Analysis of Misconduct Reported by the Royal Commission

This article analyzes the misconduct reported by the Royal Commission in the banking and financial services industry, including various types of frauds and misconducts. It also discusses the ways to prevent such frauds and misconducts. The article provides insights into the final report of the Royal Commission and highlights the major cases of misconduct mentioned in the report.

Running head: ANALYSIS OF MISCONDUCT REPORTED BY THE ROYAL COMMISSION
Analysis of Misconduct Reported by the Royal Commission:
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1ANALYSIS OF MISCONDUCT REPORTED BY THE ROYAL COMMISSION
Introduction
The Royal Commission in to Misconduct in the Banking, Superannuation and Financial
Services Industry is a Royal commission that is established by the Government of Australia, under
the Royal Commissions Act 1902. This commission is established for the purpose of reducing and
omitting misconduct in financial statement presentation in the banking industry and in financial
services industry. The Royal Commission have submitted its final report on 1st January, 2019,
where various banking frauds and industry misconducts are mentioned. The various frauds in the
Royal Commissions and the ways that will help to inhibit such fraud are mentioned below
(Financial Services Royal Commission, 2009).
Discussion
In the final report of the Royal commission, many types of frauds and misconducts in the
banking and financial services industry is mentioned, out of which the major frauds are -
accounting frauds, bill discounting frauds, cheque kitting, forged or fraudulent documents, forgery
and altered cheques and fraudulent loan applications. Accounting fraud is the most common type of
fraud, where the accountants presents manipulated data and information in the preparation of
annual reports. Other frauds bill discounted frauds or cheque kitting or fraudulent loan applications
are the most common and serious frauds in the banking industry (Khanna & Arora, 2009).
There are many severe misconducts that are mentioned by the Royal Commissions in their
interim final report, case studies. The first case of misconduct is the Aussie home loans broker
misconduct. In the case, the misconduct is done by four former brokers from Aussie Home Loans
Investment Pty Ltd, which includes submission of false documents to the lenders in regard to home
loans applications. The other misconduct mentioned in the report by the commission is the CBA
personal overdrafts. This case states misconduct of data due to programming error. CBA used to
use automated decision making system and a calculator to assess serviceability and risk, but later
during the review, they have discovered a programming error in the system, which resulted to

2ANALYSIS OF MISCONDUCT REPORTED BY THE ROYAL COMMISSION
calculate wrong information in calculating serviceability from the customers’ log form applications.
Other misconducts that are mentioned are the ANZ’s situation of pre-approved overdrafts, by an
employee, which shows scalability; a conduct in AMP of approving fees for no service; a same
case of fees for no services in CBA; Westpac Bad advice; ANZ bad advice; AMP bad advice; NAB
bad advice; Dover bad advice and the Henderson Maxwell bad advice. All the cases are mentioned
in the final report of the Royal Commissions and also described properly with evidences (Financial
Services Royal Commission, 2009).
To inhibit such frauds or misconducts some of the essential steps could be taken by the
company such as- (i) multi-factor authentication or multi- layered security structure, which includes
multi- layer software support; (ii) bank monitoring transactions, where bank should check daily
transactions and all the transactions should be reconsidered and processed by the bank, (iii)
reconciliation of the daily corporate accounts along with the daily transactions, (iv) raising the
fraud awareness, because fraud cannot always be discover by management sometimes, with the
awareness, co-workers can also discover the misconduct, (v) Dual employee control, i.e. the
company can allocate two authorities in a single department (Cooper & de Valores Mobiliários,
2006).
Conclusion
Hence, from the above discussions, it can be concluded that the Royal commissions plays a
very vital role in reducing and identifying misconduct in the banking industry and it can be
concluded that using the above prevention points, Royal commission could apply to lessen these
misconduct in the organization, of the banking industry and the financial services industry. It has
also been observed in the above discussions that most of the misconduct is due to document
falsification or software manipulation.

3ANALYSIS OF MISCONDUCT REPORTED BY THE ROYAL COMMISSION
References
(2019). Retrieved from https://financialservices.royalcommission.gov.au/Documents/interim-
report/interim-report-volume-2.pdf
Cooper, J., & de Valores Mobiliários, C. (2006). The integration of financial regulatory authorities–
the Australian experience. Speech to Comissão de Valores Mobiliários, 4-5.
Financial Services Royal Commission - Home. (2019). Retrieved from
https://financialservices.royalcommission.gov.au/
Khanna, A., & Arora, B. (2009). A study to investigate the reasons for bank frauds and the
implementation of preventive security controls in Indian banking industry. International
Journal of Business Science & Applied Management (IJBSAM), 4(3), 1-21.