Determination shows the need for draconian measures

While there is no doubt that combatting fraud and corruption within the financial services industry is a major challenge, one needs to determine how wide the net is, and where the unsavoury activities are rooted before an appropriate solution can be sought.

The majority of the fraud is most probably rooted in the fact that policyholders will try their luck with insurers when it comes to making claims on their policies. However, there are cases whereby certain insurers, as well as brokers and advisers, are guilty of defrauding policyholders.

While fraud is fraud, no matter in which direction it is appropriated, when members of the financial services industry are the guilty parties, the industry is cast in a bad light. This is because they are supposed to know better and are supposed to set the example of model behaviour to their policyholders when it comes to acting in an honest and open manner.

Shame on you

We all know the proverb: fool me once, shame on you. Fool me twice, shame on me. While we thought we saw the last of Suzette Brickhill and Protea Makelaars, and their fraudulent activities, the Office of the FAIS Ombud (Ombud) had to deal with more complaints whereby Brickhill was accused of fraudulent activities.

The complainant in the latest case against Brickhill was Frank Verbruggen. He approached Brickhill in May 2011 to take out personal short-term insurance as well as business insurance for his business, Auberge Guest Lodge. Verbruggen told the Ombud that Brickhill encouraged him to pay the premiums for the business insurance upfront for the whole year as he would qualify for a sizable discount. Verbruggen complied, and made an electronic funds transfer of R12088 to Brickhill. The effective date of the policy was said to be 1 June 2011.

At the end of June, Verbruggen received a policy schedule relating to his short-term (personal insurance) policy. He did not receive a similar schedule for his business policy. He contacted Brickhill who assured him that she would provide this schedule to him in the coming week. A week passed and Verbruggen still had not received this. He then contacted Santam who informed him that no policy was taken out under Auberge Guest Lodge.

Verbruggen approached the Ombud alleging that Brickhill misappropriated the funds.

Blind arrogance leads to guilt

Following correct procedure, the Ombud approached Brickhill with the allegations and gave her the opportunity to respond to the complaint as well as provide documents to support her response. She failed to respond to this request and further attempts to get a response were unsuccessful.

Protea Makelaars was named as the second respondent in the complaint as Brickhill was essentially acting on their behalf. When the Ombud approached owner Mathys Marais for his response he gave the same defence that he gave in previous complaints to the Ombud. He stated that he employed Brickhill on the premise that he thought she had a background in providing financial advice and that he did provide Brickhill with the necessary training to fulfil her duties in an ethical manner. He also pointed out that he monitored Brickhill’s work accordingly.

Taking the skeletons out of the closet

After engaging with Santam, the Ombud discovered that they are investigating Brickhill for a number of fraud cases. Her modus operandi was to ask for a year’s premiums upfront after which she would then provide the ‘policyholder’ with a fictitious policy number in order to convince them that they were insured.

At times, Brickhill has also been known to make use of fabricated tax invoices and policy schedules to substantiate this. This case was uncovered because Brickhill didn’t provide Verbruggen with a policy schedule, which prompted him to contact Santam. On the request of the Ombud, Verbruggen provided them with an invoice which was on a Protea Makelaars letter head which had a Santam policy number. This number proved to be false.

In addition, Santam pointed out to the Ombud that neither Brickhill nor Protea Makelaars were mandated to collect any premiums on their behalf. Brickhill and Protea Makelaars were also not empowered to provide any cover of risk and that the two parties are not mandated to bind Santam to any agreements.

There was also the issue of the owner of the bank account that ‘policyholders’ were making payments to. After correspondence with First National Bank, the Ombud confirmed that Verbruggen did in fact pay the premiums into Brickhill’s personal bank account.

Because of these findings, and the fact that Brickhill refused to BREAK respond to the complaint, the Ombud found Brickhill and Protea Makelaars guilty and ordered them to pay back the amount of R12088 to Verbruggen. Because the matter was only settled in December 2013, the guilty parties were further instructed to pay Verbruggen interest at a rate of 15,5% a year.

Setting a president

One can only assume that the cases which involve Brickhill are old cases and that she is currently not actively participating within the industry. But one has to ask what punitive measures are being handed down?

"We deal with all the Determinations that are issued and take the necessary action which may include a debarment or withdrawal of a license and we also keep a register of all the determinations which is updated regularly in terms of new cases and action taken. The determinations relating to Brickhill are receiving attention,” says FSB Head of FAIS Compliance, Manasse Malimabe.

The only way to stop fraud is to make an example of proven cases of guilt. If the FSB chooses to debar Brickhill, she should never be allowed back in the industry. All of these cases of fraud will also only serve as ample ammunition for the complainants to institute criminal proceedings against Brickhill. If this is the process followed, then the magistrate hearing the matter should have no sympathy for her and should hand down the maximum possible sentence in each and every case.

Editor’s Thoughts:
While these measures may seem draconian, they are unfortunately the only measures which will ensure that the industry is cured of fraud. The longer this continues; the more product providers lose faith in policyholders and will look at every claim very sceptically. On the other hand, policyholders will begin to lose trust in the whole industry. The biggest worry is the effect on brokers/advisers who play a vital role in the vitality of the industry. Pleasecomment below, interact with us on Twitter at@fanews_online or email me your thoughts [email protected].

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