Royal Commission? Commonwealth Bank Can!

Commonwealth Bank

If you work at one of the Big Four Aussie banks…good luck. You’re all about to come under the microscope…again.

In fact you’re hearing it here first: There will be a Royal Commission into the banking sector. There have been calls for it since the start of the year. Now it’s coming.

It has to come.

If it’s not bank aligned financial planners screwing customers over, then it millions in laundered criminal funds. Quite simply, the average person on the street is sick to death of their bank doing them over.

Pick up a paper today. Or just watch the news. Or do both. There will be one major story, and it’s all thanks to the Commonwealth Bank of Australia. They’re accused of mass breaches to anti-money laundering (AML) and counter-terrorism funding (CTF) laws.

This is bad news for the bank. These kinds of accusations typically don’t pop up unless it’s a slam-dunk for the regulator. As reported by The Guardian:

The Australian Transaction Reports and Analysis Centre (Austrac), the financial intelligence agency, announced on Thursday it is suing Commonwealth bank for 53,700 breaches of money laundering and counter-terrorism-financing laws.

That’s right, 53,700 breaches.

All up, it’s likely going to cost the bank millions in fines. They can handle fines. It’s chickenfeed considering they recorded a $4.8 billion profit after tax in their half-year report.

But can they deal with the reputational damage? Or is it just another sign of cracks in the system? And also, you have to wonder why it took the regulator 53,700 examples before they brought this to the public? Why not do something after 100, or even 10?

Again, a problem of the banks? Or is it a sign of complete and utter failure of the existing system?

There isn’t much to come from shooting yourself in the hip pocket

There’s really no excuse for mass breaches of AML and CTF laws. Every bank and person that works in finance in the country has to do AML and CTF training.

We’ve done endless amounts of training over time. You learn how to spot dodgy transactions. You learn when something isn’t right. You learn when someone deposits $2.2 million in cash that there’s probably a red flag in there somewhere.

But not at the CBA. And, of course, it begs the question: What about the others?

This is why a Royal Commission is imminent. The public will lap it up. Like a firing squad…shoot first, ask questions later.

Except there’s a problem. What good is a firing squad when all you’ll do is end up shooting yourself?

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It’s easy to pull out a Royal Commission and waste a bunch of time and money finding out what we already know. Major financial institutions that employ tens of thousands of people have problems. And you’ll probably see thousands of bank jobs out the door over the next year.

They are imperfect beasts. They’re not angels of business. They’re not the corporate saviours they make out to be. They are businesses that have the sole aim of returning value to shareholders.

And, combined, they are worth some $420 billion in market cap to shareholders across the country. They sit as investments in almost every default superannuation fund in the country.

I can’t be certain, but I’ll go out on a limb and suggest that, in your superfund (industry, private or SMSF) somewhere, you have at least one bank stock.

They are single-handedly the four most important pillars to Australia’s current banking system. And the four most important pillars in the country’s superannuation pool.

If you’re going to throw a Royal Commission at the banks, you’ll end up damaging the investments of almost every Australian. Kiss any gains in your super goodbye this year.

Unless of course you’ve seen this coming. If the AML CTF breaches of the CBA don’t surprise you, then welcome to the club. If you’ve seen the warning signs as we have, you will have already started investing in financial companies outside the banks.

That’s where the opportunity lies as the banks stumble and cracks open.

Like the recent news about ANZ going ‘agile’. That’s good PR spin for bringing in loads more technology and slashing the workforce.

You don’t think that artificial intelligence and automated services will replace all staff in all branches in the next five years?

You don’t think that blockchain technology will replace existing compliance, AML and CTF procedures and people? Well, if they weren’t before, they certainly will now.

The revolution…and the stocks to own

There is a groundswell happening in Australia and around the world right now. It’s a financial revolution. Up for grabs is the entire financial system and your money.

The system as we know it is breaking apart, and there are opportunities everywhere to benefit from its destruction.

In part, this revolution is due to the incompetency of banks — such as the current CBA turmoil. And it’s in part due to the ineffectiveness of central banks and monetary policy.

It’s also thanks to weak and pathetic attempts by government for any kind of long-term, constructive fiscal policy.

There to pick up the pieces, and market share, are a new wave of banks, financial institutions and next-generation financial services. Heck, in part it’s already here.

These companies are stealing bank market share from right underneath their noses. Companies like Transferwise, CurrencyFair, M-Pesa, Ant Financial (AliPay), Apple and Android Pay, Funding Circle are all examples of territory the banks used to own.

When the systems start to break, these companies will pick up the pieces.

These are the kinds of companies you want to own — not the banks.

And while there are loads of private companies cutting into the banks’ market, there are also listed stocks. Many on the ASX.

Some of the ones you should be paying attention to are companies like zipMoney Ltd [ASX:ZML], Kyckr Ltd [ASX:KYK], Afterpay Touch Group [ASX:APT], eServeGlobal Ltd [ASX:ESV] and OFX Group Ltd [ASX:OFX].

These are just some of the companies that are taking Australia into the new high-tech financial era…not the banks.

And of course there’s the biggest financial revolution of them all: cryptocurrencies. If you’re looking for the single biggest wealth-building opportunity in the history of money itself — investing in cryptos is it.

Some people say that bitcoin is just the domain of criminals and terrorists.

Well, that’s clearly not the case. Just ask the Commonwealth Bank. Depositing wads of physical cash into CBA ATMs — that’s the real domain of criminals and terrorists.

Regards,

Sam

Sam Volkering

Sam Volkering is Editor for Money Morning and its small-cap, cryptocurrency and technology expert. Find out what he has to say here with all his latest articles.

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