The investigation into the bank comes as the banking and financial services industry has been embroiled in a string of financial scandals that have destroyed the lives of thousands of customers, prompting calls for a royal commission. The Australian Financial Review can reveal the Bank of Queensland is also about to be hit with legal action that involves its relationship with Brad Sherwin, a financial planner who was recently charged with fraud. Sherwin hit the headlines in May when well-known actor Peter Phelpswrote on his Facebook page: "Kids' future. Farm. Gone". The star of the Channel 10 series Wonderland alleges his $400,000 life-savings were "stolen". There are hundreds of victims of Sherwin who have had their life-savings destroyed after his empire collapsed in early 2013, following the crash of related company Wickham Securities. Investors lost tens of millions of dollars. The corporate regulator began investigating the Bank of Queensland in October 2013 over its administration and operation of the money-market deposit account that was used by Sherwin and 300 of his clients. It is not known how many millions of dollars this involved, but according to ASIC the losses were "significant". ASIC wrote a hard-hitting letter to the Bank of Queensland in November 2014 outlining its concerns: "It is ASIC's view that there has been a systemic breach … and further that the inadequacies of Bank of Queensland compliance systems remain." ASIC states clearly that customers suffered a "significant" financial loss as a result of Bank of Queensland's breaches in relation to its money-market deposit accounts that are connected to Sherwin. It says the Bank of Queensland has an obligation to reimburse its customers for those losses. A follow-up letter a month later refers to interviews with Bank of Queensland staff that advised ASIC that certain transactions were "suspicious". The letter says: "It is ASIC's view that the suspicious circumstances are self-evident on the face of the instructions. They involve well-known money laundering and Ponzi scheme typologies including unexplained round-robin transactions… and backdating without explanation." Queensland-based legal firm Watson Law Group has been investigating the role of Bank of Queensland in the administration and operation of money-market deposit accounts used by Sherwin Financial Planning. According to principal Paul Watson, the bank, "may have breached its obligations under the Corporations Act, and acted in a manner that was not consistent with the terms of their Product Disclosure Statement". Watson is representing Niels and Joyce Petersen, as well as a number of other victims of Bank of Queensland and DDH Graham who have suffered substantial losses as a result of unauthorised transactions on their money-market deposit accounts. For Niels Petersen and his wife, it has been a long and heartbreaking journey. They went to Sherwin Financial Planning to invest their superannuation after he had worked as a police officer. In March 2010, Sherwin Financial Planning established a money-market deposit account. Over $800,000 was invested for Petersen and within four days most of it had been taken out of the account, never to be returned. The bank allegedly allowed the money to be withdrawn without Petersen's knowledge and without receiving a signed authority from Petersen for the withdrawal. Petersen lost everything, forcing him to go on the aged pension. He is not alone. A support group called the Superannuation Crisis Support Group has been set up to share information among people who have suffered losses through Sherwin and Bank of Queensland. In July, the bank raised the ire of the corporate regulator when it decided to file an application in the Queensland Supreme Court seeking declarations that relate to Bank of Queensland's money-market deposit account (MMDAs). In a statement the bank said "with the application, BoQ was seeking finality about processes in relation to authorised signatories to a MMDA. BoQ believes that with appropriate authorisations in place, it could act on written instructions from an authorised signatory. We lodged the application because we wanted finality given these issues have been ongoing for some time." In simple terms, it wanted to get a court-ruled declaration that a so-called authorised person, such as a financial planner, could instruct the bank to withdraw and transfer customer money from its money-market deposit account to another account. ASIC waded into the legal action with an application to stay the proceedings, which was scheduled to be heard on October 1. However, in a surprise move, the bank told the Financial Review it had decided to "discontinue the application", a move ASIC wasn't aware of when it was contacted on Friday afternoon. The bank refused to answer questions on ASIC, AUSTRAC or whether APRA had been notified of the report by AUSTRAC. It also refused to answer whether the bank had worked to rectify risks outlined by ASIC and AUSTRAC or whether it had changed its processes in how customers signatures are handled. It said discussions with regulators are confidential and the current management has a "strong track record of transparency identifying legacy issues and proactively responding in an appropriate manner". In its July 27, 2015 letter to the bank, ASIC raised concerns that the statute of limitations for victims of Sherwin in relation to any debt, damages or compensation proceedings against the bank, would soon be up. It asked the bank, as it had in previous communication, whether it would "undertake that it will not seek to rely upon the limitation issue as a potential defence in respect of the Sherwin clients". The bank continues to dodge the question. For victims such as Neils Petersen who as a policeman had worked to protect Australians from wrongdoing, more needs to be done. For now, ASIC needs to move faster on its investigation, the bank needs to consider whether taking a hard legal line is in the best interests of its reputation – and customers, and the government needs to make the right recommendations in response to the Murray inquiry.
Bank of Queensland is reportedly coming under criticism over its controls and compliance systems, as ASIC reportedly prepares to launch an enforcement against the bank as part of the response to the Murray Enquiry. The Australian Securities & Investments Commission (ASIC) has been investigating whether or not ANZ Bank, which was recently fined $US1 billion for breaching anti-money laundering (AML) rules, should be subject to a similar