Complex, siloed IT systems contributed to errors in how ANZ Bank handled a package called Breakfree Benefits, which resulted in $25 million in fines imposed by the Federal Court.
In an action brought by the Australian Securities and Investments Commission and approved by the court this week, ANZ is also to pay $211 million in remediation costs to impacted customers.
First introduced in 2003, the Breakfree package offered fee waivers and interest rate discounts on selected ANZ products which included home loans, credit cards and transaction accountsm for a yearly fee.
The statement of agreed facts [pdf] that made up part of the evidence in the case makes it clear that complex systems were a contributing factor to the breach.
“The systems and processes for setting up and administering the Breakfree Package were highly complex”, the filing says.
ANZ had three different systems that could be used to originate loans: customer account processing system (CAP), mortgage origination system (MOS) and a newer retail leading system (RLS), each with a different process for customer setup.
That led to many manual processes and handoffs between staff, all of which led to errors.
Over the years, reviews identified the issues, and around 2010 “ANZ considered investing in an automated solution to address known issues” but by “January 2011, ANZ decided not to invest in such a solution”.
The Federal Court of Australia ruled the bank botched the delivery of benefits leading to around 689,000 customer accounts failing to receive fee waivers and interest rate discounts for a period of 20 years.
The court found the bank failed “to maintain systems and processes that were adequate; which meant packages weren’t always passed down to the customers.
The court also ruled ANZ “also failed to conduct adequate monitoring or analysis of its systems and processes to identify instances of customers not receiving” benefits related to the package.
The bank said in a statement it “accepts that its conduct fell short of expectations and apologises to its customers who have been impacted.”
It added it “has enhanced its systems and processes to address these issues and is undertaking remediation programs.”
On top of its penalty payments, the bank has also been ordered by the court to publish an adverse publicity order on its website and online banking login page.
The case was filed following the implementation of ASIC’s investigations stemming from the Financial Services Royal Commission.
ASIC deputy chair Sarah Court said “having the necessary systems and processes to ensure customers are given the benefits they are promised is not an optional extra, it is a requirement."
“ANZ is a large financial institution that for many years failed to prioritise and deploy the systems and processes necessary to fulfil its obligations," she said.
Court added ASIC’s penalties from its “Financial Services Royal Commission enforcement work should act as a reminder to financial institutions that they must invest in their systems to ensure consumers are not adversely affected or harmed.”
