Monday, April 22, 2024

Macquarie pays $10m fine after failing to catch fraudulent withdrawals

Macquarie pays $10m fine after failing to catch fraudulent withdrawals

A court has ordered Macquarie pay a $10 million fine after admitting it had failed to implement appropriate controls to protect its customers from fraud.
The Australian Securities and Investments Commission sued Macquarie in April 2022, alleging the financial services giant was not screening transactions made by third parties such as financial advisers or stockbrokers on customer’s cash management accounts for fraud.
While these transactions were made under a “fee authority” system, where authorised third parties could make withdrawals from client accounts to collect advice or other service fees, the bank did not properly verify that these third parties were charging legitimate fees from clients.
ASIC alleges the bank breached its obligations as a financial services provider.  Louie Douvis
Justice Michael Wigney said in a judgment on Friday that while certain large transactions under the system generated email alerts, they were not systemically reviewed by the bank and therefore had “little or no ability” to protect customers.

“Macquarie effectively exposed their customers to the risk that their third parties might make fraudulent transactions outside their authority,” Justice Wigney said. “Macquarie received no direct financial benefit, though it must be said that it avoided the cost of remedying the controls.”
One Macquarie customer lost $2.9 million through unauthorised withdrawals from former financial adviser Ross Andrew Hopkins, who in 2021 was sentenced to six years in prison for misappropriating client funds.
The ASIC case against Macquarie is not solely focused on Mr Hopkins’ conduct, but multiple alleged failures between May 2016 and January 2020 where it did not prevent or detect transactions incorrectly made under the “fee authority” system.
The regulator alleges the bank breached its obligations as a financial services provider and that it made false or misleading representations when promoting third-party management of customer cash management accounts. Macquarie, according to the ASIC claim, represented that any transactions made under the “fee authority” would be appropriately screened.
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Lucas Baird is a journalist based in The Australian Financial Review's Sydney office. Connect with Lucas on Twitter.Email Lucas at

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