Just when you think Australia’s bureaucratic obsession with rules, regulations, and compliance requirements can’t get any more ridiculous, along comes another example of administrative stupidity that beggars belief.

This one involves a major Australian bank freezing the accounts of a customer of more than forty years despite that customer having twice provided all the information that the bank demanded.

And the customer wasn’t just anybody.

He was Noel Whittaker, veteran financial commentator, highly respected financial expert and author of numerous best selling books on personal finance and wealth creation.

Now I’ve spoken to Whittaker numerous times over the years and I’ve read his books so I know that he’s smart, sensible and ethical.

I was particularly interested to read about this case having recently been through similar absurdities with a major bank over their bizarre policies around the KYC rules and KYC stands for Know Your Customer.

In my case, ANZ Bank made my credit card disappear but did not bother to inform me and forced me to go through a lengthy KYC procedure to have it reinstated.

Then two months later, ANZ did the same thing again for the same bureaucratic reason.

Now returning to the Noel Whittaker fiasco, in an article he wrote for the National Business Network, Whittaker described an extraordinary experience with Saint George Bank, which should alarm anyone who has money deposited with a financial institution.

Whittaker and his wife, who have been banking with Saint George for more than four decades, received letters demanding that they verify their identities and answer a series of questions.

These included such gems as the origin of their net worth and the purpose of their bank accounts.

So they complied, completed the paperwork and returned it.

Then four weeks later, identical letters arrived.

So they went through the entire process again, including visiting their accountant to have passport copies certified.

Then two weeks later, a third demand arrived asking the very same questions.

Now understandably Whittaker had had enough.

He lodged the complaint pointing out that they’d already supplied the requested information twice without any acknowledgement from the bank.

So what was the bank’s response?

It froze their bank accounts.

That’s right, two long standing customers who had done everything requested of them twice suddenly found themselves denied access to their own money.

And when Whittaker attempted to resolve the situation, he encountered another familiar feature of Australia’s increasingly dysfunctional institutions, the dreaded one three hundred number.

He spent two hours getting his accounts operating again.

Now this is beyond absurd.

In fact, had I not been through a similar farce myself, I would not have believed it.

The most disturbing aspect is that Whittaker’s experience is far from unique.

After this incident, he contacted the Australian Transaction Reports and Analysis Centre, otherwise known as AUSTRAC, also the Australian Banking Association, and senior banking executives.

He discovered that identity verification requirements were the major source of customer complaints.

He also heard about an elderly woman who feared she had become the victim of identity theft after receiving similar demands and a doctor who experienced comparable problems with ANZ Bank.

Now that I can believe.

In my experience, ANZ is by far the worst of the major banks for bureaucratic bloody mindedness and overwhelming incompetence.

But the key question is how many other Australians are being subjected to this nonsense?

And how many don’t have the knowledge, confidence or contacts of someone like Noel Whittaker or myself to challenge the system.

At the heart of this debacle is Australia’s expanding anti money laundering bureaucracy.

Now nobody disputes the importance of preventing criminals from laundering money through the financial system.

But there’s a fundamental question that politicians, regulators and bank executives appear reluctant to confront.

Are these increasingly intrusive compliance requirements actually catching criminals?

Or are they simply making life miserable for millions of law abiding Australians?

As Whittaker observes in his article, criminals are hardly likely to nominate drug dealing as the source of their wealth when completing a banking questionnaire.

Surely suspicious transactions provide a better indication of criminal activity than answers supplied on a form.

AUSTRAC argues that such information helps banks establish normal customer behaviour, so unusual transactions can be identified.

But does achieving this objective require repeatedly demanding the same information from long standing customers and then freezing their accounts without warning.

This is a classic case of bureaucratic processes overwhelming common sense and extends far beyond banking.

We’ve recently highlighted the extraordinary compliance obligations being imposed on property managers and buyers agents under expanding AML regulations and AML stands for Anti Money Laundering.

These businesses are increasingly expected to perform functions associated with detecting criminal activity despite having neither the specialist training nor the resources of law enforcement agencies.

But if they don’t play along, they’re hit with massive fines.

Meanwhile, the financial planning industry has been buried under mountains of compliance paperwork contributing to the soaring cost of professional advice.

The building industry faces its own nightmare regulations, approvals, administrative obstacles which adds to the already high cost of creating new homes.

So everywhere we look, the same mentality prevails more rules, more paperwork, more compliance and therefore more costs.

Now Whittaker makes another important point.

Australia already has a serious productivity problem yet our governments and regulatory agencies continue creating systems that consume enormous amounts of time without necessarily delivering better outcomes.

Consider the hours wasted by people collecting documents, obtaining certifications, completing forms, waiting on telephone lines, and attempting to resolve problems that should never have occurred.

I have personally spent countless hours dealing with the ANZ fiasco.

Firstly, trying to find out why my credit card had simply disappeared from my menu of accounts without being notified by the bank and then trying to sort out the problems that this had created.

And then having to go through the whole process a second time two months later.

Consider the hours wasted by bank employees processing repetitive paperwork and dealing with understandably furious customers.

And consider the damage to trust when a financial institution decides it can arbitrarily prevent people from accessing their own money.

What makes this episode particularly offensive is the apparent absence of common sense or basic customer service.

Why didn’t Saint George Bank simply telephone or email Whittaker before freezing his accounts?

Why didn’t ANZ Bank contact me about their KYC requirements instead of making my credit card disappear causing scheduled automatic monthly payments to fail?

Why wasn’t the information already supplied by Whittaker properly recorded?

Why did a complaint about repeated requests result in them being denied access to their money?

Now these are elementary questions which any competent organisation should be capable of answering.

But that is the problem with so much of Australia’s bureaucracy with banks, the worst offenders.

The system becomes more important than the people it supposedly serves.

Rules are imposed without sufficient consideration of the consequences, and ordinary Australians are left to deal with the fallout.

Now Whittaker’s experience is especially revealing because he is someone who understands financial institutions better than most Australians.

If a respected financial expert with more than forty years of banking history can be treated this way, what hope does the average customer have?

The most extraordinary aspect of this story is that the bank apparently regarded freezing a customer’s access to their own money as an acceptable administrative response.

And in my case, ANZ Bank believed it was perfectly reasonable to eliminate my credit card, not once but twice, without notifying me that they’d done so, let alone explaining why.

That tells us something deeply disturbing about the priorities of our major institutions.

They’ve become very good at enforcing compliance requirements.

They appear considerably less competent at applying common sense.

And once again, it’s ordinary Australians who pay the price for bureaucratic stupidity and corporate arrogance.