Commonwealth Bank’ Dollarmites Scam Disclosed By CBA’s CEO

  • Oct 15, 2018 AEDT
  • Team Kalkine
Commonwealth Bank’ Dollarmites Scam Disclosed By CBA’s CEO

Mr. Matt Comyn, the CEO of Commonwealth Bank of Australia (ASX: CBA) has recently disclosed that the thousands of children’s Dollarmite accounts have been fraudulently used by the Bank’s staff members to earn bonuses and achieve the targets. He also admits that he could have done more to investigate this issue when it was first raised in 2003.

According to a recent investigation, Various staff members of the CBA’s retail branches deposited money in dormant accounts without the consent of the parents, so that they could meet their targets and receive bonuses. While these actions did not impact the customers financially, it is considered as a serious breach of customer’s trust.

In the parliamentary hearing, Mr. Matt Comyn informed that this issue first came to his attention in the year 2003, and confirmed that he was subsequently interviewed about the issue and disclosed it to the board before his appointment as CEO. After a whistleblower raised concerns, a law firm MinterEllison was appointed by CBA to investigate this issue in FY 2016. 

This year CBA has sacked 41 people for poor behavior and nine had resigned while investigations were taking in place. CBA has now changed its key performance indicators for staff members and it has also changed the company’s system to make it easier to monitor. The CBA also faced heat at the Royal Commission for charging dead customers for advice and CBA admits that it was wrong.

Recently, CBA announced several actions to improve results for wealth management customers. The initiatives involved reviewing any advice fees charged to deceased estates across all advice licensees and refunding with interest any instances where unauthorized fees have been charged, taking steps to remove certain fees on legacy wealth products from January 2019, saving customers approximately $25 million annually, providing all CFP customers with an option to renew their ongoing service arrangements every two years. The bank is participating transparently and fully in the Royal Commission and it is expecting that through the process of scrutiny and reflection it will become a better bank and that the Australian financial services sector will also be strengthened.

FY 2018 was a challenging year for CBA due to series of conduct and compliance issues. On the financial front, the statutory NPAT of the bank decreased by 4 percent to $9,375 million in FY 2018 as compared to last year. The operating expenses of the bank increased by 9.2 percent to $11,599 million in FY2018 as compared to last year. Operating expenses were impacted by a number of reasons including the AUSTRAC civil penalty and regulatory and compliance costs. The total operating income of the company increased by 2.6 percent to $25,907 million in FY 2018 as compared to last year.

In the past six months, the shares of CBA declined by 8.29 percent as on 12 October 2018. CBA’s share traded at $65.630 with a market capitalization of circa $118.66 billion as on 15 October 2018 (AEST 4:00 PM).

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