Go to top of page

AUSTRAC information assisted law enforcement to uncover a sophisticated investment fraud

Image of investment board

Cold-call investment fraud involves unsolicited contact, generally by telephone, with victims who are persuaded to invest money in shares that are either worthless or non-existent.

While ‘cold-calling’ (making unsolicited calls to potential investors) is generally accepted as a legitimate business practice in Australia, these scam operators engage in conduct that is fraudulent, misleading and deceptive to convince potential victims to purchase investments. The callers do not hold an Australian Financial Services Licence (AFSL), which is required to provide investment advice in Australia.

AUSTRAC provided financial transaction reporting and associated analysis to law enforcement agencies which was instrumental in dismantling an investment fraud group operating in Australia.

Investigations identified five Australia-based suspects who used cold-calling tactics and a website to convince potential victims to invest in high-interest managed investment funds. Authorities also identified that several of the suspects were directors of three associated Australian companies which were used in the scam. The suspects promised investors that all funds deposited would be used to buy shares. Investors were assured they would receive a 30 per cent rate of return over a six-month period.

The investigation identified that over three months investors deposited approximately AUD800,000 into the three company accounts. During the same period of time, approximately AUD700,000 was withdrawn in cash cheques, usually on the same day as the deposit or the next day. To date, authorities have not been able to substantiate whether the suspects purchased any shares on behalf of investors. Investigations found that the investment scam resulted in over 35 investors losing approximately AUD700,000.

AUSTRAC analysed financial transaction reports submitted by reporting entities and identified:

  • three suspicious matter reports (SMRs) and two suspect transaction reports (SUSTRs) indicating that:
  • the suspects were conducting significant cash withdrawals from multiple bank branches
  • the majority of funds had been transferred into the company accounts from multiple superannuation funds and individuals via internet banking, domestic transfers or real-time gross settlement (RTGS) payments (RTGS ensures that most payments between Australian banks are settled as they arise, using credit funds in the paying bank’s settlement account at the Reserve Bank.) 
  • the payments and withdrawals associated with the three companies were inconsistent with their business profiles
  • withdrawals from company accounts involved cheques being cashed at branches in amounts both above and below the cash transaction reporting threshold
  • the suspects deposited cash into their personal accounts and then immediately used the funds to pay for outgoing international funds transfer instructions (IFTIs) to third-party and self-named accounts located in New Zealand. The IFTIs were for amounts between AUD1,000 and AUD17,000
  • one suspect received fortnightly welfare payments, which was particularly suspicious given that funds were also being regularly transferred offshore
  • upon questioning by bank staff, one suspect was not forthcoming with the rationale for undertaking transactions
  • over a ten-month period approximately AUD160,000 was deposited in cash into one suspect’s personal and trust accounts in amounts between AUD10,000 and AUD40,000
  • over the same period approximately AUD460,000 was withdrawn in cash from the suspects’ three company accounts in amounts between AUD10,000 and AUD50,000.

Search warrants were executed across a number of premises, including a call centre which was allegedly used in the investment scam to target victims. Police seized approximately AUD180,000 after observing three of the five suspects visit various bank branches withdrawing funds.

All five suspects were charged with money laundering offences under section 250 of the Criminal Proceeds Confiscation Act 2002. The companies and directors were found to have carried on a financial service business without holding an AFSL in contravention of the Corporations Act 2001.

The companies and the directors were restrained from carrying on financial service business in Australia and were ordered to pay the cost of court proceedings. In addition, all three companies were wound up.

Case 4 - AUSTRAC information assisted law enforcement to uncover a sophisticated investment fraud

Case 4 - AUSTRAC information assisted law enforcement to uncover a sophisticated investment fraud

Offence

  • Money laundering

Customer

  • Individual
  • Business

Industry

  • Banking (ADIs)

Channel

  • Electronic
  • Physical

Report type

  • IFTI
  • SCTR
  • SMR
  • SUSTR

Jurisdiction

  • Domestic
  • International – New Zealand

Designated service

  • Account and deposit-taking services

Indicators

  • Financial transactions inconsistent with established individual profile
  • Same-day cash deposits and cash withdrawals at multiple bank branches
  • Third-party deposits into business accounts which do not hold an AFSL
  • Outgoing IFTI being sent to individuals rather than business for investment purposes
  • Third-party funds transferred into company accounts from multiple superannuation funds
Last modified: 30/07/2015 15:37