It will be the members of superannuation funds hit by early release fraud that ultimately end up paying to restore affected accounts to normal with senior superannuation executives citing using of the members’ reserve.
Barely two years after IOOF ran into trouble in the Royal Commission because of its use of the members’ reserve, executives are saying that use of the reserve would be the most appropriate way of putting members balances right.
“On the face of it, this fraud is not the fault of the fund. There were failings were evidently elsewhere. But that is what it is (the member reserve) is there for,” he told Money Management.
Superannuation fund officials have been angered by the attitude of the Government and the Australian Taxation Office (ATO) over the impact of the fraud involving about 150 accounts and amount to about $150,000 because the Government insisted on the rapid handling of early access requests (inside five days) and allowed a watering down of some key checks particularly on the part of the Australian Transactions Report and Analysis Centre (AUSTRAC).
AUSTRAC announced in late March a new rule: “where the payment is approved by the ATO, will not have to conduct additional customer verification under the AML/CTF regime”.
IOOF was the subject of controversy before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry over its use of the members’ reserve to make good an administrative error which had impacted member account balances.
The superannuation fund executive said that the amount of money involved in the fraud was not a large amount, but pointed out that news of the fraud had come just days after the Australian Prudential Regulation Authority (APRA) had produced data on the early release scheme suggesting superannuation fund trustees were taking an average 1.6 days to pay members.
It is understood that the systems break-down which led to the fraud being investigated by the Australian Federal Police did not involve a superannuation fund but, rather, a data breach within an accounting firm.