ANZ boss says rules are slowing down innovation

“The regulatory framework which is put there has been designed to slow the banks down,” Mr Elliott said.

However, while some bankers are starting to adopt a more combative view on compliance and in particular AML costs, Mr Elliott agreed the banks had no one to blame but themselves. “It’s our fault as an industry, we behaved badly,” Mr Elliott said.

‘Someone has to pay’

But he said the economics of compliance investments were “starting to creak” and the investments were starting to add up.

“A bank like ANZ, in 2017 we would invest in 0.7 per cent of revenue into running compliance systems, so that’s 4.7¢ in every dollar. That’s a lot. You imagine for every dollar that banks make, 4 to 5¢ is going into new risk and compliance systems, that is a dead weight,” Mr Elliott said.

In financial year 2021, ANZ invested $1.81 billion in continuing operations, of which 47 per cent was on “Regulatory, Compliance and Risk”.

“I’m not saying it doesn’t have good outcomes, I’m not saying it doesn’t make the banks better, but the economics start to creak a little bit, someone has to pay for that.”

Mr Elliott said shareholders, customers and employees were bearing the costs, which are also stopping that money from being allocated to support the economy.

“What we’ve got to do as an industry is to get through this so that we can get back to doing what we’re supposed to do, which is to allocate capital across the economy,” he said.

National Australia Bank said the number of staff working on compliance had gone from 200 to 1200 in four years, and total technology investment spend in 2022 would be approximately $1.3 billion, broadly in line with 2021.

But chief executive Ross McEwan said last year that the bank’s investment in systems was starting to swing back to new technology.

“In prior years, the focus of our investment has been on building our technology foundations and responding to regulatory and compliance requirements,” Mr McEwan said at the company’s annual meeting last year.

“This mix is changing, and we expect to increase the allocation to discretionary investment from 39 per cent in 2021 to approximately 50 per cent in 2022. This means that more of our investment dollars can be focused on accelerating simplification and automation in our core products.”

Across the big four banks there are thousands of staff dealing with compliance. One industry insider said one of the big four spends 85 per cent of its billion dollar-plus technology investment on dealing with AUSTRAC alone.

The banks are also understood to be resentful of having to invest in compliance to stop money laundering, as well as pay for AUSTRAC’s overall operations through a levy.

The Australian Bankers Association has previously complained it was unfair for the banks to pay 95 per cent of AUSTRAC’s costs when they only make up 4 per cent of its membership.