ASIC strikes again - AMP Superannuation fined $24 million

The proceedings

ASIC commenced proceedings against four AMP companies (part of the AMP Group),² for charging retention of life insurance premiums and advice fees from superannuation accounts for the period between 26 May 2015 to 31 August 2019³.

In each case, there was no entitlement for AMP to charge or deduct the premiums or fees because AMP had been notified that the members were deceased and did not receive the services.⁴

During the relevant period, a total of $601,767.87 in advice fees and premiums were paid.

The Federal Court held that AMP had:

• acted ‘unconscionably’ in breach of section 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); and
• failed to provide financial services ‘efficiently, honestly, and fairly’ in contravention of section 912A(1)(a) of the Corporations Act 2001 (Cth) (Corporations Act).⁵

For these breaches, two of the AMP companies were fined a combined penalty of $24 million.

Significance of the proceedings    

It is clear from the proceedings and the Court's reasons that AMP did not have adequate systems in place to:

• notify it of a member’s death;
• cease receipt of advice fees upon notification of a member’s death; and
• return any amounts deducted and received by AMP on account of advice fees after a member’s death.⁶

Further, the culture within AMP was to assume that there were no systemic issues, and AMP did not have a process in place that was capable of identifying, investigating, and remedying any systemic issues.   

The conduct proved costly to AMP and is yet another example of ASIC’s willingness to commence proceedings against Australian Financial Services Licensees (AFSL) for breaches of the Corporations Act and ASIC Act in relation to conduct arising from the lack of adequate internal systems and processes. ASIC had previously commenced similar proceedings against MLC Limited which resulted in a fine of $10 million.⁷

Lavan comment

This case is a reminder to corporations about the consequences of failing to have proper internal processes and policies which are monitored, particularly as ASIC will continue to prosecute AFSL for breaches of the Corporations Act and ASIC Act. 

Proper systems should be in place from the outset to prevent systemic issues or mistakes, and processes should be adopted to detect and rectify systemic deficiencies. Ongoing reviews of internal processes and policies are important to ensure up to date procedures and systems, and to minimise the risk of exposure.

If you require advice as to compliance with the Corporations Act or ASIC Act, please do not hesitate to contact the Litigation and Dispute Resolution team at Lavan.