Organised crime groups are increasingly involved in fraud. Financial market diversification, greater levels of economic activity and technological developments have created increasing opportunities for fraud.
Fraud can be categorised by type or by the industry in which it occurs. The main categories of fraud in Australia include superannuation fraud, serious and organised investment fraud, mass marketed fraud, revenue and taxation fraud, financial market fraud, card fraud and identity fraud.
Superannuation assets in Australia hold more than $1 trillion. As the superannuation system continues to mature, holdings are projected to increase to more than $6 trillion in 2035. Given the very large amounts of money involved, organised criminal targeting of the superannuation sector can have significant impacts on Australians, the government and the economy.
- Organised crime involvement—law enforcement activity and intelligence gathering suggests organised criminal involvement in superannuation fraud in Australia may be more significant than previously thought. Traditionally, the greatest threat to superannuation savings was believed to be from opportunistic individuals involved in the operation or administration of funds, such as employees and service providers. Now, well-resourced and sophisticated international organised fraud networks and groups are known to actively target the Australian superannuation sector, drawn by the very large pool of compulsory superannuation savings currently amassed.
- Sophisticated targeting—the collapse of Trio Capital, described as the largest superannuation fraud in Australian history, illustrates how highly sophisticated and well-funded organised crime can go about targeting the Australian superannuation sector. More than 6000 Australian investors lost a cumulative total of A$122 million in this fraud.
- Early release scams—another form of superannuation fraud is early release scams, where fraudsters offer consumers access to their funds before the legal release age. Victims’ superannuation funds are rolled into a self-managed fund and the fraudster can then either access the entire amount, or give their victims access to the funds after taking a substantial fee for themselves.
- Assuming funds members identities—fraudsters may also steal superannuation-related correspondence from mailboxes, or access personal information on the internet, to assume the superannuation fund member’s identity and gain access to their funds.
Serious and organised investment frauds
Serious and organised investment fraud—commonly known as ‘boiler-room’ fraud due to the high pressure sales tactics—usually involve cold calling potential victims.
Organised criminal groups are attracted to the high levels of superannuation and retirement savings in Australia.
Serious and organised investment fraudsters target Australian investors with promises of high investment returns, backing up their claims by directing people to fraudulent websites that appear legitimate.
This type of fraud involves the illegal and often aggressive selling of worthless or overpriced shares. It is generally highly organised, spans multiple jurisdictions and uses sophisticated technology. This type of fraud also involves non-compliance with share-listing requirements, making fraudulent statements to shareholders and using false identities.
Typically based offshore, these investment frauds use the internet to conduct their illegal operations. They are highly sophisticated and very difficult for even experienced investors to identify.
Mass marketed fraud
Mass marketed fraud refers to fraudulent scams delivered via mass communication methods, such as:
- mail and email
- internet (including social networking sites, chat-rooms and online dating services).
The contact is unsolicited or uninvited, and involves false claims to con the victims out of money.
Australia is an attractive target for overseas-based criminals involved in mass marketed fraud given the relatively affluent population, with a large number of people connected to the internet. In Australia, the two key forms of mass marketed fraud are investment fraud and advance fee fraud.
- Investment fraud—fraudsters attract victims based on promises of high financial returns and claims of low risk investment strategies. ‘Boiler-room’ frauds and 'Ponzi' pyramid investment schemes are types of investment fraud. Fraudsters use a range of techniques, including cold calling, email and professional looking websites. Investment fraud appears to be increasing, and the harm it causes is significant.
- Advance fee fraud—refers to any fraud that involves the paying fees upfront for goods, services or rewards that are never supplied. This includes dating and romance scams, lottery and sweepstake fraud and unexpected prize fraud.The reach of internet and telecommunications technology has significantly enabled advance fee fraud by making it easier and cheaper to reach victims all over the world. Almost all advance fee fraud affecting Australians originates from overseas, mainly West Africa, Europe and, to a lesser extent, North America.
Revenue and taxation fraud
Revenue and tax fraud by organised criminals is often enabled by complex business and trust structures and professional facilitators, such as tax agents, accountants and legal experts—some of whom may be complicit in the fraud.
Current information and intelligence indicates the level of traditional organised crime involvement in revenue and taxation fraud is low. Those involved in this type of fraud display varying levels of expertise and sophistication, often matched to the complexity of the fraud committed. They also increasingly rely on technology to support their activities.
Financial market fraud
Financial market fraud refers collectively to securities and share market fraud, and mortgage and loan fraud.
- Securities and share market fraud—organised crime is motivated to manipulate or exploit the securities and share market due to the potential for significant financial gain. Organised criminal involvement in this type of fraud is typically sophisticated and high level, as significant capital is often required to implement the schemes. Organised criminals also use the stock market to launder illicit funds, by investing in shares in legitimate Australian listed companies through complex webs of offshore ‘front’ companies, with criminal entities as the ultimate beneficiaries.
- Mortgage and loan fraud—organised crime groups use false documentation, stolen or fraudulent identities and trusted insiders with experience in the banking or real estate sectors to commit sophisticated and large-scale fraud against Australian victims and lending institutions. In some instances, organised crime groups have been stolen and used the identities of homeowners to acquire high value loans, with the property or other assets as security.
Card fraud is the fraudulent acquisition and/or use of debit and credit cards, or card details, for financial gain.
The following methods of card fraud have been identified in Australia:
- acquiring legitimate cards from financial institutions by using false supporting documentation (application fraud)
- stealing legitimate credit and debit cards
- card-not-present fraud
- creation of counterfeit cards
- hacking into company databases to steal customer financial data
- card skimming.
Organised crime groups are involved in sophisticated card fraud because they are motivated by the potential monetary gains. Card fraud may also be linked with other organised crimes such as money laundering and other cyber-enabled fraud types.
Identity fraud is committed when a criminal uses someone else’s personal information to commit a crime. Identity crime is a key enabler to other crimes, and can take many forms, including:
- the theft of personal identity information and related financial information
- assuming another person’s identity for fraudulent purposes
- producing false identities and financial documents to enable other crimes.