Contributed by Joe Montero

Commbank’s participation in money laundering and its failure to come clean, even after the scandal was exposed, underlines the need for appropriate action to clean up the banking system in Australia.

Passing the scandal off as an error based on outdated $100 and $50 notes is insufficient and an evasion of culpability.

The transferring of large amounts, involving some 53,000 separate transactions, could not have occurred without the bank’s knowledge. This knowledge of wrong doing, while it was taking place has been admitted and it is the smoking gun that suggests this is more than an accident. Somewhere along the line, a decision was made to participate in what looks like illegal activity. Isn’t this what allowing it to go on, while at the same time gaining a financial interest amounts to?

The announced resignation at the end of next year of CEO, Ian Narev, does not resolve the problem. He certainly should wear responsibility for what happened during his watch.  If he personally and knowingly abetted the money laundering, Narev should be charged under criminal law.

Any idea that Narev’s departure is sufficient, clears the bank from being responsible for what has happened and this is not right.

There is something fundamentally wrong within the organisation, in terms of its operations and decision-making processes. They need to be publicly reviewed, so that the community can be confident that something is being done and transparency is being put in place.

The promised investigation by the Australian Investment and Securities Commission (ASIC) is a good start, so long as its scope is not too narrow and that there are appropriate consequences for any wrongdoing that is found.

A review, however it is carried out, should lead to a re-organisation and ensure that the bank will be operating in the community interest and sufficient change is enforced, to make a real difference.

Suggestions have been made to do away with larger denomination notes, to embed nano chips in money to monitor its movement and use biometrics at money transfer points. They are not the answer. In effect, they blame the community  and evade the culpability of banks doing the wrong thing.

Significant change is not likely to occur, without government stepping in to provide an environment in which the banking system is made to operate in such a way.

Part of the problem is that Commbank and the other banks have been so deregulated that they have been able to use their power to become a law unto themselves. This is the sort of environment that provides incentives to move into grey areas and beyond, if there is enough money to be made.

The Commbank scandal has shown that Australia needs to move in the opposite direction and ensure adequate regulation to ensure ethical practices and some controls on how money in the hands of the banks is used.

After all, the money put into deposit accounts belongs to us and what they do with it, affects us directly. We have a right to expect that the banks use the money appropriately.

Since the banks only exist because the public puts money into them, the banks have a social obligation to contribute to the well-being of society and should not exist, just to make a bundle of money for major shareholders and executives.

While this particular scandal envelopes Commbank, it is but the latest episode in a string of practices that have caused the banks to be among the most unpopular organisations in the country.

When the imperative of social obligation is lost, there is no reason to believe that the industry will put an end to cut corners and engage in questionable practices to fatten the bottom line. change needs to come from the outside.