Why Helen Coonan must step down as AFCA chairman

As Treasurer Josh Frydenberg casts around for suitable candidates to fill top jobs at the corporate watchdog, he should also keep a lookout for a new chairman of the Australian Financial Complaints Authority.

It’s clear Helen Coonan cannot continue to hold this position while she remains the chairman of Crown Resorts.

One of the consequences of the harsh grilling they received at the hands of the Hayne royal commission and the eye-watering penalties imposed on the country’s two largest banks for breaching anti-money-laundering rules is that when it comes to ensuring they have robust corporate governance and risk management procedures in place, the country’s banks are light years ahead of the casino giant.

And this makes it awkward for Coonan to be sitting at the peak of AFCA, the independent body that arbitrates on disputes between consumers and small businesses and their financiers.

Counsel assisting Naomi Sharp, SC, adroitly highlighted the tensions between Coonan’s two roles when the former Howard government minister appeared before the NSW Independent Liquor and Gaming Authority’s probity inquiry into Crown this month.

Sharp outlined that in her capacity as AFCA chair, Coonan had slammed the banks, putting that poor culture had ‘‘been fingered as the main culprit that permitted a slew of bad practices, appalling treatment of consumers and small businesses and, in many cases, arrogant indifference to regulatory and compliance risk’’.

Couldn’t the same criticism be applied to Crown Resorts, at least in the lead-up to the allegations aired in Fairfax Media newspapers and on 60 Minutes in July 2019, she asked?

Coonan, who has been a non-executive director of Crown Resorts since December 2011, and chairman since the beginning of this year, tried to evade the unfortunate parallel.

‘‘Well, to begin with, a casino is not a financial institution,’’ she pointed out.

And she rejected the suggestions that Crown Resorts had shown a disdainful indifference to regulatory and compliance risk. ‘‘I think there were some shortcomings. I certainly wouldn’t describe it as arrogant indifference.’’

Undented sangfroid

Of course, several years ago, bankers were inclined to adopt a similarly cavalier approach to the criticism that was levelled at them.

That was before they were humbled by the Hayne royal commission, which put their grasping greed on full public display.

And it was also before they realised the onerous punishment that would be meted out to them for failing to implement proper procedures to detect money-laundering activities.

Australia’s largest bank was first to feel the blowtorch in 2017, when the financial intelligence regulator AUSTRAC alleged that the Commonwealth Bank had breached anti-money laundering and counter-terrorism financing laws by delaying or failing to report suspiciously large cash deposits in its network of intelligent deposit machines.

The scandal led to the early departure of CBA’s then boss, Ian Narev, and the bank finally agreed to pay a $700 million fine to settle the money-laundering case.

Westpac’s failure to comply with its anti-money laundering obligations proved even more costly.

The bank’s chief executive, Brian Hartzer, resigned and its chairman, Lindsay Maxsted, stepped down early after AUSTRAC accused Westpac of breaking anti-money laundering and counter-terrorism laws 23 million times, and of failing to properly vet thousands of transactions that could be linked to child exploitation.

Last month, Westpac agreed to pay $1.3 billion – the biggest fine in Australian corporate history – to settle the devastating AUSTRAC case.

But if Coonan has been in any way rattled by the major banks’ experience with AUSTRAC, she wasn’t letting on when she appeared before the probity inquiry.

Her sangfroid was all the more remarkable because her second day of evidence came just a day after the ASX-listed casino giant informed investors that it had received a notice from AUSTRAC about potential ‘‘non-compliance’’ with anti-money laundering laws.

Although she conceded the casino giant had facilitated money laundering at its Melbourne casino, Coonan blamed this on ‘‘ineptitude’’, rather than the company deliberately turning a blind eye to the risks.

Red flags ignored

In her second day of evidence at the inquiry, Coonan was asked about Crown’s relationship with its largest high-roller ‘‘junket’’ tour partner, Suncity, which is run by the alleged former Macau triad member Alvin Chau.

Sharp noted that multiple red flags had been raised that suggested money laundering was occurring within Suncity’s dedicated room in Crown’s Melbourne casino.