(Image: Tom Red/Private Media)

Given the litany of corporate misbehaviour and illegal activity exposed by the Hayne banking royal commission, it is hard to imagine the banks as arbiters of moral behaviour. But that is what’s revealed in submissions to the independent review of the Australian banking code of practice.

The triennial review by Mike Callaghan has been told that business banking and other financial services, including merchant facilities, are systematically denied to lawfully operating industries such as adult entertainment, the legal sex industry, gambling, medical marijuana and firearms.

The current banking code chapter on accessibility and inclusivity lists protection against discrimination for vulnerable groups, including the elderly, Indigenous, disabled, migrant and LGBTIQ communities. However, it does not include protection for small businesses, and sex workers and others in the adult industry are officially classified by the ATO, banks and the code not as vulnerable individuals but as small business operators.

As a result they can be, and often are, routinely denied basic business and personal bank accounts, debit cards, EFTPOS and credit card merchant facilities, business and personal loans, and mortgages on property where the business is located.

Discrimination and shaky reasoning

The financial and economic impact is significant. In fact, the submission from lobby group Sex Work Law Reform Victoria (SWLRV) to the review indicates that in any given year there are about 23,000 individual sex workers in Australia. And the Australian small business and family enterprise ombudsman has reported there are about 1000 sex industry and adult industry businesses employing a further 25,000 people, and that sex industry businesses are estimated to generate an annual turnover of $2.6 billion.

SWLRV has recommended to the review that small business customers be added to the accessibility and inclusivity list which explicitly protects groups against discrimination.

While discrimination against small businesses is not listed as a key issue in Callaghan’s interim report (published this month), it is clearly reflected in written submissions published on the review’s website.

Of the 37 submissions posted, 11 specifically address financial discrimination, including two from organisations representing shooters and firearms dealers, and seven from individuals and organisations associated with legal sex work or adult entertainment.

The submissions indicate that refusal to provide services to the sex industry by ABA’s member banks appears to be widespread. Australia’s leading adult industry association, the Eros Association, conducted a survey of 24 industry businesses which had experienced financial discrimination. It reported that 23 had experienced financial discrimination more than once, and that small, medium and large banks all engaged in financial discrimination, including the big four (NAB, ANZ, CBA, and Westpac).

Similarly, as part of an investigation into banking discrimination, Sex Work Law Reform Victoria contacted all 22 of the ABA’s member banks. None were willing to discuss, admit to or explain their practice of refusing services, except for NAB, which acknowledged its refusal to provide services to lawfully operating brothels and escort agencies (the refusal does not extend to individual sex workers). NAB said: “NAB no longer banks brothels and escort agencies due to different laws and licensing requirements across states and territories. This is a risk-based decision we have made to ensure we meet legislative requirements under the anti-money laundering and modern slavery laws.”

This is somewhat ironic given that last year Westpac agreed to pay the largest fine in Australian corporate history, a $1.3 billion civil penalty for more than 23 million breaches of anti-money laundering laws, including several thousand reportedly linked to offshore child-sex exploitation.

Walking a fine line

That fine surpassed the previous highest penalty in Australia, which was the Commonwealth Bank’s $700 million fine in 2018, also for money laundering reporting breaches after its ATM network was discovered to have been exploited by criminal syndicates trafficking drugs.

By contrast, SWLRV says it has been unable to find any evidence from either the Australian Institute of Criminology or AUSTRAC that the lawful sex industry is a high-risk industry susceptible to money laundering.

Given NAB’s explanation, perhaps the banks should refuse financial facilities to Crown, which was fined $1 million this year for failing to comply with regulations around junket operations, which the Bergin report found were connected to criminal influence and could have been used for money laundering.

Last year was a bumper period for fines imposed on Australian banks for corporate misbehaviour. That included NAB’s $57.5 million fine for charging superannuation customers fees for services that were never provided, and the same bank’s $15 million fine for operating an unlicensed loan referral scheme known as the “introducer program”.

Other big fines handed out to Australian banks in 2020 included the $10 million fine paid by ANZ for unfair transaction and dishonour fees and the $5 million fine paid by CBA for a promoting a package of discounts for farmers that was never activated.

An ongoing issue

And bank misbehaviour continues. It was reported just last week that CBA would plead guilty to selling questionable insurance to credit card and home loan customers, and ME Bank has been charged with making false and misleading claims to home loan customers.

In 2019 the small business and family enterprise ombudsman Kate Carnell released a statement highlighting the prevalence of financial discrimination experienced by sex workers and adult industry businesses.

“My office is continuously contacted by sex workers who have complained they have been denied banking services such as merchant facilities to allow them to conduct their business,” she said.

“There aren’t too many Australians who would rely on banks to be the moral arbiter for society.”

She is right, and that won’t change while the banking code of practice permits banks to systematically discriminate against a range of small businesses

The review is scheduled to complete its final report and recommendations by the end of November.