New figures from the Australian Crime Commission (ACC) and Australian Institute of Criminology (AIC) suggest that investment fraud is becoming a serious and growing threat, but the good news is that the Government is promoting the role of independent financial advice as a fraud prevention measure.
More than 2,600 Australians may have lost more than $113 million to serious and organised investment fraud in the last five years. That was the assessment of Minister for Home Affairs and Minister of Justice Jason Clare, as he released the latest report from the ACC and AIC into the growing threat.
“That number could be even higher because people tend not to report this kind of crime,” he added.
So who is the typical investment fraud victim? The report’s findings suggest that your male clients who are over the age of 50 are the ones to keep a close eye on – especially if they have an SMSF.
“They are usually highly educated and have high levels of financial literacy. They are likely to manage their own super,” said Clare.
“This is what happens. The criminal syndicate cold calls the investor, refers them to a flash website and sends them a brochure promising strong investment returns. After taking their money they string them along for months or even years and then the money disappears.
“People’s entire life savings are stolen by criminals with the click of a mouse. This type of crime destroys wealth and destroys lives. It’s also very difficult to stop.
“These criminal syndicates usually operate from outside Australia. They use front companies and false names. Once they’ve stolen the money the website disappears and the trail goes dead.”
And don’t be surprised if your clients soon come calling for advice on avoiding investment fraud. Clare has announced that his department will be raising awareness of the issue by issuing a warning letter to every household in Australia – the first time Australian law enforcement agencies have undertaken a mail out of this scale regarding serious and organised crime.
Financial planners will be pleased to hear that on one of the key fraud prevention tips that the letters will contain is to always seek independent financial advice before making an investment. Other recommendations include:
· Visit http://www.moneysmart.gov.au/ or call 1300 300 630 for further information or advice.
· Alert your family and friends to this fraud, especially anyone who may have savings to invest.
· Report suspected fraud to the Australian Securities and Investments Commission, on http://www.moneysmart.gov.au/ or 1300 300 630, or your local police. Remembering information such as company name, location and contact details will assist with subsequent investigations and enquiries.
· Hang up on unsolicited telephone calls offering overseas investments.
· Check any company you are discussing investments with has a valid Australian Financial Services Licence at http://www.moneysmart.gov.au/.
The SMSF Professionals’ Association of Australia (SPAA) welcomed the report, noting that – while fraud prevention often comes down to common sense – too many investors fail to follow these steps.
“In particular, the need for investors to check a number of sources before investing to ensure the legitimacy of the investment, the need to always get independent financial advice before investing, and to ensure anyone selling an investment have a valid Australian Financial Services Licence are all simple procedures to follow to find out if an investment is on the level,” said SPAA director Graeme Colley.
“In addition, investors need to diversify where they invest and be particularly wary about any overseas investment. The old adage, if it sounds too good to be true, then it probably is, is worth remembering.”
Indices:
The All Ordinaries Index has moved up increasing +121 points (or +3.0%) since closing last Friday to 01:20 pm today.
The rest of the world as measured by the MSCI index increased +12 points (or +1.4%) in A$ from closing last Friday to end of trade Thursday.
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