The banking royal commission has opened with explosive evidence of National Australia Bank branch managers accepting white envelopes stuffed with cash as part of an alleged bribery ring that also involved gym instructors and other unqualified people flogging its products.
The alleged use of ‘introducers’, including at least one gym owner, and the bank’s alleged loose lending practices resulted in signatures of customers being forged and false documentation being submitted to get home loans.
Details of the scandal, which NAB last year revealed had resulted in 20 bankers being sacked or resigning, were uncovered in royal commission hearings in Melbourne on Tuesday.
NAB was alerted to the allegedly falsified mortgage applications by its inhouse staff that were using referrals from certain members of the public in September 2015.
A second whistleblower inside NAB alerted the bank in October to what is alleged to be a major fraud being operated out of five branches in greater western Sydney.
According to the whistleblower email, read into the commission by counsel assisting, Rowena Orr: “One customer recently said they told him that he could borrow $800,000 when his property was valued at $400,000. The money exchanges hands in white envelopes over the counter of the bank.”
Eleven staff were accused by the whistleblower of being a part of a bribery ring including six branch managers.
The scheme included fake payslips, fake identification documents and fake Medicare cards to secure loans. The fake documentation was allegedly used by the bankers to get customers loans who otherwise would not get them but to also pump up their sales figures so they could get promoted, Ms Orr told the commission.
“They charged $2,800 for each customer for home loans mainly and also personal loans,” Ms Orr said.
Reading the whistleblower complaint, Mr Orr said it was suspected that a client adviser had used a fake guarantee from a person who didn’t appear to exist.
“People are being promoted on the basis of home loans and other lending so it appears they are smashing their targets but some of this is false,” the whistleblower said in his email.
NAB’s head of broker partnerships, Anthony Waldron, said there had been “obvious breakdowns of controls” within the bank. Mr Waldron earlier said some of the referrers were people who ran gyms, but its policies had since been tightened up.
“Those particular introducers doing those activities is not something we would do today but there are instances of that occurring in the past,” he said.
By November 2015, the commission heard, NAB’s group chief risk officer had appointed a taskforce into the problems, but the issue had not been reported to the NAB board.
Mr Waldron agreed the first report to the NAB board was in December 2015, and it had not reported the issues to ASIC at that time either.