The “Opportunities” have always existed, but a combination of the current economic climate together with the sophistication of the technology utilised has resulted in the level of fraud increasing significantly.
What are the drivers?
- The first of the baby boomers turned 65 this year, - i.e. are transitioning from the super accumulation phase to the super de-accumulation (or moving into retirement) phase +
- Value of super nest egg has fluctuated wildly over the last few years +
- People taking increased risks to recover losses and increase returns into super +
- Value of superannuation in Australia isapproximately $1.23 trillion as at 30 June 2010 (APRA statistics) +
- First time in super’s 20 year life that Self-Managed Super Funds (SMSF’s) hold the largest proportion, i.e. 1/3 of the total Australian superfund pool
How bad is it?
- In the last six months, approximately $30 millionhas disappeared as a result of fraud both nationally and internationally, $10 million of this has been lost to fraudster’s posing as financial advisors.
- Even more has been lost to unlicensed overseas “investment” organisations or better known in the industry as “Boiler Room Frauds”
- In Australia –since 2008,based on research undertaken by one of the state authorities;
- 4,500 individual transactions were tracked out of Australia –representing approximately 2,500 victims and resulted in $82 million being lost.
- The Australian Securities and Investments Commission (ASIC) estimated in a report in 2002 that the total cost to Australia was$400 million.
These organisations appear very professional: This is how it works:
- Initial approach generally by phone and then via phone/email. Individual with American or British accent says he has your name from surveys you completed and he is from a major international brokerage company.
- Professional manner, and approach,
- Directs you to the company’s website, - portrays a very professional image,
- Directs you to Government regulatory web site to add further credibility,
- Google searches undertaken appear to confirm the company’s legitimacy, i.e. identifies media releases and other information promoting the company,
- Person establishes an account with the company,
- You invest money in what the representative has you believe is a “proper”, “legal”and “appropriate manner to invest superannuation funds”.
The “Opportunities”:
- Gold options,
- Overseas shares,
- Carbon credits
- Continual demands for ongoing payments e.g. to meet taxes, fees etc.,
- After 2 to 4 months, you lose contact with company, website and all information about the company disappears.
How serious is this:
Research provided by one of the state authorities has identified the following:- There are around 1 to 2 new boiler room corporations daily,
- Each room always has 2 or more associated bank accounts,
- Each bank account has between 30-50 outgoing payments,
- Each day between 30-50 new victims of boiler room frauds are identified within Australia.
Who are the primary victims:
- Well educated elderly persons,
- Small business owners,
- Persons either on or seeking self-funded retiree status.
Conclusion:
Don’t end up becoming a statistic – When approached about an opportunity to invest or access your superannuation:ALWAYS:
- Get independent expert advice - talk to your accountant, solicitor or afinancial advisor FIRST!
Steven D Ponsonby is a Chartered Accountant CA, a Certified Fraud Examiner CFE and Insolvency Practitioner IP and is the founding Director of Forensic Accounting QLD, a specialist Forensic Accounting practice based in Queensland and can be contacted via www.faqld.com.au
