When Australia’s royal commission into the banking and financial services industry handed down its findings in 2019, the effect was devastating. The country’s leading banks — which had been so robust in withstanding the global financial crisis a decade before — had ripped off customers, broken the rules and lied to regulators, it concluded.
Chief executives stood down, household names were tarnished, and A$6bn of repayments were pledged to customers. The investigation revealed unscrupulous behaviour and multiple compliance breaches related to money laundering rules. Some banks had even been charging premium fees to thousands of people who were deceased.
But the royal commission also exposed the inability of even big financial institutions to cope with requests relating to their huge caches of documents. Banks struggled to prepare their defences because they had a poor idea of what was in the data they were handing over.
Since then, new inquiries into care for the elderly, disability services and the casino sector have also highlighted a need for sophisticated document management and compliance testing in other industry sectors. And, as Richard Harris, partner at law firm Gilbert + Tobin, points out, politicians in Australia have taken to using royal commissions — in-depth probes ordered by the government — as a “weapon of choice” for taking businesses to task.
That leaves clients increasingly likely to face calls for enormous data sets at short notice, without argument — giving Australian law firms an opportunity to offer new services.
“Hell [for companies] is that they don’t understand their own information and [don’t] understand that risk,” says Harris. “These are existential risks,” he stresses. Even if companies think they are not under threat, they will be exposed to much higher costs. In short, the royal commission was a “watershed” for regulation in Australia, Harris argues.
Gilbert + Tobin is one of a number of law firms that worked with banks during the royal commission and acted quickly on developing new services. It launched GTDocs, a document management tool, that has been used for 50 or so projects and generated around A$12mn in billings for the firm in 2021.
Caryn Sandler, partner at Gilbert + Tobin, leads the innovation team, which has grown to more than 20 people in the past two years as it increases its expertise in informatics and predictive analytics.
The firm has also built a “surge capability”, so it can quickly expand a team when a client needs urgent help in preparing data. Sandler says that ability became an essential tool for financial services companies as the banking royal commission triggered class actions against the banks.
Getting on top of data quickly could mean the difference between being prosecuted or not, says Felicity Healy, partner and commercial litigation specialist at law firm Corrs Chambers Westgarth.
Like Harris, she says the Australian regulators’ approach is becoming more proactive. That was evident, she explains, in recent crackdowns by the consumer watchdog, the Australian Competition and Consumer Commission, on misleading “greenwashing” claims by companies, and in action taken against Macquarie Bank, over alleged control failings, by the Australian Securities and Investments Commission.
Corrs has developed a hosting service whereby National Australia Bank can access all relevant documents in a single location. Corrs trains the in-house lawyers to use the system themselves.
“Corrs is a legal firm — we want to do legal things,” Healy says. “We need to give financial services companies control over their documents.”
Other law firms have taken a different tack still. Ashurst set up a consulting arm in the aftermath of the banking royal commission that has grown from just one consultant to more than 110. Ashurst Consulting has invested in building a risk practice so it can sell its clients an integrated service covering legal and compliance.
Jamie Ng, global head of Ashurst Consulting and head of its finance division, says the reporting burden has increased, noting a “significant increase in breach reporting” by banks and financial services companies. This means there is strong demand for an integrated offer, he suggests, as “it’s one thing to get the advice and it’s another to operationalise it.”
He highlights the triage system whereby Ashurst Advance, a division of the firm offering services such as legal operations consulting and managed legal services, can help clients identify what is important in their documents. For financial services businesses addressing the 76 recommendations handed down as a result of the banking royal commission, it is a useful tool, he says.
As for the law firms, they are looking to export the tech and data tools they have honed for helping clients under pressure from regulators.
Gilbert + Tobin’s Harris argues that too many law firms outside Australia’s competitive legal market have been less innovative in this area “largely because there is profit to be made continuing in the old way” — that is, with crowds of lawyers and other staff working on documents.
The speed and efficiency of the new data handling tools emanating from Australia could soon change that, Harris predicts: “Clients will become more savvy.”
Digital legal practice