DIY super funds targeted by criminal gangs

Self-managed superannuation funds are being targeted by criminal gangs, with thieves either engaging in identity theft or convincing fund holders to illegally withdraw their funds early for a fee.

But while the Government has attempted to address the problem, the Self-Managed Superannuation Funds Professionals Association of Australia says new regulations requiring super funds to have more stringent identity checks have not been communicated well to the DIY industry.

Dan Butler from DBA Lawyers says he has heard of criminal activity being performed which is targeting DIY funds.

“I understand there are people trying to get into accounts using identity theft in several instances… luring people in on false pretences.”

There are two major types of fraud being used within the industry. The first is traditional identity theft, whereby thieves are finding enough information to access accounts and transfer money out into their own funds.

The other major type of theft involves conmen who convince DIY fund holders to allow them to withdraw funds early, for a fee. However, unbeknownst to the fund holders this activity is illegal and after the funds have been withdrawn, the Australian Taxation Office is usually close behind.

Butler warns DIY fund holders to be scrupulous in hanging on to their identity and any private information.

“The biggest one is these early release schemes. People convince DIY fund holders that after they’ve set up this fund, they can just cipher it out. But they get put in a desperate position because they’ve pulled out their money early and it’s clearly illegal.”

“People have to make sure they’re not giving away too much control to other people. If you are dealing with the internet, then watch out for organisations which have sprung up recently and may not have good credentials.

The warning comes as the Self-Managed Superannuation Funds Professionals Association of Australia is reportedly set to argue at its conference in Melbourne this week that recent regulatory changes have not been communicated to the DIY industry.

The changes dictate how much proof of identity is needed for a superannuation fund to be rolled over into a separate fund, and were proposed due to the growing criminal activity.
However, Philip La Greca from law firm Multiport says these changes were not communicated to the DIY industry.

“This communication only went to the big funds, and anyone who sets up a DIY fund wasn’t told about them. The main way people have found out about this is that the funds have said “we need more proof”. People trying to roll funds over into new funds have been hit with specific blocks, like needing to show extensive banking proof, etc.”

La Greca says if DIY funds had been told of these changes sooner, they would have been able to inform their members. However, no such changes were flagged and many transfers are being delayed.

“No one ever said to DIY funds that “hey, you have to do this now”, and that is the problem. There have indeed been problems with fraud, people stealing money through identity theft and so on, and that needs to be addressed… but no one was told of the changes.”