Five Australian lenders have agreed to improve their compliance measures and controls for third-party access to deposit accounts, following an industry-wide review from the corporate watchdog.
The Australian Securities and Investments Commission (ASIC) has revealed that five banks have agreed to strengthen their fraud protection systems in the wake of a review by the regulator that found that “banks could do more to manage the risks to customers associated with third party access to money in customers’ accounts”.
ASIC’s review, outlined in a report entitled Improved Protections for Deposit Accounts with Third-Party Access, examined 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.
The findings of the review include:
- The amount of control that advisers are provided with over a consumer’s deposit account varies between different banks — from “view only” access to complete control.
- Banks should do more to explain the level of access that customers are providing to their financial adviser, and the potential risk of unauthorised transactions.
- Control measures for protecting customers’ accounts from unauthorised activity should be strengthened, and banks should do more to reduce the risks to customers.
As a result, the banks involved have agreed to make improvements to their current practices, including:
- Ensuring account application forms adequately explain to customers that they will be giving the adviser authority to operate on their account, and sending follow up communications to customers after the account is opened with details of the authority that has been given;
- Better monitoring of the advisers’ use of these accounts and their transaction requests, and investigating any suspicious requests; and
- Considering the circumstances of any fraud that occurs using these accounts and, where appropriate, remediating a customer who has lost funds due to unauthorised transactions by their adviser.
ASIC deputy chair Peter Kell said that all called for more transparency between lenders and their customers.
“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.”