Australian bank must conduct independent compliance review following breaches and $4.5m penalty

The Australian Securities and Investments Commission (ASIC) has published a statement with regard to imposing additional measures for ANZ as a result of several shortcomings, which had already resulted in a financial penalty for $4.5 million. Following concerns raised by ASIC, the Australia and New Zealand Banking Group (ANZ) has agreed to an independent review of its One Path subsidiaries’ compliance functions.

ASIC sought the review following a significant number of breaches reported by the ANZ Group in relation to its life, general insurance, superannuation and funds management activities. These activities are operated through its wholly-owned OnePath group of subsidiary companies.

From early 2013 to mid-2015, around 1.3 million customers were affected by breaches, requiring refunds and compensation of around $4.5 million, rectifications and other remediation of approximately $49 million. Not all breaches required monetary remediation. Examples of breaches include:

  • 1,422 superannuation fund members had $28.7 million in contributions allocated to the incorrect super account of the member for a period up to 12 months. ANZ has now returned these funds to the correct accounts and provided over $400,000 compensation for lost earnings and/or incorrect fees.
  • OnePath failed to take further action in relation to 21,000 cheques it had sent to customers that were not banked within 15 months. These cheques included proceeds of insurance claims, superannuation benefits and refunds of premiums. $2.9 million was ultimately returned to customers with a further $11.6 million treated as unclaimed monies.

ASIC was concerned that the breaches together reflected compliance issues which may impact on Australian Financial Services (AFS) licence obligations of entities in the ANZ Group. ANZ has engaged Price water house Coopers (PwC) to independently review the OnePath subsidiaries’ compliance management framework.

ANZ has agreed to take appropriate actions to implement recommendations stemming from the PwC review. ASIC is also separately monitoring rectification of the breaches as some breaches are yet to be finalised.

ASIC Deputy Chair Peter Kell said, ‘Appropriate compliance and systems to monitor compliance are essential for banks to adhere to their AFS obligations. This is important in maintaining customer trust and confidence in the sector.’

‘ASIC expects all AFS licensees to have systems in place to ensure they can satisfy their general AFS obligations.’

ASIC acknowledges the co-operative approach the ANZ Group have taken in this matter, including in ensuring that breaches were notified to ASIC.
ANZ Group customers who have any questions should contact 133 665.

The ANZ Group’s subsidiaries with AFS licences include OnePath Custodians Pty Ltd, OnePath Life Limited, OnePath Funds Management Limited and OnePath General Insurance Pty Limited.

The breaches included:

  • failure to provide disclosure documentation for some insurance products;
  • inadequate systems or processes to ensure compliance. In some cases processes did not ensure reasonable steps were taken to contact customers or that statutory timeframes were met. Some processes included manual steps that were not followed up on;
  • insufficient supervision of some outsourced functions, including third party call centres;
  • processing errors, such as payments made to incorrect superannuation accounts; and
  • significant time taken to identify some breaches.

The PwC review will:

  • review and assess the design and operational effectiveness of the OnePath compliance management framework including policies and processes;
  • assess the adequacy of processes designed to identify and manage the financial services laws which apply to the OnePath companies holding AFS licences; and
  • identify any gaps in the compliance management framework and report back to the ANZ Group and ASIC.

In 2013, following a request from ASIC, Suncorp Group agreed to implement a number improvements of compliance system across its life and general insurance businesses (refer: 13-155MR). It was finalised in 2014 (refer:14-284MR).

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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