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As technology advances, so too do the ways and means by which scammers can extract money from people.
Superannuation, self-managed superannuation funds (SMSFs) and individuals’ investment funds are increasingly being targeted by scammers due to the sheer size of the funds available, and advancements in technology which are enabling fraudsters to steal identities and subsequently superannuation and investment funds.
A recent online fraud syndicate – led by a 21-year-old woman – in which a group of people stole identities and then used those stolen identities to access share accounts and superannuation monies, is a powerful example of the evolution of scams in this space.
The growing cost of scams
In the eight months till the end of August 2019, Australians lost $44.4 million in investment scams, compared to $38.8 million for the whole of 2018, according to the Australian Competition and Consumer Commission’s (ACCC) Scamwatch.
In the first eight months of this year there were 3,534 investment scam reports to Scamwatch. Of those reports, 43.1% resulted in financial losses. Interestingly, men lost more money than women – 74.1% compared to 24.8% – and were also more likely to be the victims of the reported scams – 64.7% compared to 32.3% (the remaining percentages were reported as Gender X).
Investment scams are also the leading scam for losing money, according to Scamwatch, compared to other scams such as dating and romance, false billing, online shopping and identity theft.
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Traditional SMSF scams
SMSFs are frequently utilised by fraudulent operators and scammers when trying to access people’s superannuation funds. A scam may promise early access to superannuation and encourage people to roll their superannuation out of a larger Australian Prudential Regulation Authority (APRA) regulated fund into an SMSF.
They may have convinced the person that they will be able to access the funds once they have set up the SMSF. Acting as a financial adviser for the fund’s rollover the scammer steals a percentage, or all, of the funds.
Being encouraged to set up an SMSF to invest in cryptocurrency or property
Scam operators have also lobbied people to move their superannuation from large APRA regulated funds into SMSFs because SMSF trustees have more flexibility in what they can invest in.
Traditionally these types of operators targeted property investments, for example through seminars or newspaper advertisements, and encouraged people to set up an SMSF to buy a property and get into the property market.
However, people who did this often didn’t understand the complexity of SMSFs and property investing and would end up breaching the sole purpose test while the spruiker skimmed a commission off the top.
These days, the ‘get rich quick’ schemes promoted by fraudsters are frequently cryptocurrency trading scams. Last year Scamwatch reported that cryptocurrency trading scams were the second most common type of investment scam pushed on victims.
Identity theft investment scams
These scams involve extracting information – through phishing, social media cites, breaking into mailboxes etc. – and stealing an identity. The identity can then be used to access bank accounts, credit card details and online shopping websites.
Identify theft was used in the recent online scam which involved a 21-year-old woman. The woman is alleged to have been involved in a campaign that used stolen identities to access millions in superannuation monies from a number of large superannuation funds.
The Australian Securities and Investments Commission (ASIC) and the Australian Federal Police (AFP) allege identity information was purchased from dark net marketplaces, and the syndicate used that information, along with single use SIM cards and fake email accounts, to undertake ‘identity takeover’.
These ‘identities’ then opened bank accounts, into which the syndicate transferred superannuation money and money from investment accounts.
How to avoid scams
The adage ‘If something sounds too good to be true, it probably is’, is worth remembering when it comes to avoiding scams.
- Don’t invest in anything from unsolicited contact – i.e. phone calls, emails or even door knocking – promising a hot investment. Scammers will often call repeatedly and are known to target the vulnerable and elderly, but you should just hang up or shut the door.
- Don’t invest in anything at an investment seminar. Always do your own due diligence and research into any kind of offer. Look up share values on the Australian Stock Exchange (ASX) and seek independent financial advice if needed (see our list of independent i.e. non-conflicted financial advisers here List of Australian independent financial advisers)
- To avoid identity theft, and the investment scams that stem from it, don’t share your passwords, don’t give away too much information on social media and don’t open emails (or especially links in emails) from unknown or unverified sources. Lock your letterbox, shred important documents and make sure your computer is secure.
- You can also check whether somebody calling themselves a financial adviser is registered as having an Australian Financial Services License on ASIC’s website. They also have a list of companies you should not deal with.
What to do if you are scammed
- If you think you might have been caught up in a scam, contact your financial institution immediately to freeze your accounts and credit cards.
- Report it to the police if money has been stolen.
- ASIC also suggests getting a copy of your credit report to check who might be running up debts in your name.
- You can also report the scam at Scamwatch here and at the Australian Cyber Security Centre here.
How and if you can recover your funds
It may be difficult to recover funds lost in a scam. There are some organisations that may be able to help you retrieve funds if they have been stolen as a result of identity theft such as iDcare and you can also apply for a Commonwealth Victim’s Certificate.
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A Victim’s Certificate might help you negotiate with your financial institution or superannuation fund to remove a fraudulent transaction.
Financial institutions and superannuation funds also have their own systems in place to protect against fraud and will often contact customers if they notice irregular transactions and may reimburse them.