The Pension Funds Adjudicator Muvhango Lukhaimane has ordered the Municipal Gratuity Fund to pay a complainant serving a prison sentence, and his pension fund paid out to a syndicate.
The pension fund paid out a benefit of more than R800 000 to a syndicate that was involved in identity theft and unlawfully claiming benefits of retirement fund members.
According to the Office of the Pension Funds Adjudicator (OPFA), Lukhaimane has ordered the fund to pay the complainant the benefit due to him, with interest.
“Ms Lukhaimane said the fund has a fiduciary duty to exercise its functions with care, due diligence, and good faith. The fund failed in its duties towards the complainant when it did not seek to further confirm his imprisonment status before effecting payment,” it said.
The OPFA said the complainant commenced employment with Pikitup Johannesburg until his imprisonment on November 29, 2016.
“On September 7, 2018 the complainant’s fund credit of R810 413.07 was paid to an incorrect person while he was in custody. The complainant was aggrieved that the fund could process a withdrawal benefit claim in his absence and pay the benefit to an incorrect person using fraudulent documents.
“The complainant submitted that the photo on the identity document submitted to the fund was not his. The fund took into account an affidavit deposed by Correctional Services purporting to be him. He indicated that the affidavit was not stamped and signed as required. He also submitted that the fund accepted a withdrawal claim form that had errors. In support of his submissions, the complainant submitted a copy of the Old Mutual Money Account Statement the benefit was paid into, purporting to be his account,” it said.
The OPFA said the complainant further stated that after he exited service with his employer due to his arrest, the employer completed exit forms notifying the fund of his membership termination.
“The complainant confirmed that the withdrawal claim forms were marked unsigned and sent to the fund. Initially, the fund did not process the claim, presumably because the withdrawal claim forms were not signed. He stated that, however, on February 20, 2017 the fund contacted the employer requesting the complainant’s certified copy of his identity document. The employer confirmed it could not provide the identity document as the complainant was in custody.
“The complainant confirmed that on June 22, 2018 the fund made a follow-up enquiry with the employer ascertaining if he, the complainant was still in prison. On the same date, the employer confirmed so. However, the complainant submitted that between June, 2018 and August, 2018 the fund appeared to have been in communication with an individual who created an electronic mail address using the complainant’s name,” the OPFA said.
According to the OPFA, the complainant indicated that on August 30, 2018 the fund received claim documents from the said electronic mail. On September 4, 2018 the fund responded to the correspondence with instructions to the fraudster. The fraudster then replied accordingly.
“The complainant indicated that the fund processed the claim while knowing that he was imprisoned and could not have had access to electronic mail facilities. The complainant submitted that a copy of his original identity document was with his daughter.
“He stated that it was clear that the identity document sent to the fund was fraudulent. The complainant submitted that the fund failed to perform due diligence when dealing with the fraudulent claim,” the OPFA said.
In its response, the fund submitted that on November 30, 2016 it received a notification of the complainant’s exit from service from the employer due to imprisonment. The fund submitted that on August 30, 2018 it received the completed withdrawal claim forms from the complainant.
“The fund confirmed that in January, 2019 it was informed by Bidvest Bank that the withdrawal benefit payment may be part of the syndicate that was involved in identity theft and unlawfully claiming benefits of retirement fund members.
“It submitted that due diligence was followed by notifying the internal forensic department, which resulted in a formal criminal complaint reported to the SAPS. The fund submitted that the criminal complaint was closed as undetected,” the OPFA said.
In her determination, Lukhaimane said the fund had failed in its duties towards the complainant when it did not seek to further confirm his imprisonment status before effecting payment, which renders its act and/or omission reckless and puts the complainant in an adverse economic position. The fund must ensure that proper mechanisms, checks, and balances are implemented to combat corrupt and fraudulent activities.
“The facts indicate that the fund was informed that the complainant was imprisoned effective February 29, 2016. It initially did not process the claim as the withdrawal claim forms submitted by the employer were incomplete. This was because the complainant was in custody and could not provide all the required documents and sign the withdrawal claim form.
“The fund must first liaise with its members and their employers upon receiving exit documents to confirm the veracity and authenticity of the claim documentation. It appears that in this matter, upon receipt of the claim documents the fund enquired with the employer and was informed of the complainant’s imprisonment, hence it could not be provided with all the required documents, and why the form was not signed by the complainant.
“However, following this the fund between June, 2018 and August, 2018 appeared to have communicated directly with an individual purporting to be the complainant. It is not clear why the fund did not further confirm if the complainant was released or not. This is also because persons in custody have limited access to communication facilities and everything they send out or receive must first go through the accountable Correctional Services personnel,” Lukhaimane said.
She said the fund could not have communicated with the complainant electronically without the correctional facility knowing, let alone being able to open a new bank account, and subsequently submit all the documents that were submitted fraudulently.
“This on its own indicates that the fund did not exercise due care and diligence during the second part of processing the claim from June, 2018 until the payment was made,” said Lukhaimane.
According to Lukhaimane, if the fund’s system was compromised which led to the communication between itself and the fraudster, the complainant cannot be blamed for such.
“He justifiably knew that his funds were still with the fund and under its protection as required in terms of the act. Hence, he immediately proceeded to claim the same when he was released from custody,” she said.
Lukhaimane ordered the fund to reinstate the complainant’s fund credit together with the investment returns earned, and pursue legal action on the fraud committed against it without further prejudicing him.
* Maleke is personal finance editor.
PERSONAL FINANCE