We’ve all heard of financial scams over the internet in recent years – maybe even been victim to them – and most will be aware that attempts to defraud people out of their hard-earned cash are on the increase.

What we may not know is how sophisticated these ‘fraudsters’ are becoming and how easy it can be to get fooled.

This was highlighted to us here at Loanscope when one of our long-term customers got in touch recently to tell us about their recent experience. As we have a vested interest in all our customers’ financial well-being, we wanted to share this cautionary tale.

Unsolicited call

It started with an unsolicited call received from a person alleging to be from a well-known Australian online bank. Brian – not his real name – was surprised to hear from the bank as he no longer had an account with them, having closed a savings account with them a number of years before.

However, what they were offering was appealing – a twelve-month term deposit at an attractive rate of 5.85%. Brian had recently sold an investment property and had the proceeds of the sale in his bank account (held with another well know Australian banking institution). He recognised that this was not necessarily the best place for such a large sum of money, so a term deposit may be a useful solution. It seemed to be perfect timing..

Being an experienced investor, Brian was aware of getting everything in writing before proceeding, so asked the caller to send through the offer through on email. This was duly received and looked official – the logo and email signatures were credible, and the brochure looked identical to previous material he had received from the bank in the past.

The ‘bank’ employee called back a couple of days later to check if Brian had received and read through the information. After a brief follow up conversation, Brian agreed to deposit $110,000 into the term deposit product being offered and was told he would receive a contract on email from their compliance officer. Details of how to deposit the funds would be included, along with login details to an online portal which would allow him to view the funds once transferred.

The email from the compliance officer arrived – again looking very official and this time even including logos from ASIC (given it was an investment product). Brian was asked to provide his passport and driving licence details, as well as a recent utility bill to confirm his identity (which is standard procedure to comply with Anti Money Laundering legislation).

With four days of the initial phone call, Brian was satisfied that this was a product he wanted and deposited the funds via instruction to his regular bank. He subsequently received email confirmation from both parties, and logged in to the online portal (again, impeccably branded with the logo of the online bank) to check the funds in his new term deposit – all was in order.

Alarm bells ringing

Happy with his new account and comfortable that his money was now earning a reasonable rate of return in a term deposit, Brian headed overseas for an extended holiday. On his return he decided to check his term deposit account via the online portal to see if the first month’s interest had been applied.

The online portal wasn’t working. Neither were both the telephone numbers listed in the emails and correspondence he had received from the ‘online bank’ prior to depositing the funds. Alarm bells started ringing.

Brian contacted the online bank where he thought he had deposited his funds – being online only they have no branches – and they confirmed to his dismay that he had no term deposit with them. It was an elaborate scam.

He then went to see his own bank – who had transferred the funds to the account details Brian instructed them to – and they confirmed that the funds weren’t retrievable and his $110,000 had vanished.

To add insult to injury, the BSB account of the account where the funds were sent was a different bank to the one the scammers said they were from. The online banking facility of Brian’s regular bank didn’t show this on the transaction, which could have averted the problem if it had.

Banks not liable

Brian has subsequently contacted the police and Cyber Security authorities, who have advised him that this was a highly sophisticated fraud operation, and his funds are long gone. He is also now liaising with Cyber fraud body ID Care to ensure his personal details (passport, driving licence etc) are not compromised further.

Brian’s own bank – who’s online banking service failed to flag up the correct BSB location on the transaction – isn’t liable either. By current Australian law, they are only required to act on their customer’s instructions, and the customer is liable for any outcome if those instructions were carried out as requested.

Recent legislation in the UK is seeking to address this problem, and while it’s possible that Australia may follow the UK’s lead, for now the onus (and liability) is on the customer.

It’s a nightmare scenario for Brian, but to his credit he wanted to share this cautionary tale with others to alert them as to how sophisticated financial fraud is becoming. Based on the information he has subsequently been provided by the authorities, here are three things he recommends to avoid becoming a victim of financial fraud online.

  • Don’t respond to selling of financial services over phone. Most Australian banks won’t contact non-customers directly over phone initially, so anyone who does is likely to be suspect.
  • Online banking was used as a way of not being able to go into a branch to check the credentials of a financial institution. Be aware of this.
  • Insist on your bank confirming the BSB number of the account you are transferring funds to correlates with what you have been told.

As a footnote to this sorry situation, it’s worth mentioning that Brian isn’t a financial novice, having bought and sold multiple investment properties through his self-managed super fund, as well as running his own successful engineering business.

If someone as financial aware as Brian can be caught out in this way, it demonstrates how sophisticated and believable financial fraud schemes are becoming. Be aware…

Please note that Loanscope are mortgage brokers and do not offer independent financial advice. All financial decisions should be taken in conjunction with a qualified financial advisor.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard