The increasing regulatory compliance pressure on financial services providers and insurers is evidenced by recent ASIC announcements in respect of ANZ and Macquarie following its requirement that their compliance systems be reviewed.

In the case of ANZ, ASIC has announced that 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 given by ASIC 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.

The compliance issues 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.

In the case of Macquarie, ASIC announced that it imposed additional conditions on the Australian financial services (AFS) licence of Macquarie Bank Limited (Macquarie) following an investigation by ASIC into a series of breach reports lodged by Macquarie relating to breaches of the client money provisions of the Corporations Act, between March 2004 to 2014.

Macquarie has filed an application for review of the decision in the Administrative Appeals Tribunal and has also obtained a stay of the decision pending the outcome of the review.