ASIC Deputy Chair Peter Kell explains how
investment scams work and the ways to identify and avoid them on
the ASIC View podcast.
Interviewer: Hello and welcome to ASIC view,
the official podcast of the Australian Securities and Investments
Commission. On this episode, we will be discussing Consumer Fraud
Week 2016, and how ASIC is warning investors and consumers to do
some simple checks before they invest their money.
My name is Andrew Williams, and with me this week is ASIC Deputy
Chair, Peter Kell. Peter, thanks very much for your time on the
Peter: Happy to talk to you, Andrew.
Interviewer: The theme of Consumer Fraud Week this year is 'Wise
up to scams'. How much of a problem are investment scams in
Peter: Investment scams will always be a
problem because there are always going to be scammers out there
targeting consumers, particularly from wealthier countries such as
Australia. According to the ACCC's Scamwatch report, a significant
increase over the last year, from $12 million to around $24 million
in reported losses, and many people over the age of 55 seem to have
been the target for these scams. Not surprising, really, because
there are many people in that demographic who are looking for
higher investment returns in a low interest rate environment. So
there will always be scammers out there, particularly based
overseas. We'll always need to be on guard.
Interviewer: What are the main kinds of scams
that Australians should be looking out for? What form do these
scams usually take?
Peter: They can take many forms, but we get,
typically, scams falling into about five categories:
- The first is overseas cold calling about investment
opportunities, and we've seen that take hundreds of
millions of dollars in the past.
- Another type of scam are overseas calls offering fake
credit or loans, so this is where you may not be able to
access credit or it will sound like a very good interest rate on
your loan. All you've got to do is pay a small upfront fee, and
you'll get the loan. But you never see the loan, and you'll never
see your fee again.
- We see a lot of scams around sports arbitrage, or share trading
software, or other sorts of what are effectively gambling
schemes based on buying expensive software that are
magically going to be able to pick you the winner in any
- We see money transfer schemes where people are
promising some sort of job, often online, or other opportunity
where if you pay what seems like a small upfront fee, you're going
to end up with a lot of money.
- And finally, fake debt and invoice scams which
are often targeted at small business.
Interviewer: Now, you mentioned before that
these scams are targeting Australians, people over 55 in
particular. What are the kind of things that they're offering that
they're seeking to prey on that market with?
Peter: Well, the scams can often be quite
sophisticated. It would be unwise for anyone to think that you
can't fall for a scam - they're not always silly or amateurish.
They are often accompanied by quite sophisticated websites or even
paper documentation. So they promise tax-free benefits, quick
returns, discounts for early bird investors, what seems like a
great return for the payment of a small fee, and no risk or low
risks where you can sell any time. That will often be a feature of
these sorts of offers. They will, in our experience, very commonly
be based outside of Australia, so that in itself is a warning sign
- although we have seen instances where the money is actually
diverted through an Australian address so it's not always the case
that the overseas destination will give the game away.
Interviewer: So an Australian address is not a
failsafe for avoiding these schemes, it can still be a scam even
with an Australian base?
Peter: Australians as well have operated these
scams in the past, so there have been both overseas operations and
The best way to protect yourself if you receive an offer of an
investment that sounds really good, and it comes to you out of the
blue, hang up. Don't pursue it any further. After all, if someone
was to ring you up and offer you a medical diagnosis out of the
blue and a miracle cure, would you follow that? I don't think many
people would. Well, this is the same sort of thing really, when you
think about it. They don't know anything about your financial
situation, you don't know anything about their bona fides.
If you want to make an investment, then you should think about
your objectives carefully, look at the ASIC website, our MoneySmart
website to see what tips are on that site to help you make a
sensible choice, and if you need investment advice, go to a
licensed adviser. Check that licence number - you can do it on our
website. Anyone involved in this area in Australia has to have a
licence, and you can check that through our website.
Interviewer: Are there any other questions that
you might be able to ask someone if they have called you out of the
blue, if you do want to chase it up a bit further to determine
whether they may or may not be a scam?
Peter: You should start with the basics: What
is your name? What company do you represent? Who owns your company?
How did you get my contact details? What is your address? And you
can add to that, of course, do you have a licence? The safest thing
is to just hang up in the first place. But this might also help you
if, for example, we find that some people ring us occasionally
because a relative or a friend has been contacted and they're
trying to find a way to say to their friend or relative, 'don't
send your money'. These are some of the questions that can perhaps
help someone avoid a financial tragedy.
Interviewer: Can you talk briefly about an
example or a case study of a particular scam? There was one that
fell into the category you mentioned before of sports betting scams
or sports arbitrage scams that seem to offer this magic software
that can enable people to beat the bookies.
Peter: Well, that's a fairly common type of
scam over the years. We've seen people who might get a brochure in
the mail advertising a computerised system that will generate you
extra income while having to do very little work. Generate extra
income with opportunities to turn, say $1,000 into $40,000 in
twelve months, and that's often supposed to be achievable through
software, say on sports betting, perhaps on share market
The idea is that they will send you the software - only a
limited number of these packages will be available, and that you
need to act quickly. That's one of the other warning signs. In one
case we found that the cost of the software was almost $19,000, and
then an additional $10,000 had to be provided to open a personal
account online. Interestingly, these scammers are clever
enough, they often do it in such a way that initially it looks like
you're making money. Or, they may even return you some money in the
early days to get you hooked, but once you're in, suddenly the
losses accumulate and it becomes very difficult to get in touch
The key point here is, and I'll go back to the original starting
point of this scam, a massive offer to make money coming at you out
of the blue.
Interviewer: Yes, if it sounds too good to be
true, it usually is.
Peter: If it sounds too good to be true, it
almost certainly is. We see that even in some of these scam offers
they try to play on some of the areas that people might currently
be interested in. We've seen, for example, offers about investments
in environmental companies, or high tech new technology companies.
They will sometimes have some minimal information about some of the
ways these companies might work in Australia. The scripts are often
quite clever, but they will be playing on areas of current
interest, or ways that seem like they're opportunities to make a
lot of money quickly. Unfortunately life doesn't work like
Interviewer: Yes, that's always been my
experience. Finally how else can consumers avoid being the victim
of a scam? Any tips and tricks to finish off?
Peter: A key part of this issue is that you see
some common mistakes that people make. One is that they don't
take the time to consider their own investment needs and who they
want to deal with when it comes to investments. We've found in the
past that people who focus on the investment, rather than the
actual type of firm or adviser they want to deal with, they are
more likely to run into trouble, because someone can make the
investment sound wonderful.
- Check ASIC's MoneySmart website. It's not going to take you
long and, indeed, we've got some of the names there of some of the
firms that have been behind scams in the past as well.
- Check the company is real by calling publicly listed phone
numbers or trying to contact them.
- Make sure that you're dealing with someone who's licensed.
- Get a second opinion from someone you trust. Not someone within
the company or someone they refer you to, but someone you trust. It
might be a friend with financial experience, it might be an
accountant or a financial adviser. It's partly just to give you a
bit of breathing space because often these scammers rely on the
idea that you'll get caught up in the heat of the moment or in the
emotion of the moment, and that you won't make a rational decision,
you'll make an emotional decision.
Interviewer: Absolutely. If you think you have
been scammed, please contact your financial institution
immediately. You can also report investment scams to ASIC online or
by calling 1300 300 630. Peter, thank you very much for your
time on the podcast this afternoon.
Peter: Thanks very much.
Interviewer: Listeners can visit ASIC's
MoneySmart website, as Peter said, for further information on
investment scams. Thanks very much for listening.