6 tips to protect your SMSF against fraud

Christine St Anne | 27 Jul 2012

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Christine St Anne is Morningstar's online editor.

 

Not long after his wife's death, 65-year-old Steve received an unexpected call regarding an investment opportunity. The caller was professional, with a good knowledge of investment issues. He answered all of Steve's questions.

Steve received follow-up calls from "senior advisers". As a retiree, he felt his superannuation was not performing too well and decided to take up the opportunity.

He was referred to a website and set up a login account. Over the next 12 months, Steve made a number of investments and noticed his investment increasing in value. Steve's overall investment was $200,000.

The opportunity proved to be a scam. He only realised this when the website went down and he could no longer access the account or contact the offshore company by phone.

He did not report the scam. However, police eventually contacted him after finding out details of bank transfers he made to the fraudulent company.

Unfortunately, the authorities could not recover Steve's $200,000 investment.

The above example is based on an actual case identified by the Australian Crime Commission (ACC).

According to the ACC, more than 2600 Australians have been defrauded of $113 million in recent years. The average person has lost $42,348, with losses ranging from $35,000 to $4 million.

While the fraudsters are targeting any person with money to invest, the ACC says the victims are usually men over the age of 50 who have made previous investments.

Many of these victims were members of self-managed superannuation funds (SMSFs).

Retirees or people nearing retirement are also particular targets for these fraudsters, as they have relatively large amounts of money to invest.

In a post global financial crisis world, and with low returns from investments and superannuation, many people are worried about their savings lasting through their retirement. Just like Steve in the above example, this has made them even more vulnerable to fraud.

The ACC has set up a multi-agency taskforce to prevent this type of crime, as well as a joint education campaign with Australia's investment and superannuation industries.

Below are a number of key steps investors can take to protect their investments and superannuation against fraud.

1. Be wary of websites

The websites that fraudsters use are just as professional as any website developed by a bank or superannuation fund, SMSF Professionals' Association of Australia (SPAA) director Graeme Colley says.

"The ACC showed us a number of websites linked to scams and it was difficult to identify them as fraudulent," Colley says.

These websites are used to make the scammer's investment "opportunity" appear legitimate. Often they will provide an unsuspecting victim with a fake login and fake investments with growing returns.

Colley says many of these websites have been set up by so-called "boiler rooms" located in other countries.

"Investors need to be wary of overseas websites. They need to check the company they are speaking with has a valid Australian financial services licence (AFSL)," Colley says.

2. Hang up on cold calls

Many of these scammers cold call potential victims and promise to send out documents regarding the "opportunity" they are spruiking.

Colley says people can ensure these calls are legitimate by asking simple questions about the company, such as who owns the company and its address. If the caller fails to provide these details, hang up.

Colley says these spruikers will often use the name of a family member or friend as a referral source to further legitimise their "opportunity". Colley says in those cases, potential victims simply need to check their sources.

3. Do your own checks

As touched upon in the previous two steps, people are urged to do their own checks on a company before they deal with them.

Companies offering investment products must have an AFSL number. AFS-licensed companies are registered with ASIC.

If a company says it does not need an AFS, the ACC urges people to report these companies to ASIC. ASIC also has a list of companies investors should avoid on their website.

4. Seek professional advice

People are urged to speak with a qualified professional adviser before making any investments.

Colley says organisations like the one he represents have details of registered advisers. Similarly, other associations like the Financial Planning Association have a registered list of advisers.

5. Alert authorities, family and friends

The ACC also urges any potential victims to contact their family and friends, particularly those who have savings to invest.

Report any suspected crime to ASIC, local police, or by calling 1300 300 630.

The ACC says any information such as the company's name, location and contact details will assist with investigations.

6. Protect your identity

Colley says identifying fraud has become a critical issue among the larger superannuation funds, with many of these funds already putting strategies in place to prevent this activity.

"Identifying fraud is also very much a local issue, perpetuated by locally-based companies," Colley says.

The ACC says people should protect their personal information by not giving out personal, banking or credit card information. People should check their bank and credit card statements each month and destroy all documents with personal information on them.

Passwords should not be simple and should never be shared with anyone. All unsolicited emails should be deleted and computers and mobile devices should have current anti-virus software installed.

Further information can be found at https://www.moneysmart.gov.au or at www.asic.gov.au or by contacting your local police station.

This report appeared on www.morningstar.com.au 2021 Morningstar Australasia Pty Limited

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