CBA fined $5m for overcharging farmers Australian financial review Jun 5, 2020 – 4.20pm Commonwealth Bank has been ordered to pay a $5 million penalty by the Federal Court, which found its inadequate systems led to thousands of farming customers being overcharged. ASIC deputy chairman Daniel Crennan, QC: "Entities ought to make admissions and engage in the penalties process at the earliest possible opportunity." The court found the overcharging, which amounted to $8 million, breached the bank's duty to provide services "efficiently, honestly and fairly". The blunder, which affected 8600 customers over a decade to 2015, was examined in the Hayne royal commission. CBA admitted to the misconduct when ASIC filed the case in March. "What happened can be attributed, at least in part, to the inadequacy of CBA's 'control environment','' Kenneth Hayne said in his final report. "The errors were not prevented or detected by the bank's risk management systems." ASIC deputy chairman Daniel Crennan, QC, said on Friday that the regulator expected banks, in appropriate circumstances, "to make admissions and engage in the penalties process at the earliest possible opportunity" when ASIC sued them. It is the second court judgment following case studies in the Hayne royal commission, after former NAB branch manager Mathew Alwan was found guilty of making false and misleading statements in connection with NAB’s introducer program and sentenced in November to a year of home detention. The latest case involved CBA selling customers a so-called AA+ Package, which entitled them to benefits including fee waivers, interest rate discounts and bonus interest on savings. But the bank failed to maintain systems and processes to ensure these benefits could be provided, and 8659 customers were affected on 131,542 occasions, ASIC said. ASIC argued CBA's systems, which should have checked whether the product's benefits were actually being provided to customers, were highly manual and the bank lacked systems and processes to check whether the benefits offered were actually being received. ASIC and CBA agree on two Hayne prosecutions The court found this amounted to a breach by CBA of its obligation in section 912A of the Corporations Act to do everything necessary to ensure its financial services are provided efficiently, honestly and fairly. It also found additional breaches of similar parts of the ASIC Act. The small penalty reflected the "very substantial mitigating circumstances", the court said, including that the conduct was not deliberate, and that CBA compensated all customers. CBA chief executive Matt Comyn previously apologized to the Agri Advantage customers, saying the bank closed the product at the end of 2015. "We have sent refunds of approximately $8 million [including interest]," he said in March. "Failures of this sort are unacceptable."

Reflect upon the case study provided, applying Toffler’s three business ethics principles. In each case name the principle and briefly explain it and give an example(s) from the case study where you believe each principle might be breached.