As we are becoming more educated regarding identifying scams, scammers are also becoming increasingly sophisticated in their methods often going to great lengths to prove their offer is “legitimate”.

Their approach can be so sophisticated and smooth the scam can be difficult to spot, despite our increased awareness.

Common scams to be aware of

Self-Managed Superfund (SMSF) Trustees are often targets for these types of criminals. According to ASIC, one of the most common scams is along the following lines:

• Cold calling – either by email or phone. The scammers will pretend to be financial advisers and will encourage their target to transfer your superannuation to a new SMSF. They will often sound sophisticated and friendly to lure them in.
• Making attractive promises, for example high returns – scammers feed off our desire to make the most of our superannuation to enable us to retire comfortably. They often promise returns of up to 25%.
• Their company will appear to be legitimate – they will use company details, names, email addresses etc similar to legitimate companies that hold an Australian Financial Services Licence.
• Once they the target is hooked, they will use the information provided to set up a legitimate company with a separate SMSF bank account in the investor’s name.
• They then transfer the money from the existing superfund to an account controlled by them, which they have set up using the identification documents provided to set up the SMSF.

Another common scam is in the form of Investment offers. Obviously not all investment offers are scams however, be wary if:

• The person says they do not have an AFSL or do not need one
• They bombard you by email or with phone calls
• They try to pressure you into making a quick decision
• Their prospectus is not registered with ASIC

How can I check if an investment offer is legitimate?

Due to their sophistication many scams are difficult to detect. Let us look at one of the most recent and high-profile cases regarding investment scams, that of Melissa Caddick.

Over a period of 8 years Ms Caddick convinced investors to entrust her wealth management business with $30m. None of these funds were ever invested, $7m was returned to clients and $23m was used to fund her lavish lifestyle.

Despite ASIC receiving an anonymous tip in late 2019 that Ms Caddick was operating without a licence, they did not investigate immediately. It was only in June 2020 when ASIC received another, more detailed, complaint that they acted swiftly.

As many of her victims were family and close friends who trusted her without question, and who also recommended her to others, it would have been very difficult to identify this scam.

Some of the tactics she employed were:

• To support her credibility, she claimed to be a certified member of the Financial Planning Association of Australia (FPA).
• To prove to her investors that she was investing their money and getting the promised returns she created bogus CommSec share trading accounts. She would produce monthly reports and copy and paste the CommSec logo on to them.
• Knowing she needed an AFSL licence to operate legally and lacking the qualifications to obtain one, she used, without permission, the AFSL of a former work colleague.
• To explain her lavish lifestyle she weaved a web of lies from winning a sexual harassment suit to being paid millions of dollars for developing a program for managing SMSFs.
• Ironically, the more wealthy she appeared, the more successful she was believed to be and the more investors trusted her.

Can I avoid being scammed?

Obviously not all investment opportunities are an attempt to scam a victim.

If approached with an investment opportunity, or if your suspicions have been aroused regarding existing opportunities you are involved in, you can undertake the following:

1. Always get independent financial advice before investing.
2. Do your own research:

• Is your financial adviser is listed on the Financial Advisers Register on ASIC’s Moneysmart website? The Financial Planning Association also has a list of members on its website.
• As well as asking the usual questions “Who are you?” and “What company do you represent?”, ask for their AFSL licence number and if their investing prospectus is registered with ASIC. If they try to avoid answering your questions this is a red flag. However, given how sophisticated some scammers are, many have learned to answer these questions with confidence, even when lying.
• Is the AFSL licence number provided linked to their company and that they are an authorised representative of that company? These details can be verified in the registers on ASIC Connect.
• If a prospectus has been provided, has it been registered with ASIC?
• Is the company included on ASIC’s list of companies you should not deal with?

If you believe you have fallen victim to a scam or that someone is trying to scam you, notify ASIC immediately.

If you require any assistance, please contact your Hall Chadwick QLD advisor.

Hall Chadwick QLD is not a financial advisor. This article should not be taken as financial or investment advice and is general in nature. You should consider seeking independent financial and legal advice to see how the information provided relates to your unique circumstances.