ASIC boss Joe Longo warns super funds leaving members vulnerable to scams because of poor systems, governance

Australia’s top financial services regulator claims superannuation funds are leaving their members vulnerable to dodgy promoters because of poor technology and governance. Flagging more regulatory action against the $4 trillion industry this year, Australian Securities and Investments Commission chair Joe Longo said funds were aware of growing reports of scams “but aren’t taking it seriously”. Long a critic of technology-outsourcing in some big industry funds, Mr Longo said the managers need to improve their systems and their data analysis to detect dodgy activity and protect the savings of members.“They remain responsible even though they outsource,” he said. ASIC is expected to release a detailed review of member services provided by super funds in coming weeks in the wake of a doubling in cases taken to the Australian Financial Complaints Authority between 2021 and 2023. Ahead of the review being released, it has warned of the “considerable volume of superannuation” savings flowing to high-risk investments, such as property plays through newly set-up self-managed superannuation funds. Big movements of super savings were being accompanied by payments to lead-generation services, ASIC says. These dodgy business models are being driven by high-pressure sales tactics and social media algorithms to target vulnerable people. While Mr Longo did not link mainstream funds to these boiler room operations, he said fund trustees had been told to put systems in place to detect dubious payments. “We’re requiring them to take more notice of that,” he said. When asked whether funds were failing to report scams or just not connecting the dots, he said it seemed they had not placed sufficient priority on systems and technology. “It’s just an under-investment — that’s where governance issues arise,” he said. “You’ve got this need for cybersecurity, cyber-resilience and operational resilience — and you’re wanting to deliver services needed for member outcomes. “You’ve got to have the data and systems to do that.” And with many funds outsourcing technology services the same provider, this added risk to the industry should that provider go down. ASIC concerns about poor quality systems have already had consequences for some big funds. Pushing for AustralianSuper to cop a $27 million fine for breaching Federal laws by failing to consolidate the accounts of 90,000 members, ASIC said the giant fund had no excuse for under-resourcing its consolidation obligations and not having the right systems in place. Mr Longo’s deputy Sarah Court warned in November that “trustees cannot outsource accountability” when launching a Federal Court action against CBUS for its slow payment of more than 10,000 death and disability claims. Mr Longo said ASIC was also concerned by poor systems and claims handling at insurance companies, including persistent problems with claims handling in natural disasters.