Superannuation’s regulators stand up to protect your nest egg

Scammers, cheating bosses and poorly-performing super funds are being targeted as ASIC, APRA and the ATO sharpen their skills.

Superannuation regulators are stepping up their efforts to stop Australians from being dudded out of their life savings by scams, poor performance and dodgy employers.

As the $3.6 trillion super sector grows strongly, AI is emerging as a fresh fraud threat, and super funds have been warned to increase their vigilance to avoid becoming “the weakest link”.

Speaking at this week’s ASFA conference, a trio of regulators – the Australian Taxation Office, Australian Prudential Regulation Authority and Australian Securities and Investments Commission – said authorities were co-operating to combat criminals.

ATO deputy commissioner superannuation and employer obligations Emma Rosenzweig said fraud was a big issue and there were increasing efforts “to share intelligence across the system”. “You would have to be living under a rock to not know there are increasing data breaches in the community, and the super industry is not immune to this,” she said. “I would say if you and your fund have not found fraudulent staging accounts recently, you probably haven’t looked hard enough.”

Ms Rosenzweig said fraudulent behaviours trended up and down as criminals learned the controls of regulators and super funds.

“People who are trying to commit fraud don’t really care whether you’re one fund or another – they’re looking for our weakest link, and they will find it,” she said.

ASIC senior executive leader, superannuation and life insurance, Jane Eccleston said people expected their super funds to have “the necessary investment, resources and processes to protect their retirement savings”.

Scammers are rapidly adopting AI to help them rip off investors. Picture: iStock

“Scam prevention, cyber and operational resilience are key priorities for ASIC, she said.

Ms Eccleston said ASIC was examining AI use in financial services, and said AI was a big issue in conversations.

“It is something all of our thoughts are crystallizing around,” she said. “The people haven’t thought about it from a risk perspective – that’s the concern.”

Ms Eccleston said ASIC was working with a number of government agencies to take down investment scam websites.

“More than 2500 investment scam and phishing websites were removed between July and September 2023,” she said.

Fraud is not the only threat to nest eggs, with underperforming super funds and investment options costing Australians billions of dollars in missed wealth.

Ms Eccleston said ASIC had been examining super fund investment options that had persistently failed to meet benchmarks, and would release its findings in early 2024.

“We identified some deficiencies in the monitoring of poor performance and a lack of open and transparent communication with members about underperformance,” she said.

Superannuation performance tests in recent years have shamed several super funds, forcing some to shut down or merge.

APRA executive director, superannuation, Carmen Beverley-Smith said the tests had enhanced transparency of performance “and more particularly underperformance”.

From next year, more comprehensive data covering fees, investment returns and performance insights would be published, Ms Beverley-Smith said.

“We all should expect that the performance test continues to cover increasing sections of the industry … I can’t comment on specifically when or how that will happen,” she said.

Employers who don’t pay their workers’ compulsory super entitlements are also in the firing line. The ATO’s Ms Rosenzweig said advanced data collection from super funds and payroll systems would allow it to “follow up employer noncompliance much more proactively” from 2024.

“We will be taking further and stronger action in relation to unpaid super guarantee debt,” she said. “We are trying to implement and change the behaviour of employers.”

In 2022-23 the ATO issued more than 134,000 “nudges and reminders” to employers who had previously had issues with compliance, Ms Rosenzweig said.

This raised more than $80m in super taxes, and the ATO collected and paid almost $700m of super entitlements into members’ accounts from unpaid super, she said.

Originally published as Superannuation’s regulators stand up to protect your nest egg