ASIC has raised serious concerns about the effectiveness of Macquarie Bank’s transaction monitoring systems after it launched a civil action against the bank for not screening unauthorised transactions that led to customers losing millions of dollars.
The regulator yesterday filed a claim in the Federal Court, alleging the bank had “deficient detecting and monitoring controls” that allowed a now convicted financial adviser Ross Hopkins to defraud A$2.9 million from 13 customer accounts between 2016 and 2019.
While Hopkins had a third party authority to debit the customer accounts for payment of fees, ASIC alleges that Macquarie failed to check for transactions above $10,000 that fell outside his authority.
“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 ASIC deputy chair, Sarah Court.
“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.”
The regulator argues in its statement of claim that Macquarie breached its obligations as a financial services provider to ensure its services were delivered “efficiently, honestly and fairly”.
It also alleges that Macquarie misled customers into believing that it would check that any transaction made under a “fee authority” was actually a fee.
A Macquarie spokesperson said the bank had remediated Mr Hopkins’ victims about $3.5 million on an ex-gratia basis.
However, the spokesperson did comment on whether the bank would defend aspects of the claim brought by ASIC.
“Macquarie has cooperated with ASIC’s investigation into this matter,” the spokesperson said.
“ASIC’s court filing notes that this issue arose in relation to 13 clients of an independent financial adviser between 2016 and 2019, who has since pleaded guilty to fraud.
“Following the independent adviser’s failure to compensate his clients for their losses, Macquarie fully reimbursed the 13 clients.”
The spokesperson said Macquarie treated the security of clients’ accounts with “the utmost seriousness”, and that the bank had introduced new controls and processes to respond to the evolving external fraud environment.