t received any reports of misconduct or any indication that any of those entities referred to in the article—that consumers were continuing to invest or lose money as a result of investments in those entities. However, following the media reporting, we went back and had a look at those entities, and I think we took a decision that we would put four out of the five—even though we had no information about continuing losses to investors—on the investor alert list, for completeness.  

Senator ROBERTS: Thank you. On Mayfair 101: ASIC went after a company that appears to have been trading *legally. Mayfair 101 were up-to-date with repayments to lenders and, as demonstrated over the last three years, had financial resources as they fought your action. ASIC considered Mayfair’s advertising misrepresented their investment product and took immediate action to freeze the company’s asset. By doing that, ASIC almost cost 500 Australian investors $200 million but the company has survived. ASIC’s actions have, however, caused a lot of damage to investors and the company for no good reason we can see. One Nation, I must mention, as I previously stated, is one of those investors. This matter has been dragging on for three years and now ASIC is going for another round. What’s the state of play now?  

Ms Court: I gave quite a long answer to Senator Bragg earlier, when you weren’t in the room, about the status of Mayfair—  

Senator ROBERTS: Okay; we’ll leave it. I want to get on. Thank you for that. Your actions were ostensibly to protect investors, yet the investors in Mayfair have not had access to their funds or a return on their investment since you started your action, despite the entity they invested in still being viable. Why are you hurting the people you profess to protect?  

Ms Court: As I said in my response to Senator Bragg earlier, ASIC acted quickly in relation to the Mayfair matters for the purposes of protecting future investors. The matter’s been before the court, and Mayfair has been found to have engaged in misleading conduct. The court has imposed a $30 million penalty on Mayfair, which I understand remains unpaid. There are still several matters currently before the courts, and the courts are testing ASIC’s claims and the defences to those claims. That is an appropriate place for them to be determined now.