'Tombstoning' case has massive ramifications

by Kathleen Payne05 Jul 2013

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."