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Amidst public outrage over the dodgy dealings revealed in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services, the government is taking action.
Treasurer Josh Frydenberg has today announced new legislation in the federal parliament to significantly crack down on the individuals behind major institutions who took Australians for a ride.
Jail time for individuals found guilty of misconduct in the financial sector will be lifted to up to 10 years under the draft laws.
The legislation also increases civil penalties for individuals by more than five-fold ($1.05 million fine) and ten-fold ($10.5 million fine) for corporations.
Treasurer Frydenberg says the government's plan to make penalties harsher is part of rebuilding trust for those companies that have hurt so many.
"This is not only necessary to ensure individuals and corporations who do the wrong thing are appropriately punished, but it's also an essential part of rebuilding community trust in the financial services industry," said Frydenberg in the lower house this morning.
Some of Australia's major banks like NAB, ANZ and Commonwealth Bank have set side significant sums of money to compensate customers for their mistakes.
The big four banks (ANZ, CBA, NAB, and Westpac) and embattled financial advice institution AMP, have already paid or offered customers $222.3 million in refunds for failing to provide advice to customers despite charging fees.
ASIC is also overseeing FFNS programs by other financial service institutions like Bendigo Financial Planning Ltd, BankVic, StatePlus, and Yellow Brick Road Wealth Management Pty Ltd.
The financial services watchdog also says it is aware of five other institutions that have provisioned for future remediation payments, with four of these providing to ASIC amounts for future remediation. If all of these provisions are paid in full, FFNS remediation may exceed $850 million.
AMP's half year profit took a 74 per cent dive on the back of a $290 million compensation payout to customers charged fees for no service.
The company's first-half net profit went down from $445 million in 1H17, to $115 at the end of June 2018.
Commonwealth Bank has also suffered, with profit down 5 per cent to $9.23 billion at the end of FY18.
The profit drop was primarily due to the history making $700 million penalty CBA paid to AUSTRAC after it admitted to 53,700 breaches of anti-money laundering and counter-terrorism funding laws.
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