‘Tombstoning’ case has massive ramifications

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HNW principal Robert Cumming is focussed on protecting the reputation of HNW Planning, after a former adviser has been caught ‘tombstoning’.

An ASIC investigation found that Pavan Vyas submitted 12 applications for life insurance policies in the names of people that did not exist, and also submitted three further applications in the names of friends without their knowledge.

Vyas worked for HNW for just over a month before the company discovered his illegal behaviour and reported him to AUSTRAC, ASIC and the police, says Cumming. Before that time, Vyas worked for Lionsgate Financial Group, had received numerous industry awards and was featured on the website of a second-tier accountancy firm.

Cumming says that HNW are now being held responsible for ‘the mess that was created somewhere else’.

“We caught him and caught him quickly…We have good systems and have caught the issues that somebody allowed to happen."

“We’ve got 46 Authorised Reps around the country. We’re mid-sized, we’re IT systems-based and that’s why we were able to pick this up, because of the thoroughness of our data checking.”

Cumming says that if HNW is held responsible for the fraud, it would have huge ramifications for transferring advisers, as firms would have to double check every bit of advice that an adviser has ever done.

“If the insurance companies now hold HNW responsible for the fraud committed at Lionsgate then where does it stop? Are we responsible for the advice in previous dealer groups as well? The ramifications for transferring advisers is huge, and the way out of trouble for a dealer then becomes to help an adviser move to a new dealer.”

ASIC has permanently banned Vyas, and HNW are yet to hear from AUSTRAC what action it will be taking. ASIC also imposed additional conditions on the Australian financial services (AFS) licence of Lionsgate Financial Group in March this year.

Cumming says the case highlights major issues for the life insurance industry around money laundering and their internal data checking and duplicate detection.

“There’s a gaping hole where money can be laundered through insurance companies, and that’s proven by this case and similar cases to it. It's the insurance companies who have the credit card and banking data; dealers simply do not have this information”

The case has also given Cumming “very thorough food for thought” about who he will work with in the future "One of the companies has worked well with us cooperatively, the other two have turned their heads and hearts against us in spite of our role of finding and acting and spending a huge amount of our time assisting them and ASIC on this."

More stories:

AUSTRAC to scrutinise advisers

The rising trend of self-licensing

Synchron: Compliance, SOAs and vertical integration

  • Mark on 4/07/2013 2:58:33 PM

    Unfortunately Lionsgate Financial Group should of reported this adviser to ASIC and other authorities as opposed to encouraging him to simply move.
    ASIC should not punish licensee that discover and report this behavior - it should be encouraged. ASIC should investigate why Lionsgate (and his other previous licensees) did not report him.
    It is not however and hence too many licensees simply move people on as opposed to reporting.

  • Pat on 4/07/2013 4:08:04 PM

    Mark, sounds a bit like the practices of some religious organisations.

  • Merv Gay on 4/07/2013 4:29:21 PM

    I don't know what the fuss is all about. If the fraudster concerned had only signed the Best Interest Duty Form, and sent out an FDS none of this would have happened. Just ask Bill Short On......Merv Gay

  • Rod on 5/07/2013 9:37:04 AM

    Sadly once again if Reference checking was done correctly this may have been nipped in the bud ? Have to seriously wonder why Lionsgate did not pick this up totally agree how do ASIC hold the licensee responsible that discovered this so quickly and acted upon it quickly, once again shows incompetence somewhere in the system, maybe lionsgate should be investigated by ASIC

  • Mark on 5/07/2013 10:02:25 AM

    There is no doubt in my mind that Lionsgate knew what the adviser was up to. They knew (like has now happened to HNW), that ASIC would investigate them with considerable depth - hence for their business it was easier to move the adviser on and make him someone else's problem, as opposed to report him and suspend his licensee. This is very common in the industry and if this article is an indication of how ASIC will approach issues in the future, lit will continue, as it would appear the licensee that attempts to do the right things and remove people who participate in unacceptable practices. Next time HNW comes across an adviser like this - they will have to seriously consider 'Do we do the right thing' or simply pass the adviser on ?

  • Adviser Fred on 6/03/2014 10:07:24 AM

    It is far too easy for this to happen. Yes it is illegal, but there needs to be more done to make it harder for this to occur. Starting a super account requires checks, like TFNs, Certified ID etc to ensure real people are starting the policies, yet Insurance often doesn't even require a signature, let alone taking any steps to ensure fake policies are not being created.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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