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An Extraordinary Scam that is Netting Millions Romano Sala Tenna, Katana Asset Management 19 February 2021 In 30 years following markets, I've seen a lot of scams. But the current one is the most dangerous yet, and people we know and care about are going to lose money unless we warn them. Two weeks ago a Melbourne-based friend emailed me. His closest friend's 68-year-old mother, who happens to be disabled from a stroke, had recently inherited $300,000. Using www.compare-investments.com.au, they checked for a rate better than the 0.4% on offer at the bank. After completing an enquiry form, they were soon emailed a "prospectus" from a global bank. This offered 4.56% for one year, 5.49% for two years right up to 9.21% per annum for 10 years. My friend asked me what I thought. The 23-page prospectus looked professional and completely consistent with genuine documents from the global bank in question. But as I later discovered, key pieces of information were doctored, including the phone number, email address and of course the bond rates. As I read the prospectus, my first impression was that the rates looked really good! Good, but not ludicrously high enough to raise my suspicions. And with the apparent backing of a big bank brand, it seemed like an option worth considering. But timing is everything in the markets. And fortunately for my friend (and unfortunately for the scammers), literally 24 hours beforehand, I had received an email from the head of fixed interest at Bell Potter Securities, warning of high yield bond scams. An exchange of emails confirmed that this was indeed a scam. If this unfortunate lady had proceeded, her application form and 100-point identification check would have provided the scammers with all the information they needed to steal her identity. Worse still, if she had transferred money, it would have been directed to a false bank account and then very quickly skimmed off-shore; never to be returned. I'm not too proud to admit that, if not for that email the day beforehand, I would not have realised this was a scam. And if a professional money manager doesn't immediately recognise an investment scam, what hope is there for the average citizen? Most Scams Are Easy to Spot... Such scams usually have one or more of the following traits:
...but not this one Several factors, alongside the impressive but "realistic" returns - especially over one- and two-year terms - actually further suggested the authenticity of this scam, including:
As an aside, when I phoned that number it went through to an after-hours voice recording. But earlier in the week I actually got through to a lady with an Australian accent, who definitely did not work for a tier-1 global bank! We are in an especially dangerous time for scams, and it is not just because of the pervasive reach of technology. The even bigger issue currently is that because cash rates are so low, many mums and dads - who have often only ever used bank deposits - are now looking elsewhere. Scammers are becoming increasingly clever and more resourceful, and it has never been quicker or easier to enact a scam than it is today. This scam was certainly deceptive, but you can bet even more sophisticated scams are close behind. We need to ensure that those most vulnerable are not defrauded. Simple steps to protect savings - yours or others I think most scams can be avoided if the would-be victim follows three simple steps:
Further Steps if You Have Time There are some additional things to look for:
As a final point, take the time to report any scams to SCAMwatch. The short time it takes to fill out the form may very well save someone else's life savings. Please Warn Anyone You Care About I have been following financial markets for 30 years, and this scam passed my radar. If a seasoned market follower can be fooled, then anyone can. Our only defence is to warn those we care about. |
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