SMSFs attractive for ‘fraudulent exploitation’, says ACC
The Australian Crime Commission (ACC) has found SMSFs have been more attractive than APRA funds to organised criminals, and may also be attractive as a vehicle for money laundering.
The ACC’s Organised Crime in Australia report for 2015 found Australia’s superannuation savings pool is an attractive target for organised crime.
There are a number of factors that contribute to this, including that many Australians are disengaged from their superannuation, increasing the risk that detection of fraud will only occur close to their retirement.
In addition, the complex nature of superannuation regulation in Australia, in which different regulatory bodies, including ASIC, APRA and the ATO, all have separate and distinct roles makes it difficult to trace wrongdoing.
The report found that, historically, SMSFs have been more attractive for “fraudulent exploitation” than APRA-regulated funds as they are not prudentially regulated.
“The fact that SMSFs hold, on average, the largest balance of superannuation assets provides an opportunity for low-volume, high-impact fraud on individual funds that may be managed by financially inexperienced individuals,” the report stated.
Defrauding aside, the report found these fund types may also be attractive to organised crime as a vehicle for money laundering, since criminals can easily mask large transfers into their funds as legitimate investment activity.
Further, the report stated that as SMSFs and APRA-regulated superannuation funds transition more to the online environment, there is potential for super funds to fall victim to high-tech crime.
“With online processing systems, superannuation funds may fall victim to phishing and key logging scams. Cloud computing and storage of the financial details of individuals in the cyberspace environment may also represent a risk,” the report stated.