Financial Fraud

Financial Fraud & Surprising Statistics

There is no doubt about it. Personal and financial fraud is on the rise. In fact, in 2020/21 11% of Australians experienced some form of fraud.[i] In 2021 losses due to investment fraud were up 119.6% compared to the same period in 2020.[ii]

Scams are becoming more sophisticated and harder to detect every day, aided by technology, which allows fraudsters to pop up, enact their scam, and disappear almost in the blink of an eye. So who are they targeting and what can you do to protect yourself?

Who They Target

There is no point scammers targeting people who have no money, so when it comes to financial fraud, most scammers target people who have a higher level of wealth. Often they aim at owners of Self-Managed Super Funds because they tend to be higher net worth, are actively looking for investment opportunities, and are in a position to move money or investments with relative ease.

In fact, research suggests if you are male, over 50, highly educated and manage your own superannuation, you are at higher risk of being the target, and potential victim, of organised investment fraud.

Types Of Financial Fraud

Scams come in all shapes and sizes, although 40% of investment scams come from mobile apps and social networking sites.

The two most common financial fraud schemes revolve around:

1. Fraudulent Investment Schemes – Beware the ‘golden opportunity’ that promises high returns at low risk. As we have said many times, Risk and return are intrinsically linked. If the returns are high, they will certainly come with risk. So remember the old adage, if it seems to good to be true, it probably is.
2. Early Access to your Superannuation – No matter what anyone says, there are only very specific circumstances under which you can access your superannuation:
   • You are incapacitated
   • You need to pay for medical treatment when seriously ill
   • You are experiencing extreme financial hardship
   • You are terminally ill

There are no exceptions. Of course, if you wish to set up your own SMSF, you can roll you super into that, but as you will see from our mini case study, that is not always as it seems.

How To Spot A Scam

Ever had a phone call from someone who said ‘You filled out our survey several weeks ago’ but you couldn’t remember doing so? This is likely a scam. Here are a few other key indicators to look for:

• Unsolicited approach, by someone who appears to know a lot about you
• Social Media posts, often using celebrity endorsements, from a company you have never heard of
• Quoted results far in excess of market norms, or claiming knowledge of a loophole that will allow you to take advantage of something not known about by the general public

Mini Case Study

Bob wants to help one of his children out with a deposit for a house. But all his money is tied up in his superannuation. If only he could get to it!

He searches the internet for options and an advertisement pops up promising early access to your superannuation. This puts Bob in touch with a ‘specialist’ who helps him set up a SMSF, telling him that as the fund trustee he will be able to get hold of his super money. Bob signs the paperwork to set up the fund and rolls over his super. But the money doesn’t turn up where it should. Bob discovers that his retirement savings were transferred to a bank account controlled by the scammer, who has now ‘disappeared’, and moved the money overseas.

Now Bob has not only lost his superannuation, but he also faces a tax bill for accessing his super prematurely.

What To Do If You Suspect A Scam

First and foremost, give them nothing. They can and will use any information you give them, so whether it is over the phone or the internet, disengage immediately and never open suspicious emails. Delete delete delete.

If you’re not sure about the company, contact a trusted financial adviser and ask if they have heard of them. If you don’t already have a financial advisor check the company out on ASIC’s list of Australian Financial Service Licence holders. But go there directly, do not click on any link provided by the people who approached you. They will have an entire ‘universe’ of websites and accounts set up to fool you.

If you suspect a scam, contact Scamwatch.gov.au. They have a list of the current scams doing the rounds, and can confirm your suspicions, or add a new name to their list.

If you are concerned about the possibility of financial fraud, contact scamwatch.gov.au immediately. If you are interested in securing your financial future with the assistance of a reputable and knowledgeable financial advisor, please give us a call on (02) 9976 3388 or contact us via the below link.

Interested in knowing more?

References:
[I] https://www.abs.gov.au/statistics/people/crime-and-justice/personal-fraud/latest-release
[ii] https://www.accc.gov.au/media-release/australians-lose-over-70-million-to-bogus-investment-opportunities