ASIC has commenced civil penalty proceedings in the Federal Court against Macquarie Bank Ltd 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.
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.
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. Mr Hopkins’ conduct is an example of what can go wrong when banks do not properly monitor their systems and implement appropriate processes.
‘ASIC’s case is not focused on Mr Hopkins’ conduct but rather on alleged multiple failures by Macquarie to take proper steps to monitor, detect and prevent unauthorised transactions,’ concluded Ms Court.
ASIC 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.
The date for the first case management hearing is yet to be scheduled by the Court.
Between October 2016 and October 2019, Mr Hopkins made 167 unauthorised transactions on 13 of his client’s cash management accounts via Macquarie’s bulk transaction system, totalling $2.9 million.
Mr Hopkins was sentenced to six years’ imprisonment after an investigation and referral of a prosecution brief from ASIC (21-114MR) and has also been permanently banned from providing financial services or from controlling an entity carrying on a financial services business (21-242MR).
A case management hearing was scheduled for 10 May 2022 before Wigney J. This hearing was vacated and orders made by consent on 9 May 2022.
The orders provide, amongst other things, for the filing of a Concise Statement in response by 21 June 2022 and a Statement of Agreed Facts by 23 August 2022.
A further case management hearing is scheduled for 20 September 2022.
Editor's note 2:
A case management hearing was scheduled for 20 September 2022 before Wigney J. This hearing was vacated and orders made by consent on 26 July 2022 which provide for the filing of a Statement of Agreed Facts by 21 October 2022. A further case management hearing is scheduled for 9 November 2022.
Editor's note 3:
A case management hearing was held on 9 November 2022 before Wigney J of the Federal Court. Orders were made which provide for the filing of a Statement of Agreed Facts by 24 February 2023, with a further case management hearing listed for 1 March 2023.
Editor's note 4:
A case management hearing was held on 1 March 2023 before Wigney J of the Federal Court. Orders were made which provide for the parties to file and serve evidence with a further case management hearing listed for 9 November 2023. The proceeding is set down for hearing on an estimate of two weeks commencing 8 April 2024.