Inadequate payment processes enabling SMSF fraud to occur

“Funds undertake manual checks including requesting copies of certified bank statements from member, which is only partially effective in preventing fraud,” the submission explained.

In addition, the submission stated that when making a payment to an SMSF, the APRA-regulated fund must check against the ATO SMSF register to confirm the bank account details match.

“However, the ATO also has no way of checking that the bank account registered belongs to the trustee of the SMSF,” it stated.

“As a result, there are occasions where an APRA regulated fund has confirmed the bank account details match those on the ATO SMSF register and have rolled monies to that account. The member then subsequently finds that they have been defrauded.”

The submission also noted that during COVID-19, early release scheme super funds were instructed to pay monies to the bank account provided to the ATO without further manual checking.

“This led to monies being paid to accounts that were not in the member’s name, for example in financial abuse scenarios where the abuser had the money paid into their account,” it said.

The lack of certainty in payee details also has implications beyond superannuation, AIST noted.

The ACCC recommended that Australian banks adopt a scheme similar to the UK’s confirmation of payee scheme of the IBAN-Name Check in the Netherlands.

The intent of these systems is to provide payers greater assurance that their payments are being routed to the intended recipient and not being accidentally or deliberately misdirected.

Analysis of four billion checks in the Netherlands has indicated that the confirmation of payee service has resulted in an 81 per cent fall in reported fraud and scams.

“Adopting a similar system in Australia would reduce the incidence of scams and the amount of money Australians lose to scammers both within and outside superannuation,” it stated.