ASIC Commissioner Simone ConstantThe Australian Securities and Investments Commission will on Thursday write to super funds to order them to improve anti-scam measures after a review found they lacked even a “foundational” level of protection.
Funds risk becoming a “soft target” as millions of customers become eligible to draw down their balances in the coming decade, says a letter signed by Commissioner Simone Constant and seen by The Australian Financial Review.
The spectre of a new wave of enforcement action by ASIC heaps pressure on a sector already under fire for poor customer service standards, especially when it comes to paying out death benefits.
“While all members are vulnerable to scams and fraud, members who have reached preservation age face fewer frictions in accessing their funds and tend to have higher account balances [and] these factors can make them attractive targets,” the letter says.
“As banks, telecommunications providers and other financial service businesses increase their anti-scam and anti-fraud capabilities, superannuation trustees must do the same or risk becoming a soft target.”
Before the letter was sent, Ms Constant told The Australian Financial Review ASIC wanted super funds to double down on customer service – or risk court action.
Treasury was earlier this week tasked with drafting mandatory service standards for super funds after repeated episodes of poor service, including the slow payment
of death benefits and other insurance claims. ASIC will also release the findings of a review of funds’ claims processes early in the year, after launching a landmark case against construction industry fund Cbus last August, alleging it had cost customers at least $20 million by failing to process disability and death benefit claims quickly enough.
The ASIC letter opens up another front in the drive to improve the way super funds
treat their customers. It says none of the funds reviewed had a strategy to prevent scams or dedicated reporting of them, and highlights a lack of oversight of the anti-scam provisions of external administrators.
Areas of weakness identified in the ASIC review included being too focused on confirming the person requesting a transfer was a member of the fund rather than looking more broadly for red flags to indicate that they may have been tricked.
“Trustees generally reported that they had not seen many, if any, instances of scams impacting their members,” the letter says. “Several trustees told us that this was the reason for their limited focus on scams.”
While this apparent absence of scam activity might be because the super system prevents people who are still working and accumulating retirement savings from accessing their money, it could also be because of “shortcomings” in processes and practices, the letter says.
“Trustees must ensure they capture and record scam attempts accurately, so they have the necessary data to properly assess the real risk of scams to members. This observation is similarly applicable to fraud.”
Cbus has tried to lay blame for its customer failings on death benefit payments on its administrator, Link, but ASIC has rejected this as an excuse because super funds are ultimately responsible for the services they offer.
Funds with stronger customer service and cybersecurity records have typically taken their administration services in-house.
