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Monday 16 May 2016

16-141MR ASIC warns consumers to wise up to investment scams

During Consumer Fraud Week 2016, the Australian Securities and Investments Commission is warning consumers and investors to ‘Wise Up to Scams’ and do some simple checks before they part with their money.

"The Targeting Scams report published today shows losses reported to the Scamwatch website from investment scams doubled in 2015. ASIC is alerting the public to the ways they can protect themselves from scams that are designed to steal their money," ASIC’s Deputy Chairman Peter Kell said.

"The ScamWatch data published by the ACCC indicates that a wide variety of scams, including investment and 'get rich quick' scams, continue to hit Australians. Overseas based scammers in particular commonly target consumers in wealthier countries such as Australia. People over 55, many of whom are looking for investment returns in a low interest rate environment, are often most at risk," he said.

"ASIC received 367 reports about scams in 2015, although in our experience scams are often under reported.  The number of Australians contacted by scammers, and the amounts of money lost, are likely to be much larger than what is reported to us."

In 2015 the top five types of scams reported to ASIC were:

  • overseas cold calling about investment opportunities;
  • overseas calls offering easy credit or loans after payment of an upfront fee;
  • sports arbitrage or gambling schemes;
  • money transfer schemes (job opportunity or other fraud); and
  • fake debt and invoice scams.

"The scams reported to ASIC generally come from overseas. In many cases the pitch to consumers is so professional, slick and believable that it is hard to tell these are not genuine financial opportunities. Scammers have sophisticated sales practices that include call scripts, false paperwork, fake websites and made-up referees," Mr Kell said.

Typically, investment and financial scams will offer:

  • High, quick returns and sometimes tax-free benefits;
  • Big rewards for what seems a small upfront payment;
  • Discounts for early bird investors;
  • 'No risk' or 'low risk' investments, where 'you can sell anytime', get a refund for non-performance or have 'guaranteed' transactions;
  • Inside information or the opportunity to invest before a public float; or
  • 'Magic' software that claims to predict sporting results or promises to makes you rich through active share trading.

'Do not send your money overseas for an investment offer that has come out of the blue. It's as simple as that,” Mr Kell warned.

“If you wish to invest, take some time to consider your needs and objectives. Only put your money with a managed fund or other investment that is licensed by ASIC, and speak to a licensed adviser if you want investment advice.  ASIC's MoneySmart website has information about safe investing".

The best thing to do if you are cold called about an investment is to hang up. If you do have concerns, consumers should ask the person offering the investment these questions, to check their legitimacy:

  • What is your name and what company do you represent?
  • Who owns your company?
  • Does your company or scheme have an Australian Financial Services Licence (ASFL) or an Australian Credit Licence (ACL) and what is the licence number? Check this number on ASIC's Professional Registers.
  • What is your address?

"If they try to avoid answering these questions, it is a scam.  To avoid being a victim of a scam hang up the phone, do not respond to the email or stop dealing with the person. It's important not to let anyone pressure you into making decisions about your money or investments," Mr Kell said. 

"And if you do get caught out, don't send good money after bad. We've seen too many people hit a second time with offers to get the money back, often from the same scam operation,' said Mr Kell.

Investors can protect themselves against investment scams by:

  • Always taking time to consider investment opportunities.
  • Checking ASIC's MoneySmart website for the list of companies you should not deal with. If the company that called you is on the list - do not deal with them.
  • Checking the company's listing on the stock exchange for its current value and recent share performance as some offers to buy shares may be well below market value.
  • Checking the company is real by calling their publicly listed phone number.
  • Getting a second opinion from a licensed financial adviser.                   

If you think you’ve been scammed, contact your financial institution immediately.

You can report investment scams to ASIC online or by calling 1300 300 630.

Visit ASIC's MoneySmart website for more tips on avoiding investment scams.

If you have more general concerns about other types of scams, visit the Scamwatch website or contact the ACCC on 1300 795 995.

ASIC Media Contact:  Gervase Greene: 1300 208 215

Case studies

Here are some case studies of real scams reported to ASIC in the last 12 months. The facts are real and only the names have been changed.

Cold calling investment scam

Max received an unexpected call about 20,000 shares he held in a company in the United States. The caller told Max that he was from a regulatory body (commission) overseas and that another company (buyer), also in the US, was looking to buy his shares. Max said he did not recall ever purchasing shares in the US.  The caller reassured Max and confirmed that he held shares in the company but that it had changed its name several times which is why he did not have a record of the shareholding.

The caller advised Max that the buyer was offering to pay $160K for his shares but he needed to firstly pay a fee of $7,000 to a bank account in Hong Kong as the shares had been deregistered and payment was required in order to have them registered again. When asked why the money had to be paid to this account, the caller advised that it was to avoid paying certain taxes.

After the call, Max received a follow up email together with instructions on where to pay funds and a copy of a share certificate showing his shareholding in the US company. After initial payment, the caller contacted Max again advising that because of a lack of supporting paperwork, a withholding tax of $5,000 under US regulations needed to be paid to the same account. The caller sent Max a further email enclosing a letter that showed that $160K was being held in an escrow account and would be released on payment of the withholding tax. The letterhead had the name of the regulatory body where the caller was from.

Max told the caller that he had started to have doubts about the offer and whether it would go ahead. The caller provided Max with an Australian phone number of a person who lived in Australia and said this person would confirm that the offer was legitimate. When Max called the phone number, there was no answer and he left a message. A few minutes later, he received a call back from a person with an Australian accent who told him that he too had been approached about selling his shares in similar circumstances and confirmed that his dealings were genuine as he had made over $700K from the deal.

After speaking with this referee, Max paid the additional fee (withholding tax) as instructed. Despite payment, Max never heard back from the caller nor would they respond to his emails or calls.

Some weeks later, Max was advised that other Australians had also not received any return of funds and that he was a victim of this scam.  Max wasn't able to get his money back because the entity behind the scam was operating from overseas.

Max later checked online, finding the name of the made up regulatory body listed on ASIC's MoneySmart website list of companies (and list of fake exchanges and regulators) you should not deal with as they were known scammers.

Fake credit scam

Adam desperately needed money and made several enquiries online for a loan of $20,000.  He then received a call from Kevin, representing a loan company, who advised Adam that he qualified for a $30,000 loan.  Kevin asked Adam to return a loan application form online (in which he provided personal information as well as copies of identification documents).  Kevin also said that Adam must pay $2100 loan insurance, before the loan monies could be paid to him.  Kevin made this payment, but did not receive the money.  Kevin called Adam again, indicating there was a further payment of $1980 for taxes before the funds could be released to him.  Adam again paid this money into a bank account, even though he found it strange that the account name was not the name of the loan company.  Adam did not receive the money, and again called the loan company, with Kevin indicating that they are waiting on a private lender to forward the money.  After a few more days, Adam tried to contact Kevin again, however the phone was disconnected and there was no response to emails.  

Adam was the victim of a form of the advance fee fraud known as a fake loan scam.  Kevin and the fake loan company never had any intention of lending Adam any money, solely looking to extract money and personal information from Adam.  The money deposited by Adam was quickly transferred overseas.  Adam is now several thousands of dollars out of pocket, and in even more financial difficulty than before.  If only Adam had known that it is unusual for lenders to ask for upfront fees when applying for a loan, and that loan expenses are usually disbursed from the loan monies itself.

Providing money in advance of a loan and being asked to put money into a bank account not in the name of the finance company are signals of a possible scam.  Adam may have avoided the scam if he had asked for the name and Australian Credit Licence number of the loan company.  He could have confirmed this on ASIC's website and then made contact directly with the finance company from telephone numbers or addresses he had located independently (preventing a scammer from using details of a legitimate business as a cover for their scam).

Sports betting scam

Bob received an unexpected brochure in the mail advertising a computerised system that generates extra income with opportunities to turn a $1000 investment into $40,000 in 12 months.

Bob called the number showing on the brochure. The sales person told Bob that he would have to decide quickly as there were a limited number of 'licences' available for purchase of the software program.

The sales person explained that the company offered a number of software packages relating to sporting events including memberships for life. The software predicted results using historical trends and data. Each subscription came with a 12 month guarantee if no profits were made, as well as SMS tips. The cost of the software was an upfront fee of $ 18,900. A minimum amount of $ 10,000 was also needed to open a personal account online. The account was set up with an online bookmaker so that bets could be placed on clients' behalf.

Bob told the sales person that he could only afford $25,000. The salesperson said that in the circumstances the company would approve a special offer so he could purchase the software at a reduced price.

After payment, Bob is provided with a disk containing the software and a user manual. He also receives a personal login for 24 access to his 'trading account'. Initial profits are made in the first few months and Bob deposits more funds to maintain his trading account. Bob later discovers that his trading account has incurred increasing losses with no profits realised. Bob attempts to contact the company to obtain a refund under the 12 month guarantee however the company is not responding to his emails. He soon discovers that the company website has since closed down with the phone number disconnected.