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The Federal Court has found an individual in contempt of court for failing to comply with an injunction preventing him from carrying on unauthorised banking business.
Justice Lee of the Federal Court has found that Andrew Morton Garrett is in contempt of court for failing to adhere to an injunction that stopped him from operating and marketing businesses in Australia as ‘banks’, despite not being authorised to carry on a banking business.
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On 14 August 2023, the court made orders with immediate effect permanently restraining Garrett from carrying on a banking business or using the word “bank” given he did not have the appropriate licence.
Under the Banking Act 1959 only authorised deposit-taking institutions (ADIs) licensed by APRA are legally permitted to carry on banking business in Australia, which gives the ability to refer to themselves as banks and describe their services as banking.
However, despite the court having previously made immediate orders to permanently restrain Garrett from carrying on a banking business and “assuming or using the words ‘bank’ (or similar words) in relation to any purported bank, business or purported business or advertising, representing, or stating that any purported bank, business, or purported business will carry on banking business”, the Federal Court found that he had continued to do so.
His purported banking businesses were Dynamic Capital Bank, Banque de Capital Dynamique, and Banco di Como.
In his judgment, handed down on 3 May 2024, Justice Lee backed APRA’s application by finding Garrett in contempt of court.
The court also ordered Garrett to pay a fine of $10,000 to be suspended for 18 months, conditional on compliance with the orders.
The Australian Prudential Regulation Authority (APRA) first filed proceedings for contempt in September 2023, alleging Garrett breached these orders by continuing to operate and market these businesses in Australia that he describes as banks, despite not being authorised to carry on a banking business.
Reacting to the latest move, APRA stated that the “latest legal action underlines APRA’s determination to protect Australians from mistakenly believing they are depositing money with an APRA-regulated institution and receiving the same protection”.
The regulator highlighted that anyone unsure whether a financial institution is a legitimate bank can check the register of all APRA-regulated authorised deposit-taking institutions.
Speaking last year, APRA’s deputy chair Margaret Cole said: “APRA’s licensing regime, prudential framework and supervision protect bank depositors by requiring any business wanting to conduct banking business to meet stringent standards and requirements in areas such as capital, liquidity, governance, and risk management.
“We have limited information about Mr Garrett’s businesses, including how many customers they have, because we don’t regulate them and they don’t report data to us.
“However, we are taking action to help prevent Australians mistakenly believing they are depositing money with an APRA-regulated institution and receiving the same protections.”
Australian regulators have been cracking down on bank impersonation and unlicensed banking activities in recent years.
According to Scamwatch, bank impersonation scams are among the top scams impacting Australians in recent years, with consumers often misled into providing personal information such as banking details or driver’s licence or to transfer money.
The Australian Securities and Investments Commission (ASIC) also recently revealed it had taken down nearly 3,500 investment scam websites over the prior seven months.
According to the regulator, Australians have become increasingly vulnerable to financial scams due to cost-of-living pressures.
ASIC chair Joe Longo said in March: “Cost-of-living issues mean more Australians are looking for ways to make ends meet, and scammers are only too happy to try and take advantage.
“That’s why ASIC is stopping investment scams at the source of their promotion, removing them from the internet before they can lure in unsuspecting consumers.”
The regular has previously looked into the major banks’ practices to protect customers from scams, which led ASIC to set expectations regarding cyber security for all financial institutions.
Longo said that ASIC will now be “turning its attention to a broader range of banks and superannuation trustees” to ensure that financial institutions are effectively protecting their customer base from “predatory scammers”.
[Related: ASIC takes down thousands of scam websites]
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