Macquarie alleged for failure in observing third-party withdrawals from customer accounts

Key Takeaways:

• ASIC has charged civil penalty against Macquarie Bank for not adequately monitoring and controlling the transactions by third parties.
• Macquarie Bank failed to watch and prevent AU$2.9 Million of withdrawals by the previously accused former financial advisor, Ross Hopkins

On 5 April 2022, The Australia Securities and Investment Commission (ASIC) announced it has commenced civil penalty proceedings against Macquarie Bank Ltd in the Federal Court for not adequately monitoring and controlling the transactions by third parties, like financial advisors, on their customer’s cash management accounts.

Macquarie is a global financial services group that operates in 33 markets in asset management, retail and business banking, wealth management, leasing and asset financing, market access, commodity trading, renewables development, specialist advisory, capital raising and principal investment.

Why ASIC alleged Macquarie Bank?

ASIC alleged that Macquarie Bank had limited monitoring of the transactions made via their bulk transaction system using a "Fee Authority" provision, allowing third parties to deduct a fee. Also, these transactions did not pass via a fraud management system nor go through manual checks to confirm whether those transactions were for fees.

Macquarie Bank failed to monitor and prevent AU$2.9 Million of withdrawals by the previously accused former financial advisor, Ross Hopkins. From October 2016 to October 2019, Mr Hopkins made 167 illegal transactions from 13 of his client's CMA accounts, totalling AU$2.9 Million. After an investigation, Mr. Hopkins was also sentenced in May 2021 for six years imprisonment.

Sarah Court, the deputy chair of ASIC, stated that “‘Mr Hopkins misused Macquarie’s systems by processing transactions using his fee authority to steal client funds.”

Further, Macquarie Bank had failed to monitor and stop these illegal fee transactions, with many of these being over AU$10,000 each. Ms Court stated “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.”

ASIC also alleged that Macquarie Bank had made false and misleading representations in promoting Cash Management Accounts as the accounts having limited access to third parties, such as financial advisors. ASIC also claimed that Macquarie had represented that the bank would check whether all the transactions which were made under the "Fee Authority" provision were actually for fees or not.

Macquarie stated that bank has co-operated with the issue and also fully reimbursed those 13 clients.

About the Bulk Transacting tool:

Bulk Transacting is an online payment tool that is offered to, and used by, independent financial advisers (IFA) and adviser businesses (or other third parties) for uploading numerous transactions to several accounts as per the level of authority they had been approved under a third party authority.

In order to complete the process of bulk transactions, an IFA would complete a template of a type based on the transaction to be processed. Once this step is done the template is uploaded to Macquarie’s Adviser Online portal.

 What Next?

The matter is in the Court and the case management hearing is still pending. Hence, it will be interesting to see the outcome of this case.

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