The Federal Court has ordered Macquarie Bank to pay $10 million in fines for failing to prevent and detect unauthorised fee transactions conducted by an adviser on his SMSF clients’ cash management accounts.
The court ruled 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.
Specifically, an Australian Securities and Investments Commission (ASIC) investigation found between October 2016 and October 2019, former Sydney-based financial adviser Ross Andrew Hopkins made 167 unauthorised transactions on 13 of his SMSF clients’ cash management accounts via Macquarie’s bulk transaction system, totalling $2.9 million.
Hopkins misappropriated the funds for personal use, including vacations, rent, credit card repayments, and settling personal loans. He was handed a six-year prison sentence and was permanently banned from providing financial services or controlling any entity carrying on a financial services business.
Commenting on the fine imposed by the court, ASIC chair Joe Longo stated: “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.”
According to ASIC, Macquarie allowed 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.