Misconduct in Banking, Superannuation and Financial Services
Misconduct in Banking
Financial Planning in Australia is a thoroughly regulated field, with financial planners being obliged to follow numerous government guidelines and requirements. Various reviews have been performed on the Financial Planning regulations in the country, with the latest conducted in 2019 by the Royal Commission on Misconduct in Banking, Superannuation, and Financial Services. This report will consider two case studies in relation to Superannuation and examine the recommendations made by the Royal Commission and whether they were realized.
AMP Limited Case Study
AMP Limited is a financial services company based in Australia. The firm is a holding company that owns the stock of AMP Superannuation Limited (ASL) and NM Superannuation Proprietary Limited (NM) (Royal Commission, 2019b). The company was included in the Royal Commission report due to ASL and NM releasing the trustee duties of their funds because of the AMP Group membership (Royal Commission, 2019b). During the investigation, several critical findings in the conduct of AMP Limited were made. The inquiry found that the ASL and NM outsource a significant proportion of their powers and duties to other players within the AMP Group (Royal Commission, 2019b). All the functions of ASL and NM, including the collection of funds, trust management, and investments, are performed by outside parties, including AMP Life. The report discovered numerous administrative, advice, and investment fees charged to the members against the cash balance in their accounts. The costs charged to the members are received by other firms within the AMP Group, to which ASL and NM have outsourced their duties (Royal Commission, 2019b). Overall, ASL and NM are passive to the decisions of other AMP Group stakeholders.
The Royal Commission report provides several recommendations to the AMP as a holding company for ASL and NM and other companies with similar transgressions. The primary suggestion is to increase reporting between the trustees and the organizations to which their powers and duties are outsourced (Royal Commission, 2019a). It is recommended to ensure that the outsourcing is performed in the members’ interests and is no detriment to their financial investment with the company. Finally, it is advised to cancel advice fees deduction from the cash balance of the members (Royal Commission, 2019a). As of 2020, AMP Life remains in charge of the day-to-day operations of ASL (AMP Superannuation Limited, 2021). Both ASL and NM are prepared to terminate their outsourcing arguments if they prove inappropriate and damaging to the members’ interests.
The case at hand represents a particular example of misconduct in the banking sphere. Specifically, the provided evidence suggests that the organization had a profound understanding and clear appreciation for the concept of role recognition during the performance of key banking transactions. Namely, the company established quite explicitly that it had appointed its group insurer, Mr. Paul Sainsbury, with due care and cautious selection among a range of potential candidates (Royal Commission, 2019a). The specified attention to the management of the appointment process indicates that AMP Ltd was eager to focus on a broad range of factors affecting the extent of the financial processes’ vulnerability as opposed to providing a superficial assessment of the emergent risks.
The case at hand proves the absolute necessity of introducing tools for controlling key operations within the bank, particularly the ones associated with financial transactions, especially closely and subjecting every activity that seems to be suspicious, at least to some extent, to extensive scrutiny. Thus, the threat of being labeled as untrustworthy and subjecting the bank customers to the risk of their personal data being exposed and their savings being stolen can be avoided safely.
However, the issue of data risk management and the task of containing the threat in question have been growing increasingly difficult to implement lately. The observed problem has been occurring due to the emergent risks in the realm of digital banking (). While the transfer to the digital setting occurred quite a while ago, allowing most banks to develop and apply an appropriate framework for smooth transactions and effective management of the related procedures, new threats are produced regularly. These include cyberattacks and other forms of cybercrime aimed at collecting customers’ information and using it for the purposes of stealing their money or performing illegal financial activities under their name.
Specifically, the key assumption concerning the case at hand includes the high probability of fraudulent practices performed within its framework. Namely, some staff members or managers may have developed the need to abuse the system, which is why tighter supervision of the possible malpractice within the organization is vital.
For this reason, it is strongly recommended that the bank should reinforce its approach toward controlling its financial operations and enhancing the principles of corporate governance within the organization.
The suggestion mentioned above may take significant time and effort to implement since it implies a collision of two different criteria for effective performance, which include providing managers with the flexibility needed to perform a detailed assessment of the target environment and selecting the best solution to a specific issue, and the need to exert tight control over the bank’s operations. However, it is worth noting that the idea of corporate governance as the foundational strategy for minimizing the risk of corporate fraud and similar concerns does not nullify the possibility of flexible decision-making and the promotion of agency in staff members and managers.
Additionally, the system allowing customers to reclaim unfair charges so that unfair practices could be identified immediately and that the bank’s clients should not develop mistrust toward the organization is needed. The specified system should be built on a rigid framework of supervision that will involve both the digital scanning of the key transactions and the work of staff members, who will communicate to customers, identify the details of the problematic scenarios, and work to resolve the matter at hand as promptly as possible, while also meeting the emotional needs of clients. The proposed technique will help to address two issues at once, namely, the problem of possible fraud within the organizational environment and the threat of a drop in customer loyalty.
Additionally, the audit strategy will need to be adjusted for the bank so that managers can isolate the cases that appear to be particularly suspicious and examine them as a potential source of financial risk for customers. The specified approach will allow AMP Limited to restore its reputation while actively working on the improvement of the company’s operations and quality assurance. Thus, the company will be able to attract new customers and business partners, expanding its supply chain and turning a new leaf in its development.
Finally, the analysis of the operations performed at AMP Limited indicates that the organization could improve its customer relationships approach. Namely, the overdraft problem could be addressed more effectively by improving the overall customer experience and focusing on making it as pleasant and memorable as possible. Namely, enhanced levels of safety ensured by the bank coupled with more proficient services offered by staff members are likely to help AMP Limited address the concerns at hand. Specifically, the bank staff members will have to acquire the skills needed to build emotional intelligence and emotional competence so that they can help customers retain their loyalty to the bank and continue using its services. With the focus on quality management and the redesign of the approach to ethical standards, as well as the management of customers’ needs, AMP limited will be able to remain in the banking industry without its reputation being ruined.
Hostplus Pty Limited Case Study
Hostplus is another company, the conduct of which was reviewed by the Royal Commission. Hostplus, a superannuation fund for sports and hospitality industries in Australia, was included in the report because of its questionable member retention strategies and the use of funds to attract new employers and contracts (Royal Commission, 2019b). The Royal Commission discovered that Hostplus spent over $260,000 on corporate entertainment to retain and acquire new employers and grow the funds available to the company (Royal Commission, 2019b). Hostplus focused its member retention strategies on customers with inactive accounts to prevent the transfer of their funds to the Australian Tax Office (ATO) (Royal Commission, 2019b). The inactive members were not fully informed of the transfer of funds to ATO and its impact on their retirement savings. Moreover, retaining inactive clients translated into tax benefits for the company. Thus, it can be asserted that Hostplus was not entirely truthful with its clients and engaged in dubious retention tactics.
The Royal Commission recommended improving the company’s communication with its members, making it more transparent and outlining all retirement savings options. In addition, section 68A of the Superannuation Industry (Supervision) Act should be revisited to ensure that employers do not influence the superannuation choices of their subordinates (Royal Commission, 2019b). As of 2021, it is unclear whether Hostplus amended its communication strategies with its members.
The obtained evidence has shown that the extent of misconduct within its organizational setting has been quite broad, particularly in regard to Superannuation and the provision of the needed financial services. Given the context of the situation depicted above, one could make the assumption that the fund has been using the lack of information available to customers to deliberately confuse them and, therefore, trick them into making greater payments. The described strategy is admittedly unfair and borderline illegal, which is why the fund needs to be subjected to multiple audits in order to test its current financial practices, as well as the standards for managing financial transactions and communicating to its clients.
In light of the fact that the communication issue has been identified as one of the major concerns that may have led to the development of the current situation, it could be assumed that updating the current communication channels used by Hostplus will help to improve the company’s performance in the risk management department and make the fund more reliable.
Furthermore, a drastic change in corporate ethics and the approach toward enhancing responsible decision-making must be introduced as a means of restoring the company’s reputation. Although a rise in transparency rates will help the bank to address some of the current issues and med rapport with its clients, the specified change must be consistent and, therefore, needs to be integrated into the very framework of the bank. Consequently, the managers at Hostplus will need to promote the concept of Corporate Social Responsibility and the necessity to meet customers’ needs increasing their satisfaction and loyalty, which will remain the main focus of Hostspot’s performance.
Furthermore, the case shows quite explicitly that communication remains an issue even within the confinements of the company. Specifically, employees struggle to transfer data accurately and need continuous guidance, which results in them making errors during essential corporate processes, including the delivery of essential services. Therefore, for Hostplus to regain the trust and loyalty of its customers, it will need to update its communication channels. Using social media, as well as personal emails, will allow Hostplus to be cleansed of the accusations of miscommunicating with its clients and withholding data from them. As a result, the company’s superannuation strategy is expected to prove more effective and lead to fewer complaints from customers. Namely, other changes such as alterations in the organization, policy regarding retirement funds, and the related issues, which are likely to affect the quality of customers’ lives in the future, must be made aware to the target audiences before the changes actually take place. The specified step can be managed by introducing communication channels connected to social networks. Since yet use of social networks will allow keeping every member of the target community informed about changes within the organization regularly, complaints regarding the absence of a warning for the issue at hand will no longer represent an issue to the organization.
Moreover, the problem of ethics should also be seen as a major concern. While the communication problems could be explained by the lack of resources for establishing an intricate communication chain stretched across a wide variety of social networks, the absence of any concern whatsoever for the security of customer funds is an inexcusable misstep that must be managed accordingly. Therefore, it is strongly suggested that the basic principles of corporate ethics should be included in the set of standards used at Hostplus. Additionally, the role of transparency within the organization must be emphasized as one of the foundational prerequisites to effective management of customers’ needs. Namely, the organization will have to use appropriate media to ensure that its clients are aware of the major changes and are capable of taking appropriate actions to ensure that the changes in question do not affect them negatively. The use of email notifications, as well as the provision of the relevant data at the company’s site, should be interpreted das vital to ensuring that the target demographic remains informed and is capable of consenting to the participle[action in the transactions that the bank offers.
To resolve the issue at hand, one might consider the introduction of mobile applications as the means of keeping customers constantly informed about the changes in the company’s strategy and performance. Moreover, to ensure that the data mismanagement occurring at the organization is not performed deliberately, audits must be conducted regularly. Additionally, the fund will have to submit reports with detailed information about its key transactions and the changes within its corporate strategy, and the management of the customers’ finances. Thus, opportunities for reducing the risks associated with superannuation problems and mishandled financial services will be minimized.
Thus, the current retention strategies applied at Hostplus must be challenged for their lack of transparency and honesty and replaced with more ethical strategies for building customer loyalty and engagement. Specifically, the organization could consider promoting a more responsible approach toward addressing customers’ needs and communicating with them, as well as ensuring that managers and staff members do not abuse their powers and approach their work responsibly. Therefore, audits and reports should be deemed as essential measures for preventing situations similar to that one observed at Hostplus from happening in the future. The promotion of corporate values and the ethical management of communication issues, as well as dilemmas emerging when delivering services to customers, must rely on a properly designed philosophy and a code of ethics. Moreover, a proper leadership style must be assumed by organization leaders to exert influence over staff members and managers so that they can accept ethical decision-making as the only available option.
Ensuring that fund staff members and managers remain ethical and abstain from financial fraud or any other type of fraudulent behavior is a rather challenging yet achievable goal. To prevent cases of fraud from taking place, rigid control over the company’s financial procedures and the active promotion of corporate ethics must become the priority for the organization. Furthermore, closer control over the firm’s actions by means of supervising its activity and conducting audits must be seen as a solution. With the rise in the role of digital tools as the means of managing finances, as well as the recent transfer of key financial transactions into the realm of the digital market, the extent of transparency has decreased, leading to a rise in the threat of fraud or cyberattacks. However, digital tools provide an array of opportunities for better control of key financial activities and, therefore, can be used to reduce the threat of further instances of fraudulent activities.
AMP Superannuation Limited. (2021). Directors’ report and Financial report for the year ended 31 December 2020.
Royal Commission. (2019a). Final Report. Volume 1. Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Web.
Royal Commission. (2019b). Final Report. Volume 2: Case studies. Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Web.