Banks pledge to improve fraud protection
Five Australian banks have agreed to improve their compliance measures and controls for deposit accounts that can be operated by a third party such as a financial adviser, following a review by the Australian Securities and Investments Commission (ASIC).
ASIC said its industry-wide review was prompted by concerns raised through an investigation of the conduct of persons involved in Sherwin Financial Planners Pty Ltd and Wickham Securities Pty Ltd. Both firms are currently in liquidation.
By the time the Sherwin group of companies collapsed in January 2013 they owed nearly $60 million to approximately 400 clients, the regulator said.
ASIC's review looked at the policies, procedures and controls that banks have in place to prevent fraud and unauthorised transactions for consumers who have deposit accounts that can be operated by their adviser.
ASIC said while its review did not identify concerning levels of fraud, it found that banks could do more to manage the risks to customers associated with third-party access to money in customers' accounts.
At the time of review, ASIC said there were around 455,000 of these accounts open across the banks it was looking at, held by approximately 530,000 customers with balances totalling around $28.6 billion. These accounts are often marketed as “cash management accounts,” it said.
ASIC deputy chair Peter Kell said banks offering these accounts should review the measures they have in place to address the risk of fraud where a third party has authority to withdraw a customer's money and make improvements where necessary.
"Banks and advisers are often entrusted with their customers' life savings. They must be clear in communicating to their customers about any authority the customer's adviser has over their money," he said.
"Moreover, banks must also have robust systems in place that ensure their customers' funds are protected from the risk of fraud."
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
