Commonwealth Bank controversy exposes $60 billion reason why you could get locked out of your account
A CBA spokesperson told Yahoo Finance the bank was following anti-money laundering legislation and the Know Your Customer policy, which is handed down by the Australian Transaction Reports and Analysis Centre (AUSTRAC). It's another slice of power financial institutions have in their arsenal to combat financial crimes, like money laundering, fraud or scams.
Outside of freezing accounts to determine a person's funds are legitimate, the banks have also recently been scrutinised over their power to refuse cash withdrawal requests.
If customers can't explain where the money is going, or if the bank determines there's a risk of scam, you could end up like Tim, who was stopped by Westpac from seizing a $6,500 cryptocurrency opportunity.
Swinburne University Professor Steve Worthington told Yahoo Finance banks are caught between a rock and a hard place as they try to stop financial crime, and that sometimes customers won't agree with their methods.
"You're damned if you do, and damned if you don't," Worthington said.
Commonwealth Bank customer rages over threat to cut access to his money: 'Seven day deadline'
Dad with no savings reveals surprising money message for struggling Aussies: 'Living pay to pay'
Coles shopper 'stunned' after getting $50 item free due to little-known rule: 'Insane'
Stopping scams and money laundering from happening is a no-brainer.
Aussies lost a collective $2 billion to scams in 2024 (although thankfully that's a 25.9 per cent decrease from 2023). Similarly, the Australian Institute of Criminology estimated that serious and organised crime cost Australia up to $60.1 billion in 2021.
Criminals are coming up with new ways to steal and launder money in this increasingly digital world, which they use to fund sex and drug trafficking, child exploitation, fraud, terrorism and other illicit activities.
In order to prevent this scourge on the community, banks have to ask certain questions about your money, where it came from, and why it's being spent.
Unfortunately, that leaves people furious because it seems invasive.
A poll of more than 10,000 Yahoo Finance readers found 71 per cent felt banks have no right to ask you about your money.When it comes to KYC requests, banks will ask you a range of questions to make sure their systems are as up to date as possible.
It can be as simple as your name and address, or, in Christopher's situation, you can be asked to explain your "source of your money and your wealth".
The 52-year-old SQM Research founder told Yahoo Finance that handing over that type of personal information left him worried.
He's been with CBA for nearly 50 years and said there hasn't been anything "abnormal" recently that he felt warranted such a specific probe.
"I regard that as a potential security threat to have that information out there on my family," he said.
"I've been treated as a likely criminal if I don't provide this very, very personal information, and that's not on."
CBA sent him an email in April and a follow-up in May, warning that if he didn't comply with the information request within seven days, he would be locked out of his account.
He was told he also wouldn't be able to use his cards at ATMs, shops or online, and was told there would be "flow on consequences" for not acting fast enough.
The SQM Research founder felt he was being unfairly singled out, even though he had done nothing wrong.
However AUSTRAC told Yahoo Finance why everyday Aussies with no history of misdeeds might be asked for information like this.
"Banks ask customers questions and ask them to provide verification so they can understand what a normal transaction looks like for their customers," a spokesperson said.
Knowing what a regular transaction history looks like can help financial institutions spot ones that might be dodgy in other peoples' accounts.
AUSTRAC said it doesn't prescribe what type of punishment to dish out for non-compliance in KYC requests, as that's up to each financial institution to decide.
"AUSTRAC does not require banks to deny services, freeze or close customer accounts," a spokesperson told Yahoo Finance.
"Banks need to know the money laundering risks posed by the services they provide and the customers they provide them to, and have processes to manage those risks."
But, anti-money laundering legislation has a specific clause that grants financial institutions this power.
The law states that banks are well within their rights to do the following until customers do eventually comply:
refuse to continue to provide a designated service to the customer
refuse to commence to provide a designated service to the customer
restrict or limit the provision of a designated service to the customer
Banks will also have terms and conditions that allow them to do this for cash withdrawals or movements of money, which customers agree to (whether every person reads those T&Cs is up to them).
Commonwealth Bank was supported by the Australian Banking Association (ABA), which said this type of punishment was necessary to ensure KYC protocols are followed by customers.
"Banks have strict obligations under Australia's anti-money laundering laws to verify customer identity and understand the nature of their financial activity," a spokesperson told Yahoo Finance.
It said KYC isn't just for banks to stop money laundering, but also plays a "vital" role in protecting Aussies from fraud, scams and the use of accounts by money mule networks.
Money mule networks are bank accounts used for illegal activities and serves, and act as an intermediary between the scammer and the illicit funds.
Rather than having all the scammed money in one account, they can send it to multiple, both in Australia with different banks and overseas, to make it harder for authorities to track it down.
"Banks are required to periodically confirm that KYC information is correct and are not permitted to continue to provide services when they are aware that information is out of date," the ABA spokesperson added.
"This means that if a customer doesn't respond to repeated requests for information, banks may be legally required to restrict or close the account.
"These checks are essential to protect customers and the financial system from fraud, scams and criminal misuse."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
Social Security, Medicare, retirement savings: Ask Yahoo Finance
Robert Powell, host of Yahoo Finance's Decoding Retirement podcast, joins Mind Your Money with Allie Canal to answer Yahoo Finance readers' most common questions about retirement. To watch more expert insights and analysis on the latest market action, check out more Mind Your Money. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
ETF comparison: SPDR S&P 500 vs. Invesco QQQ
Yahoo Finance Markets and Data Editor Jared Blikre, who also hosts Yahoo Finance's Stocks in Translation podcast, does an exchange-traded fund (ETF) comparison between the SPDR S&P 500 (SPY) and Invesco QQQ (QQQ) to see how they contrast. Catch more Stocks in Translation, with new episodes every Tuesday and Thursday. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts. Earlier this week, we took a look at ETFs versus mutual funds. And today, in Stocks and Translation, we're going to explore two of the earliest ETFs, SPY and the QQQs, and how the asset class has evolved over the last 30 plus years. And first, a recap of the definition of an ETF. These are shares that trade like a stock, but usually represent a basket of assets tracking an index or a theme, though there are exceptions recently. Unlike mutual funds, which trade only once per day after the close, ETFs can be traded bell to bell like a stock. Now, let's take a look at a timeline that begins in 1993. That was the birth of SPY, and that's what this chart up here is representing. Now, this came to pass in early 1993, and it was kind of the holy grail because there had been attempts before to create an ETF, but they had been struck down by the courts. So, in 1993, SPY is born, and now you can trade the entire ET, the entire S&P 500, just like a little stock with a low amount of money. Then, a few years later, in 1996, we get open-end ETFs, and this is different from the way SPY was constructed. It was a closed investment fund that makes it more difficult to swap out the shares. But even though these open-end ETFs got the green light, not all ETFs would use them in the years to come, and I'll come back to that shortly. Now, in 1998 at the end of the year, we got a very tax-friendly ruling from the SEC, and this has to do with the way that shares are sold or swapped in. Now, in a mutual fund, if you want to change out a share, then you have to sell the stock, and it events, it actually creates a tax event at the end of the year. So, you could get a bill for that, but not in ETFs. They can usually avoid that. So, that was a critical distinction that made ETFs more favorable than most ET, the mutual funds, when it comes to those taxes. Now, let's take a look at the Q here. This launches in May or March of 1999. Uh, kind of a big day there because now you could trade the Nasdaq 100 as bubble was still going up. It would have another year or so, and then we would see that nasty fall. By the way, the Nasdaq 100 ETF QQQ, that would lose about 82%, and we'll get to that stat in a second. But fast forward a few years, and in 2004, we get GLD. This is the first physical gold ETF, and the first time we've had a commodity in ETF form. Quickly thereafter, we would get SLV for silver, but then we get others for wheat and coffee and all kinds of different things, all kinds of different derivatives. And then a few years later after that, we got active ETF managers in the game. So, now this is kind of like hedge fund territory. This came in 2008, but by the time we got into the mid-teens, Kathy Wood would use this for the Ark Innovation Fund, and she would actively manage that ETF, kind of like a hedge fund. Now, we're going to skip forward a few years in time, and let's see. We, we just did that one. Here, we're going to go to the end of the teens here, and we have semi-transparent ETFs approved. So, for some of these active funds or actively traded funds, uh, if you wanted to protect your secret sauce instead of disclosing all your holdings at the end of the day, this would allow you to do that. And that would kind of pave the way for some more active ETFs in the coming years. We still have mostly passive, but it is an improving game for the active managers. And then taking a look just a short time later, we have the ETF rule arise. This was kind of like the holy grail for ETS, because previous to this, it was very difficult to get these things launched. You had to get, you had to apply for regulatory relief, and this just streamlined the entire process. And this would really explode the ETF volume, the new ETF launches over the next few years. Finally, not finally, but almost to the end here, we got 2022 single stock leverage ETFs and also inverse ETFs. Those would join the game, uh, Tesla and Nvidia, Broadcom, you name it. We now have, I believe, close to 100, if not more, of these. And these are tracked by our friend Todd Sohn over at Strategas ETF Management. He comes out with some interesting figures each week on that. And then in the beginning of 2024, we got those spot Bitcoin ETFs. Prior to that, we had Bitcoin ETFs that were based on futures, but these were, would really allow investors for the first time to track the actual price of Bitcoin in their 401Ks and just have access to it like any other stock. And the last item here, this is not a big sweeping, but, uh, regular, this is not a big sweeping change to the industry, but Invesco is asked, has to convert the Nasdaq 100, and that's its Qs fund tracker, from a fixed unit investment trust to an open-end ETF so that the firm, not just the custodian and Nasdaq, can share in the fees. And this goes back to that early decision in 1999 to form it as a unit investment trust, which is a closed-end fund instead of an open-end fund. Uh, at the end of the day, Invesco's left, left hundreds of millions of dollars on the table because of that. But, uh, we'll get to some details on that in a second. First, next, I want to show you the differences between SPY and Qs over the year and some of the different stats that have evolved. So, we've already covered the launch dates, but look at the total price return of SPY. That's up over 1300% since 1993, and since 1999, we have the Qs up 1,007%. When it comes to the worst selloff, that would be the global financial crisis, minus 56% for SPY. And then I think I cited this before, 83% in 2000 to 2002 for the Qs there. That was bust. And if you take a look at the management fee, basically half for SPY that of the Qs, 0.0945 if you're going to add a few decimal points. And the volume on SPY, I believe it's still the heaviest traded ETF in the solar system, 67 million shares per day versus 40 million for the Qs. And then if you were to convert that to a dollar amount, that's $42 billion every single day, and about half of that, or $23 billion, for the Qs. Now, the shareholders of the Qs, they're going to vote on October 24th, fourth, whether to modernize the ETF. And if they say yes, then the trust becomes an open-end fund, letting Invesco keep most of the management fee worth over $600 million a year based on today's asset base. So, if the shareholders give the green light, the changes could go into effect in early 2026. And tune in to the Stocks and Translation podcast for more jargon-busting deep dives. New episodes can be found every Tuesday and Thursday on Yahoo Finance's website, or wherever you find your podcast.
Yahoo
an hour ago
- Yahoo
ETF comparison: SPDR S&P 500 vs. Invesco QQQ
Yahoo Finance Markets and Data Editor Jared Blikre, who also hosts Yahoo Finance's Stocks in Translation podcast, does an exchange-traded fund (ETF) comparison between the SPDR S&P 500 (SPY) and Invesco QQQ (QQQ) to see how they contrast. Catch more Stocks in Translation, with new episodes every Tuesday and Thursday. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts. Related videos Europe's most expensive city revealed, as living costs near £3,500 per month Britain's gas imports surge as Miliband abandons North Sea How much do you need in an ISA to target a £5,000 monthly passive income? My Legal & General shares are suddenly being shorted! Should I worry? Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
