In a case of identity theft, a retirement fund that mistakenly paid out more than R800 000 to a syndicate instead of the rightful member – who happened to be in prison at the time – has been ordered to rectify its error.
In a recent determination, the Pension Funds Adjudicator, Muvhango Lukhaimane, ordered the Municipal Gratuity Fund to pay the complainant the due benefit with interest.
Before his imprisonment on 29 November 2016, the complainant was an employee of Pikitup Johannesburg. While he was still in custody on 7 September 2018, the fund processed a fraudulent claim in his name, paying out R810 413.07.
The complainant discovered the fraud when he attempted to claim the funds after being released from custody.
The unfolding of events
On 30 November 2016, the fund was notified by the employer that the complainant had left service because of his imprisonment. A withdrawal claim form was sent to the fund, but initially, the claim was not processed, presumably because the forms were unsigned.
According to the complainant, the fund asked the employer for a certified copy of his identity document on 20 February 2017. The employer replied that it couldn’t provide this because the complainant was in custody.
On 22 June 2018, the fund checked again with the employer to see whether the complainant was still in prison, and the employer confirmed that he was.
Between June and August 2018, the fund seems to have communicated with someone who created an email address using the complainant’s name.
The fund received the completed withdrawal claim forms via email from someone they believed to be the complainant on 30 August 2018. The fund sent instructions to the fraudster, who responded accordingly.
The claim was finalised on 7 September 2018, and the benefit was paid into an Old Mutual Money Account that was falsely presented as the claimant’s account.
The fund submitted that as part of its verification process, a telephonic validation was done with Bidvest Bank to confirm the account status. It indicated that the account was confirmed as open, active, and in the name of the complainant.
The fund said it had also taken into account an affidavit deposed by Correctional Services purporting to be the complainant.
In January 2019, Bidvest Bank alerted the fund that the withdrawal benefit payment might be part of a syndicate involved in identity theft and illegally claiming retirement benefits.
The fund notified its internal forensic department, and a criminal complaint was filed with the South African Police Service (SAPS). However, the criminal complaint was closed as undetected.
In his argument against the fund’s actions, the complainant asserted that the fund processed the claim despite knowing he was in prison and unable to access email.
He pointed out that the photo on the identity document submitted to the fund was not his, and his original identity document was with his daughter. He said it was clear the document sent to the fund was fake.
Regarding the affidavit from Correctional Services, the complainant noted it was neither stamped nor signed as required.
He also pointed out that the fund accepted a withdrawal claim form that contained errors.
The fund’s fiduciary duty
In her determination, Lukhaimane said the fund failed in its duties towards the complainant when it did not seek to confirm his imprisonment status before effecting payment.
She noted that the fund appeared to have communicated directly with an individual purporting to be the complainant between June 2018 and August 2018 even though the former employer informed the fund on 22 June 2018 that he was still in prison.
“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 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.”
She said if the fund’s system was compromised, which led to the communication between itself and the fraudster, the complainant cannot be blamed for such.
“The fund has a fiduciary duty to exercise its functions with care, due diligence, and good faith.”
Lukhaimane ordered the fund to reinstate the complainant’s fund credit, including any investment returns, and pursue legal action on the fraud committed against it without further prejudicing the complainant.
