ob体育 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鈥� cash management accounts.
ob体育 alleges that there was limited monitoring by Macquarie of transactions made through its bulk transaction system using a 鈥榝ee authority鈥� and that these transactions did not pass through a fraud monitoring system or undergo manual checks to confirm the transactions were for fees.
ob体育 alleges that the impact on Macquarie鈥檚 customers includes $2.9 million in unauthorised withdrawals by now convicted former financial adviser, Ross Andrew Hopkins.聽
ob体育 Deputy Chair Sarah Court said, 鈥楳r Hopkins misused Macquarie鈥檚 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鈥� conduct is an example of what can go wrong when banks do not properly monitor their systems and implement appropriate processes.
鈥榦b体育鈥檚 case is not focused on Mr Hopkins鈥� conduct but rather on alleged multiple failures by Macquarie to take proper steps to monitor, detect and prevent unauthorised transactions,鈥� concluded Ms Court.
ob体育 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 鈥榝ee authority鈥� given by a customer, including misappropriating, and attempts to misappropriate, customer funds.聽
ob体育 claims these failures by Macquarie breached its obligations as a financial services provider to ensure its financial services were provided efficiently, honestly and fairly.
ob体育 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, ob体育 claims that where a customer gave 鈥榝ee authority鈥� to a third party, Macquarie represented that it would check that any transaction made under the 鈥榝ee authority鈥� was actually for fees, when it did not.
ob体育 is seeking declarations, pecuniary penalties and other relief from the Court, including a compliance order for an independent review of Macquarie鈥檚 fee authorities and fee transactions using its bulk transaction system to ensure recommendations regarding improvements are effectively implemented.
Following engagement with ob体育, from December 2021, Macquarie remediated Mr Hopkins鈥� 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.
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Background
Between October 2016 and October 2019, Mr Hopkins made 167 unauthorised transactions on 13 of his client鈥檚 cash management accounts via Macquarie鈥檚 bulk transaction system, totalling $2.9 million.
Mr Hopkins was sentenced to six years鈥� imprisonment after an investigation and referral of a prosecution brief from ob体育 (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).
Editor's note:
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.
聽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.
聽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.
Editor's note 5:
A case management hearing was held on 28 March 2024 before Wigney J of the Federal Court. The hearing scheduled for 8 April 2024 was vacated and the proceeding was listed for a hearing on 19 April 2024.
Editor's note 6:
On 19 April 2024, Wigney J of the Federal Court ordered Macquarie Bank Ltd to pay a penalty of $10 million for failing to have effective controls to prevent and detect unauthorised fee transactions conducted by third parties, such as financial advisers, on customer cash management accounts using Macquarie鈥檚 bulk transacting facility (refer: 24-080MR).