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NAB staff accepted cash-stuffed envelopes as part of alleged bribery ring

The banking royal commission has opened with explosive evidence of National Australia Bank branch managers accepting white envelopes stuffed with cash as part of an alleged bribery ring, in which bankers sold loans based on fake documents to "smash" their sales targets.

NAB's use of home loan "introducers", including at least one gym owner, and the bank's alleged loose lending practices resulted in signatures of customers being forged and false documentation being submitted to get home loans.

Fresh details of the scandal, which NAB last year revealed had resulted in 20 bankers being sacked or resigning, were uncovered in royal commission hearings in Melbourne on Tuesday.

NAB was alerted to the allegedly falsified mortgage applications by its in-house staff that were using referrals from certain members of the public in September 2015.

A second whistleblower inside NAB alerted the bank in October to what is alleged to be a major fraud being operated out of five branches in greater western Sydney.

According to the whistleblower email, read in the commission by counsel assisting, Rowena Orr: "One customer recently said they told him that he could borrow $800,000 when his property was valued at $400,000. The money exchanges hands in white envelopes over the counter of the bank."


Eleven staff were accused by the whistleblower of being a part of a bribery ring including six branch managers.

The scheme included fake payslips, fake identification documents and fake Medicare cards to secure loans. The fake documentation was allegedly used by the bankers to get customers loans who otherwise would not get them but to also pump up their sales figures so they could get promoted, Ms Orr told the commission.

"They charged $2800 for each customer for home loans mainly and also personal loans," Ms Orr said.

Reading the whistleblower complaint, Ms Orr said it was suspected that a client adviser had used a fake guarantee from a person who didn't appear to exist.

"People are being promoted on the basis of home loans and other lending so it appears they are smashing their targets but some of this is false," the whistleblower said in his email.

NAB's head of broker partnerships, Anthony Waldron, said there had been “obvious breakdowns of controls” within the bank.

Ms Orr quoted an anonymous whistleblower email that referred to "under the table” cash payments, and put it to Mr Waldron that "it was in fact an allegation of bribery?”

Mr Waldron replied: “Potentially, yes.”

NAB is the first bank to be put under the microscope in this round of hearings, which will focus on misconduct and banks' failures to live up to community standards in home loans, personal loans, credit cards, and credit insurance.

The royal commission, which continues on Wednesday, is probing fraudulent mortgages written by NAB as part of its "introducer" scheme, a program where people were paid a spotter's fee of 0.4 per cent of a loan's value for referring a customer to the bank.

Mr Waldron earlier said some of the introducers were people who ran gyms, but its policies had since been tightened up.

“Those particular introducers doing those activities is not something we would do today, but there are instances of that occurring in the past,” he said.

Ms Orr said the scheme had been "extremely profitable" for the bank, wrote more than $24 billion in home loans through introducers between 2013 and 2016, a period in which the alleged misconduct occurred.

NAB has said about 2480 loans were affected by the misconduct, and it has since restricted the introducer scheme to people working in relevant industries, such as accountants or financial planners.

By November 2015, the commission heard, NAB's group chief risk officer had appointed a taskforce into the problems, but the issue had not yet been reported to the NAB board. Mr Waldron agreed the first report to the NAB board was in December 2015, and it had not reported the issues to ASIC at that time either. NAB filed an official breach report with ASIC in February 2016.