Superannuation fraud risks run high

A run on super savings opens the door for scammers

As the world scrambles to come to terms with the combined physical threat of the coronavirus crisis, the economic crisis and a wave of new government announcements, the environment is rife for potential crime and fraud.

Governments, companies and individuals are going to have to be even more vigilant about protection against scam artists fleecing them. Personal security — both physical and online — will ­become an increasing issue as the economic situation worsens. I have already received fake invoices from scammers for supposed supplies of protective anti-coronavirus equipment and masks.

The super fund industry is finding some are already getting calls from unscrupulous people pretending to represent their super fund, asking for bank account details to receive a $10,000 deposit.

The federal government’s announcements for people affected by the coronavirus crisis to access $10,000 of their super before June 30 and another $10,000 after June, while well intended, is rife with administrative complexities and potentially rich pickings for unscrupulous operators.

Even before this week it was not uncommon for fraudsters to put together details on someone, and approach their super fund to make a withdrawal.

One police officer told me once that retired businessmen with significant balances in self-managed super funds were particularly vulnerable to calls at home from people preying on them, appealing to their desire to be in control of their investments.

This week’s announcements open up the potential for fraud at several stages. First could be people, including the elderly, getting calls or approaches from now on pretending to help them access their super. The next could come when people wanting to access their super apply to the Australian Taxation Office from mid-April for approval through the MyGov website.

The ATO can expect to be flooded with urgent requests from people wanting to access their super. One assumes the ATO has the correct procedures in place to verify that all people who could be applying for approval are actually who they say they are and they meet the criteria for early release.

Under a fact sheet released this week, applicants will “self certify” that they are eligible for early release. The ATO will be under heavy pressure to make the determinations for what could be more than a million workers as fast as possible.

The pressure we have seen on Centrelink this week can be expected to be repeated with the ATO as cash-strapped workers try to get access to their super.

The third step comes as workers who have received approval from the ATO then take the ATO certification back to their super funds to pay them out.

Let’s assume this is around late May or June. Super funds already overwhelmed with people asking about the impact of the market crash on their super are going to be flooded with urgent requests for withdrawals before June 30.

As super funds are now pointing out, they have their members’ details but they don’t have their bank accounts. Each fund is going to have to find out the account into which the workers wants their $10,000 to be deposited.

The potential for administrative error at the very least, not to mention identity fraud along the way, is not small. It is hard not to think those unscrupulous people who have already found ways to access some people’s super funds are not already thinking up ways to game the system ranging from conventional fraud to hacking.

Another potential security issue is from the millions of people now working from home.

What sort of security system do they use on their home computer? Is it one supplied by their company or their own personal one?

How much access can a worker have from their home computer to the office computer systems?

If thousands of super fund staffers are working at home processing payments, how secure are their IT systems? How open are they from being hacked as the worker accesses their office internet from home?

In most cases, companies will have thought about these issues and will have secure IT systems in place, but not in all cases.

The coronavirus crisis has caught many businesses unprepared as it is unprecedented and unpredictable.

Given that June will in theory see a barrage of applications from super holders for their money, are the super funds prepared (and let’s face it, what organisation could be) for their staffers to be prepared to pay out thousands of dollars in processing done by workers at home? Some companies, particularly in the financial services sector, are already having to deal with issues such as overseas call centres being shut down or workers in countries such as India or The Philippines themselves having to work from home.

The potential for fraud — as well as the administrative issues — with the super access measures could be reduced if the government agrees to the proposal by the Association of Superannuation Funds of Australia that the ATO is the agency to pay out the super, not the individual funds.

Under this proposal, the ATO would process the certification and send the money straight to the individual’s nominated bank account. This would be far more ­secure, more protected from hacking and involve more traceable payments.

Super fund X would then get one combined bill after June 30 for the total funds paid out to their members rather than having to process each individual’s request, a process that includes getting new information on bank accounts they don’t already have.

While the government is keen to get cash out to needy workers, care needs to be taken to minimise the danger for fraud.