In a recent submission, superannuation industry group AIST explained that there is currently no automated method for confirming the payee details of a bank account to which benefits are being paid, whether this is to an individual or an SMSF.
“Funds undertake manual checks including requesting copies of certified bank statements from member, which is only partially effective in preventing fraud,” the submission explained.
In addition, the submission stated that when making a payment to an SMSF, the APRA-regulated fund must check against the ATO SMSF register to confirm the bank account details match.
“However, the ATO also has no way of checking that the bank account registered belongs to the trustee of the SMSF,” it stated.
“As a result, there are occasions where an APRA regulated fund has confirmed the bank account details match those on the ATO SMSF register and have rolled monies to that account. The member then subsequently finds that they have been defrauded.”
The submission also noted that during COVID-19, early release scheme super funds were instructed to pay monies to the bank account provided to the ATO without further manual checking.
“This led to monies being paid to accounts that were not in the member’s name, for example in financial abuse scenarios where the abuser had the money paid into their account,” it said.
The lack of certainty in payee details also has implications beyond superannuation, AIST noted.
The ACCC recommended that Australian banks adopt a scheme similar to the UK’s confirmation of payee scheme of the IBAN-Name Check in the Netherlands.
The intent of these systems is to provide payers greater assurance that their payments are being routed to the intended recipient and not being accidentally or deliberately misdirected.
Analysis of four billion checks in the Netherlands has indicated that the confirmation of payee service has resulted in an 81 per cent fall in reported fraud and scams.
“Adopting a similar system in Australia would reduce the incidence of scams and the amount of money Australians lose to scammers both within and outside superannuation,” it stated.
I will stand correct by someone with more detailed knowledge, but my understanding of OSKO means the account name is no longer being checked with the transfer. For auditors, I am sure this is a grave concern. But for criminals this is BLISS. They forge an invoice to change BSB & Account easy enough, but opening a false bank account in the name of someone else is much harder. I think the Payment System needs to “slow down” and work on a 3 point check: BSB, Account & Name. Last week a client had this happen and $16K was advised as being paid, but not to their bank account. E-Invoicing is touted as a solution (similar to superstream?), but a stronger solution is that the account name must match or the bank needs to reject the transfer. The system is far too open to manipulation, so the Banks/Payment authorities need to tighten it. That should fix any concerns. And if the transfer takes an extra day initially, then so be it. Safety first.
I’d like to see those reports that AIST is quoting. Is this a legitimate concern from regulators, or is this just another anti-SMSF beat up from the Industry Super Funds?
I thought that this was the whole point for the Super Stream system – a rollover is paid to the SMSF from the APRA fund, and the confirmation is sent through Super Stream back to the APRA fund?