SMSF owners beware: Crime Commission reveals how to spot a fraudster

Self-managed superannuation funds are at risk of losing hundreds of millions of dollars to sophisticated fraud schemes which are increasingly targeting smaller funds, the executive director of the Australian Crime Commission has warned.

The warning comes alongside increasing attention on the SMSF sector, with new reports today suggesting the federal government may tap into the industry’s wealth to scrape savings for the budget.

Speaking at the Self-Managed Superannuation Professionals Association of Australia annual conference yesterday, ACC executive director David Lacey said the industry is experiencing both large and small scale fraud – and SMSFs are being specifically targeted.

Fraudsters are usually expats, speak very good English, and are computer-savvy. So much so, Lacey says, they will create an entire ecosystem of fraud to manipulate search engines into providing positive results.

The sophistication of these types of scams is even surpassing the expertise of some government departments, Lacey says.

“It’s calculated, and sophisticated, and we are seeing experienced investors fall victim, with many individuals revictimised,” he said at the conference, where SmartCompany was in attendance.

“They target the savings of those nearing retirement – the groups we’ve been looking at have acquired over $100 million in the last few years alone.”

Lacey said the typical victim is over 50, well-educated, financially aware and with ready access to savings. They have usually invested previously, which makes the victimisation all the more strange – and a testament to how sophisticated the frauds have become.

These are not hastily created scams, Lacey says. Fraudsters, including some who have moved into financial crime from illicit drugs due to the higher profit margins, are intelligent and spend a large amount of time building a relationship with the victim.

Lacey even said some of the calls between victims and fraudsters suggest they may even see themselves as acquaintances. They will send out information packs and brochures, and set up comprehensive websites to make the scams appear real.

“They use publications delivered via courier to trick consumers into thinking investment is financially rewarding.”

One of the more fascinating techniques is the manipulation of search engines. Fraudsters will go online and create websites, comments and blog posts seemingly from other users who praise the company. They’ll build enough to fill as many as a few pages of Google results – enough for a vigilant investor to believe the product is legitimate.

“Most people don’t go to page four where they see victims, blogs and other online communications about the real aspect of those fraudulent investments.”

The scams usually involve having the investor transfer money online, after which they are given a login to check their investment. After that, they may even be asked for more money. After a while, they disappear without a trace and usually, never receive their money back.

But the fraud doesn’t stop there. Lacey said fraudsters will even impersonate corporate regulators, call up the victim and ask for a fee to investigate the loss.

Lacey says victims aren’t uneducated about investment – even sophisticated and successful SMSF owners have fallen prey. As a result, he says, businesses need to watch out for warning signs and follow these steps:

• Alert family and friends if you have been victimised
• Report suspected fraud immediately
• Hang up on cold callers
• Check any company you are discussing investment with has a valid licence
• Seek independent financial advice before making an investment

The Australian Securities and Investments Commission has been cracking down on investment fraud, one of the fastest-growing types of fraud in the world. Criminals are now targeting both large and small funds, Lacey says, making the warning all the more relevant.

The ACC said the amount of money lost may even be higher due to embarrassed victims not seeking assistance from law enforcement.

The news comes as reports from The Australian suggest the SMSF sector is ripe for government picking. A report claims the SMSF industry could be targeted for savings in the May budget, although SPAA chief executive Andrea Slattery said at the industry’s conference yesterday members should resist any move on behalf of the government to tax super accounts.

The SMSF sector is considered lucrative due to the high number of accounts with more than $1 million in assets.