The Financial Services Tribunal (FST) has set aside a determination by the Deputy Pension Funds Adjudicator against Absa Bank, which sought to withhold the withdrawal benefit of a former employee involved in defrauding customers of more than R79 million.
According to Absa, the employee (“LN”) admitted, during a disciplinary hearing, to providing confidential information about client accounts to a syndicate.
In a subsequent statement to the Office of the Pension Funds Adjudicator (OPFA), LN said she was paid R3 000 for providing the information at a time when she was experiencing financial difficulties.
Absa dismissed LN in January 2020. The following month, it asked the Absa Pension Fund to withhold paying out LN’s withdrawal benefit (at that time, about R400 000), pending the outcome of an investigation by its forensic department.
The Absa Pension Fund told the FST that Absa informed it in March 2020 that criminal cases related to LN’s alleged fraud were pending.
The fund said Absa informed LN in January 2021 that several criminal cases had been opened against her, and the bank had asked the fund to withhold her withdrawal benefit.
Adjudicator upholds the complaint
LN filed a complaint with the OPFA in February 2021. The OPFA upheld her complaint on the following grounds:
- In terms of the fund’s rules, the amount that is withheld may not exceed the amount that is deducted from the withdrawal benefit. When the decision to withhold the withdrawal benefit was taken, the fund had no proof of the quantum as claimed by the bank.
- The rules also require that the fund is satisfied that the employer has made out a prima facie The trustees failed to submit a trustee resolution to the adjudicator reflecting the reasons for the decision to withhold the withdrawal benefit.
- The fund had to be satisfied that there was no undue delay in instituting proceedings against the complainant. The fund’s administrator, Sanlam Employee Benefits, said in August 2021 that Absa intended to institute civil action that month. The Adjudicator concluded that the delay was unexplained and exorbitant.
- The fund had not allowed the complainant an opportunity to be heard.
Opportunity to respond
The FST said was “no debate” about LN’s dishonesty and misconduct. “The history of this matter, dating back to October 2019, and the records before us do not reflect a defence that could assist the complainant.”
It also found that the Absa Pension Fund had given LN an opportunity in April 2021 to make a submission about the withholding of her withdrawal benefit. “She had the opportunity to do so, as she was aware of the allegations against her.”
No undue delay
Absa submitted that it did not delay in dealing with the allegations of fraud pertaining LN.
The bank said that as soon as it became aware of the fraudulent scheme, it immediately investigated the matter; it embarked on urgent court processes to protect its clients and recover its financial losses; it subjected a number of employees to disciplinary processes; it laid criminal charges against suspected former employees; and it instituted a civil claim against LN in August 2021 to recover its anticipated financial losses, in line with the purpose of section 37D of the Pension Funds Act.
Based on the above, the FST found there was no undue delay by Absa in instituting a civil claim against LN.
In the tribunal’s view, what constitutes “an undue delay” depends on the circumstances of each case. “To hold a contrary view will defeat the manifest purpose of section 37D of the Act,” it said.
Prospects of success
It agreed with Absa that the OPFA had failed to give appropriate weight to the discretion afforded to the fund, in terms of its rules, to withhold the benefit. In this regard, the OPFA had disregarded LN’s written admission, the investigation, the criminal cases, and Absa’s prospects of success in the civil proceedings against LN.
Although Absa informed the Adjudicator that it intended to institute a civil claim by 6 August 2021, the Adjudicator did not consider this.
“Since we hold the view that there was no undue delay in instituting a civil claim, it is unclear why the Adjudicator could not appreciate the prospects of success of the applicant’s civil claim against the complainant.”
In a supplementary submission to the FST, Absa said it had been awarded judgment in its favour against LN, and the quantum contained in the judgement exceeded the amount of LN’s withdrawal benefit.
The tribunal said that with the judgment in place against LN, Absa was within the ambit of section 37D, and there was no reason the provisions of this section could not be implemented.
The FST set aside the OPFA’s decision and sent it back to the Adjudicator’s office for further consideration.
