Banks urged to update authorisation capabilities
Updating bank systems to allow SMSFs to require authorisation for electronic transfers from more than just two trustees would help reduce the risk of money being illegally removed from a self-managed fund, says an industry consultant.
Speaking in Sydney at an event hosted by Townsends Business & Corporate Lawyers, Ascentor senior consultant Tony Negline said that currently, SMSF trustees can make an arrangement with the bank whereby a transaction is only processed once it has been authorised by two trustees – but no more than two are needed.
“Unfortunately, [the banks] don’t allow authorisation by more than one other trustee,” he said.
Mr Negline stressed the importance of using an authorisation system like this to prevent occurrences such as the case of Triway Superannuation Fund.
“What happened was the son, who was a partaker in illegal drugs of various sorts, convinced his parents to set up a SMSF,” Mr Negline explained.
“There were three members, [but] you only needed one trustee signature to be accepted at the bank, and he had some debt problems created by his gambling and his drug habit and all the money was extracted out of the fund illegally.”
Mr Negline said the fund became non-compliant and there were various fines and penalties.
“To solve this [in my family’s SMSF] each of us has to authorise a transaction and each of us has to be a signatory of that,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.