Case 1: Signs of undue influence
A married couple in their 90s, although not separated, were living in separate nursing homes and held funds in a joint account with the FSP. In 2014, they signed a power of attorney providing the applicant’s daughter and her husband’s son with authority to access online banking to view statements only. In April 2015, the applicant’s daughter rang the FSP to report suspected unauthorised transactions on the joint account by the husband’s son.
Five days later, the son took his father in his wheelchair to a branch of the FSP. The husband closed the joint account and transferred the funds of almost $140,000 into a different account, in the husband’s name only, without the applicant’s knowledge.
The applicant said the FSP should not have allowed her husband to close the joint account and transfer the funds into his name without her knowledge and consent.
We considered the dispute and found the FSP’s notes showed that its staff considered whether the applicant’s husband had capacity to conduct the transaction. However, the FSP employees should have made inquiries of the husband in the absence of his son, and of the applicant, before closing the account and transferring the funds. If they had done so, the applicant would most likely not have consented to the transaction.
We found the FSP did not exercise appropriate care and skill in response to the following ‘red flags’:
- the unusual nature of the disputed transaction
- the husband who conducted the transaction was in his 90s, in a wheelchair and accompanied by a person who the FSP had been notified may have not been acting in the best interests of both account holders.
We determined that the FSP did not comply with good industry practice to protect the applicant from potential financial abuse, and we required the FSP to transfer half the funds plus interest into an account nominated by the applicant.
Case 2: Complying with good industry practice
Roy* attended a branch of an FSP with a new acquaintance, Olivia*, and completed a third party operating authority allowing Olivia to operate on his personal account. Roy and Olivia also asked to withdraw $30,000 from Roy’s personal account, but they were told to return at a later date when cash would be available. Two days later, Roy and Olivia returned to the same branch to complete the $30,000 cash withdrawal.
One month later, Roy was admitted to hospital and was subsequently declared incompetent. Eleven weeks later a guardian was appointed to administer Roy’s financial affairs. Olivia kept the $30,000 cash withdrawn from Roy’s personal account.
Roy’s guardian lodged a dispute and said:
- Roy would have been incapable of consenting to the account operating authority and cash withdrawal at the time
- Roy was induced by Olivia to change the account operating authority and withdraw the cash
- the FSP should have questioned Roy about the relatively large amount of the withdrawal as it was inconsistent with the previous contact of the account
- the FSP should also have questioned Roy’s capacity and prevented the transactions.
We considered the dispute and found the FSP did not comply with good industry practice in relation to the cash withdrawal because Roy:
- appeared elderly and dishevelled, and
- withdrew a large amount of cash while accompanied by a new acquaintance.
The FSP was required to make a refund of $30,000 to Roy because in these circumstances, they should have:
- discussed the transaction with Roy separately from Olivia, and
- taken steps to identify and protect Roy from potential financial abuse.
*Not their real names.