In Australian Securities and Investments Commission v AMP Superannuation Limited [2023] FCA 488 the Federal Court of Australia made declarations that four companies in the AMP Group failed to do all things necessary to ensure the financial services covered by its AFSL were provided efficiently, honestly and fairly, and thereby contravened s 912A(1)(a) of the Corporations Act or breached their general obligation to comply with financial services laws in contravention of s 912A(1)(c) of the Corporations Act.

The action by ASIC concerned the deduction and retention of life insurance premiums and advice fees from the superannuation accounts of deceased customers during the period 26 May 2015 to 31 August 2019 in circumstances where it has since been acknowledged that there was no entitlement to charge or deduct the premiums or fees.

The evidence was that some employees within the AMP Group were aware that amounts were being deducted after the date of notification of death. However, it does not appear that, prior to the investigation following the issue being raised at the Financial Services Royal Commission in 2018, any employee knew that death benefits paid were not being calculated in a manner that reversed deductions made after the date of death.

During the relevant period, a total of $601,767.87 in premiums and ongoing advice fees was deducted from and not refunded to the superannuation accounts of 2,156 deceased members .

At the time of the contravening conduct, the defendants were large companies with large revenues and part of a very large group.

The contravening conduct essentially fell into two categories:
(1) Continuing to deduct premiums and advice fees following notification of a member’s death; and 
(2) Failing to refund premiums and advice fees deducted between the date of a member’s death and the date of notification of the member’s death.

In addition to remediation payments, the defendant AMP Companies ordered to pay a penalty were:

• AMP Life Limited, which is now part of the Resolution Life Group, but was part of AMP when the conduct occurred – penalised $18 million; and
• AMP Financial Planning Proprietary Limited – penalised $6 million.

The four companies were also ordered to publish, at their own expense, a written adverse publicity notice.

In conclusion, Justice Hespe observed:

“The deficiencies in compliance and governance frameworks relating to the handling of complaints were only part of the cause of the contravening conduct. The contravening conduct arose because amounts were deducted from customer accounts contrary to the terms of the contracts agreed with the customers. 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. The systems were heavily reliant upon manual adjustments and lacked centralised oversight. The process for “enhancing” the system was cumbersome. Each “enhancement” required submissions relating to costs and benefits to justify the request — even when the “enhancement” requested was to give effect to the terms of the policy issued. The complaints handling system was premised on an unacknowledged and unwarranted assumption that there would be no systemic issues. Combined, this was a recipe for potential undetected incorrect charging.”

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.