The Federal Court has mandated Macquarie Bank to pay a $10 million penalty due to inadequate controls in place, which resulted in the failure to prevent and detect unauthorised fee transactions conducted by third parties, including financial advisers.
These transactions occurred on customer cash management accounts utilizing Macquarie's bulk transacting facility.
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.”
The regulator 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, according to ASIC.
Between May 1, 2016, and January 15, 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.
Between October 2016 and October 2019, Hopkins made 167 unauthorised transactions on 13 of his client’s cash management accounts via Macquarie’s bulk transaction system, totalling $2.9 million.
Macquarie admitted that it failed to do all things necessary between October 2016 and January 15, 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.
