The Australian Financial Complaints Authority (AFCA) has backed a superannuation trustee after it paid a total and permanent disability (TPD) insurance benefit to the insured's mother, who was acting fraudulently. 

The insured member lodged a TPD claim, but their mother contacted the trustee posing as the insured, and had the benefit of more than $306,000 paid into her bank account. The insured member died shortly afterwards. 

The mother has reimbursed part of the benefit totalling $240,800, but the deceased member’s legal personal representative complained to AFCA, demanding the trustee pay compensation for the shortfall and legal costs, totalling $105,237.30. 

But AFCA says the trustee carried out all necessary checks during phone calls and “had no reason to think the person to whom it paid the TPD benefit was not the member as claimed”. 

AFCA says proof of identity documents were acquired in accordance with the trustee’s rules. 

The complainant says that when the fraudster provided different banking details, the trustee did not change the name on the account. But AFCA says there is no legal requirement on the trustee to do so. 

“There has been much discussion in recent years about the implementation of such a requirement, but no such requirement has been legislated. 

“Although the trustee ultimately paid the TPD benefit into the mother’s bank account rather than into the deceased member’s bank account, I am satisfied this was not the result of any failure by the trustee to meet its obligations.” 

The trustee also points out that the complainant was awarded damages of $76,552 after taking court action, arguing the complainant is not entitled to “double dip”. 

“AFCA cannot make a determination about the mother’s failure to pay the amount awarded by the court to the complainant in his role as the legal personal representative,” AFCA said. 

“I am satisfied the trustee sought and received adequate identification when dealing with the unauthorised third party, causing it to be satisfied it was dealing with the deceased member.  

“I am satisfied the trustee had no reason to know or to suspect it was the victim of fraudulent activity by the mother.” 

Click here to read the full ruling.