Macquarie Bank slapped with $10m fine after failing to monitor fraudulent transactions

Macquarie Bank slapped with $10m fine after failing to monitor fraudulent transactions

Financial services giant Macquarie Group's (ASX: MQG) banking division has been ordered to pay a $10 million fine by the Federal Court after acknowledging it failed to have effective controls to protect its customers from fraud.  

The Australian Securities and Investments Commission (ASIC) initiated legal action against Macquarie Bank in 2022, alleging it failed to adequately monitor and control transactions by third parties such as financial advisers on their customers’ cash management accounts.

Between October 2016 and October 2019, Ross Hopkins made 167 unauthorised transactions on 13 of his clients' cash management accounts via Macquarie’s bulk transaction system, totalling $2.9 million.

Hopkins had almost complete control of his clients’ superannuation, allowing him to complete transactions on their accounts. These funds were then used for his own benefit, such as holidays, rent, paying his own credit card debts and repaying personal loans.

While the firm initially defended the proceeding, it later admitted that it contravened its obligation to provide its financial services efficiently, honestly and fairly and agreed to a penalty of $10 million for its conduct.

Hopkins, who was not a Macquarie employee, pleaded guilty to fraud and was convicted in 2021. Following his failure to compensate the clients for their losses, the financial firm decided to fully reimburse the 13 clients.

“Fraud controls are increasingly important and this case sends an important message to financial institutions and other financial service licensees that they must have appropriate controls in place,” ASIC chair Joe Longo said.

“ASIC expects financial institutions to prioritise and invest in systems that protect their customers. Macquarie fell short of its obligation to do all things necessary to provide its financial services efficiently, honestly and fairly and as a result it has become liable for a substantial penalty.”

Macquarie enabled its customers to give third parties, such as financial advisers, stockbrokers and accountants, different levels of authority to transact on their accounts, including a limited authority to withdraw the third party’s fees.

In a statement, Macquarie said it acknowledged the firm had contravened a statutory obligation in connection with the controls to monitor bulk transactions made under third-party fee authorities on the CMA.

“In 2020, Macquarie introduced new controls and processes for third-party fee authorities on the CMA to address the issue,” the company said.

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