ASIC says the bank failed to adequately monitor transactions
Macquarie Bank is staring down a possible multimillion-dollar fine after alleged failures to monitor transactions that allowed a former financial advisor to embezzle $2.9 million from customers.
On Tuesday, the Australian Securities and Investments Commission (ASIC) launched Federal Court action against the bank over its monitoring of cash management accounts, according to a report by The Sydney Morning Herald. The accounts can be accessed not only by clients, but also by third parties such as financial advisors.
ASIC said that there was only limited monitoring of transactions that occurred through a feature that allowed third parties to withdraw their fees from the accounts.
The case comes after a former financial advisor, Ross Andrew Hopkins, used Macquarie’s system to make $2.9 million in unauthorised withdrawals from client accounts, the Herald reported. Hopkins was sentenced last year to four years in prison after pleading guilty to 15 offences involving his handling of clients’ money.
ASIC deputy chair Sarah Court said the regulator’s case against Macquarie wasn’t focused on Hopkins’ conduct in particular, but instead on “multiple failures by Macquarie to take proper steps to monitor, detect and prevent unauthorised transactions.”
“Mr Hopkins misused Macquarie’s systems by processing transactions using his fee authority to steal client funds,” Court told the Herald. “Macquarie failed to properly detect and prevent these unauthorised fee transactions, many of which were over $10,000 each. Mr Hopkins’ conduct is an example of what can go wrong when banks do not properly monitor their systems and implement appropriate processes.”
ASIC is accusing Macquarie of breaching its obligation to provide financial services efficiently, honestly and fairly in violation of the Corporations Act. The regulator also accused the bank of making false and misleading representations.
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A Macquarie spokeswoman told the Herald that the bank had cooperated with ASIC’s investigation and that affected clients had been compensated.
“ASIC’s court filing notes that this issue arose in relation to 13 clients of an independent financial advisor between 2016 and 2019, who has since pleaded guilty to fraud,” the spokeswoman said. “Following the independent advisor’s failure to compensate his clients for their losses, Macquarie fully reimbursed the 13 clients. Macquarie treats the security of its clients’ accounts with the utmost seriousness, and has continued to introduce new controls and processes to respond to the evolving external fraud environment.”
The bank has since put in place controls on the fee authorisation feature, a source told the Herald.
