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Judge warns financial firms on technology interoperability
Justice Hespe has shared details into her decision to issue a combined $24 million penalty to AMP Life and AMP Financial Planning, stating the importance of financial institutions operating a quality IT infrastructure operation.
Last month, the Court had found four companies that are or were part of the AMP Group — AMP trustees AMP Super and NM Super, AMP Financial Planning, AMP Life, and AMP Services — breached the law when charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers.
The AMP companies received more than $500,000 in insurance premiums from the superannuation accounts of deceased customers, with at least $350,000 charged between May 2015 and August 2019.
The companies also received more than $100,000 in advice fees from deceased customer accounts, with at least $75,000 being charged between May 2015 and August 2019.
In the Federal Court verdict on the Australian Securities and Investments Commission (ASIC) v AMP Superannuation Ltd, it detailed how the $24 million fine was imposed to deter the conduct that had given rise to those contraventions.
A significant factor contributing to the error was problems with the firm’s IT systems.
Justice Hespe wrote: “Ultimately, the cause of the contravening conduct was the lack of a centralised complaints handling system coupled with a failure to ensure that information technology systems were programmed to be capable of giving effect to the terms of the products that had been issued. AMP Life’s information technology systems were a disconnected conglomeration of legacy systems involving product administration systems, workflow systems and complaints systems.
“The systems did not speak to each other and users of one system could not readily access relevant information stored in other systems. There was no evidence of the maintenance of records of how the systems were programmed to calculate death benefits.”
She ended her document with a message for other financial institutions to avoid the same fate.
“It is incumbent on sophisticated financial institutions offering financial products and services to devote the resources necessary to ensure that, as far as reasonably possible, their information technology infrastructure delivers on the terms of the products they offer,” Justice Hespe wrote.
“The Court does not want to foster a situation in which it is more expedient for a company offering financial services and products to recompense customers and pay a pecuniary penalty for defaulting on the terms of those products and services rather than devoting the time, resources and funds necessary to ensure their information technology are fit for delivering in accordance with the terms of those products and services in the first place.”
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
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