Macquarie facing court over alleged SMSF fraud detection failures

In a public statement, ASIC stated that it has commenced civil penalty proceedings in the Federal Court against Macquarie Bank for failing to adequately monitor and control transactions by third parties, such as financial advisers, on their customers’ cash management accounts.

ASIC alleges that there was limited monitoring by Macquarie of transactions made through its bulk transaction system using a “fee authority” and that these transactions did not pass through a fraud monitoring system or undergo manual checks to confirm the transactions were for fees.

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ASIC alleges that the impact on Macquarie’s customers includes $2.9 million in unauthorised withdrawals by now-convicted former financial adviser Ross Andrew Hopkins.

Andrew Hopkins was convicted of 15 dishonesty offences under the Corporations Act after he misappropriated $2.9 million from his clients’ SMSFs without their knowledge.

Mr Hopkins used his clients’ funds for his own benefit, such as holidays, rent, paying his own credit card debts and repaying personal loans.

ASIC deputy chair Sarah Court said Mr Hopkins misused Macquarie’s systems by processing transactions using his fee authority to steal client funds.

“Macquarie failed to properly detect and prevent these unauthorised fee transactions, many of which were over $10,000 each,” said Ms Court.

“Mr Hopkins’ conduct is an example of what can go wrong when banks do not properly monitor their systems and implement appropriate processes.”

Ms Court said ASIC’s case would be focused on the alleged multiple failures by Macquarie to take proper steps to monitor, detect and prevent unauthorised transactions.

The corporate regulator alleges that from 1 May 2016 to 15 January 2020, “Macquarie failed to take measures to prevent or detect transactions made using its bulk transacting system that were outside the scope of a ‘fee authority’ given by a customer, including misappropriating, and attempts to misappropriate, customer funds”.

ASIC claims these failures by Macquarie breached its obligations as a financial services provider to ensure its financial services were provided efficiently, honestly and fairly.

ASIC also claims that Macquarie made false or misleading representations in the promotion and offering of limited third-party access over cash management accounts. In particular, ASIC claims that where a customer gave “fee authority” to a third party, Macquarie represented that it would check that any transaction made under the “fee authority” was actually for fees, when it did not.

ASIC is seeking declarations, pecuniary penalties and other relief from the court, including a compliance order for an independent review of Macquarie’s fee authorities and fee transactions using its bulk transaction system to ensure recommendations regarding improvements are effectively implemented.

Following engagement with ASIC, from December 2021, Macquarie remediated Mr Hopkins’ clients approximately $3.5 million on an ex gratia basis.