Australia's Federal Court has ordered Macquarie Bank to pay a penalty of $10m for failing to have effective controls to prevent and detect unauthorised fee transactions conducted by third parties, such as financial advisers, on customer cash management accounts using Macquarie’s bulk transacting facility.
In a statement on 18 April, ASIC said Macquarie enabled its customers to give third parties, such as financial advisers, stockbrokers and accountants, different levels of authority to transact on their accounts, including a limited authority to withdraw the third party’s fees.
Macquarie also made available to third parties a bulk transacting tool to make multiple withdrawals across multiple customer accounts simultaneously.
Between 1 May 2016 and 15 January 2020, Macquarie failed to implement effective controls to monitor whether third party bulk transactions under the fee authority were actually for fees.
While Macquarie initially defended the proceeding, it later admitted that it contravened its obligation to provide its financial services efficiently, honestly and fairly.
Macquarie agreed to pay a penalty of $10 million for its conduct.
ASIC Chair Joe Longo said, ‘Fraud controls are increasingly important and this case sends an important message to financial institutions and other financial service licensees that they must have appropriate controls in place.’
‘While Macquarie implemented effective controls from January 2020, its earlier failures meant that financial adviser Ross Hopkins was able to fraudulently withdraw around $2.9 million from his customers’ accounts without being detected by Macquarie.
‘ASIC expects financial institutions to prioritise and invest in systems that protect their customers. Macquarie fell short of its obligation to do all things necessary to provide its financial services efficiently, honestly and fairly and as a result it has become liable for a substantial penalty.’
Between October 2016 and October 2019, Ross Hopkins had made 167 unauthorised transactions on 13 of his client’s cash management accounts via Macquarie’s bulk transaction system, totalling $2.9m.
Macquarie admitted that it failed to do all things necessary between October 2016 and 15 January 2020 to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly by failing to implement effective controls to prevent or detect transactions conducted by third parties through its bulk transacting system that were outside the scope of the fee authority conferred on them, including those carried out by Hopkins.
Hopkins was sentenced to six years’ imprisonment after an investigation and referral of a prosecution brief from ASIC (21-114MR) and has also been permanently banned from providing financial services or from controlling an entity carrying on a financial services business (21-242MR).
