An article regarding the Options Rider Scam which operated in Australia with the help of the Commonwealth Bank and the St George Bank.
Very similar to the disgusting Bitcoin Scams.
I loved this part. “The liquidator was appointed in May and asked that debits be frozen, but deposits be allowed to continue.”
It appears that the liquidator was prepared to allow the victims to keep paying into the scam after his appointment.
The liquidator acts in the interests of the creditors?
I know it’s not PC to blame victims but, struth, alarm bells should have been going off with investors. Just as banks have a legal obligation to “Know Your Customer”, investors have an obligation to themselves to know what they are investing in. The fact that the bank has applied the “100 points of ID” and carried out whatever other checks are legally required in no way says that the investment is a good one.
That is a bit like saying that the investment company has a phone line provided by Telstra and Telstra is a reputable company and Telstra has met its legal obligations to identify the customer and … therefore the investment is a good one.
The first alarm bell that should have been going off is … that the account is in Australia i.e. the exact opposite of how “Carmelita” reasoned. As soon as you do business with a company outside your jurisdiction, you automatically give up whatever legal protections your jurisdiction provides and you make it a hundred times less likely that you will ever get your money back and a hundred times harder to pursue your money if the whole thing goes pear-shaped.
The fact that we know about this at all is because a bank filed a Suspicious Activity Report (SAR) and subsequently the AFP began investigating. So I guess the system is working as far as that goes.
Probably the scammers are mostly one step ahead of the investigating authorities - and it’s a game of whackamole.
Mum-and-Dad investors should generally steer clear of investing in options (derivatives generally) - as the linked article says, it’s “high risk”. I mean from time to time as a share investor you may end up owning some options as a consequence. That’s different. Going out of your way to invest in options is riskier.
The good news is that the perp (in this case) is in custody.
Not with help. Anyone with an ABN and proof of identity can set up a bank account. At the time banks are not required (would be impossible to do anyway) check the legitimacy of the business establishing an account. If it was required to do this, no new businesses would ever be created as any new business without history of operating could be effectively ruled as a illegitimate business.
The person in the article unfortunately put faith in a company because it banked in Australia. A scammers can set up a bank account, get deposits in the account and then clean it out (and leave the country like this particular scammer did)…as this cam seemed to be effective in catching its victims and also able to remain function for an extehded period, the returns possibly would have been greater than one which was an obvious scam.
Furthermore, there are other scams which they use a victims bank account to launder money…getting other scammed victims to deposit the money in a local account and then clean it out sending the money overseas using various methods. Such activities aren’t helped by the bank but indirectly by victims of the scam.
There is an old adage that never take investment advice off friends (unless they are qualified and experienced to do so), never invest in anything you don’t understand and never give money to anyone you don’t know. If these three had been followed, possibly the scam would have had limited effect.
Even if the bank does and could (by some miracle) check the legitimacy, the business can be legitimate at the time the account was opened and then be repurposed. So this would only work if the bank constantly (every 3 months?) re-checked the legitimacy … which is obviously unreasonable in so many ways.
The investor unfortunately had misapprehensions about how the Australian regulatory system for corporations works, which is just another reason not to invest outside of your jurisdiction unless you really know what you are doing. You can assume that scammers will know more about how things work in their country than you do.
If you can’t explain what the business does and how they make their money, at least in broad terms, it is probably best to look elsewhere.
When we registered Pty Ltd companies in the 1980’s, the 1990’s and 2000’s, we had to provide a copy of the Certificate of Incorporation and a copy of the Articles of Association to the CBA in order to be able to open bank accounts for them.
Perhaps things have got very slack.
No, all you need is an ABN (which is usually the ABN registration sent to the business) and proof if identity of key business personnel (usually those responsible for finances).
Certificate of Incorporation and a copy of the Articles of Association don’t prove that a business is legitimate and not a scam/sham. They, like an ABN, show the business legally exists and who is responsible for various positions within the business.
Exactly. For shelf companies the Articles of Association are mostly formulaic, would be the same as hundreds of other companies and give you very little in the way of new information.
It’s not as if the Articles of Association are going to mention that the business has been created for the purposes of a scam.
Westpac cops a well deserved smack around the ears.
Looks like tha CBA is saying #METOO.
Which bank?
Sadly the 1.3 billion was a pittance compared to the lack of prudential practice and the sloppy negligence that assisted this series of offences that occurred…and per instance the fine works out to a paltry $50 odd. Maybe that’s the standard fine we should ask for when we infringe Laws, Yes Sir I’m guilty so please only fine me $50 something for the offence so we are held as accountable as Westpac were…wonder how well that would go down.
Each year Westpac’s profits are several Billions of dollars (each year yep each year) plus the dividends they pay out each year must account for several billion more…I feel no sadness that dividends might need to be cut but the fine should have been a substantially higher one.
Where was AUSTRAC is more the question. AUSTRAC is the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime.
As always sitting on their duffs waiting for someone else to push the panic button. NAB, CBA, Westpac, and ANZ all found lacking over a few years but little to no action until it became public knowledge…Embarrassment led to outcomes the RC led to some outcomes, media reporting and whistleblowers are most of the reasons. Expecting those tasked with the job to really do it? Not while they are pals.
Where was AUSTRAC? Doing their job is the answer. They collect and analyse info sent to them by entities required to report.
The failure here was a few entities not reporting transactions as they are by law required to do. Comm bank was failure to report cash transactions over $10,000 via ATMs, and Westpac with international money transfers using a special corporate transfer facility that someone forgot to put the AUSTRAC reporting into.
AUSTRAC had warned them but the Banks did not really comply, it was a mates game.
2017:
and further reporting
“Even when suspected money laundering was brought to the bank’s attention, Austrac alleges CBA did not monitor customers at risk of money laundering. Some customers were allowed to make suspicious transactions after the bank had given 30 days’ notice that it intended to terminate their accounts, it alleges”
So how long did AUSTRAC wait before really taking action…my guess way to long. Were they, ASIC, and APRA funded enough to be more active, probably not but was even a sufficient follow up undertaken to ensure the Banks had complied…that is most probably not the case. Banks are big adults and they should be able to carry out the tasks requested but it still requires follow up and this is what appears to have failed. Profit is a mighty incentive to break the Laws.
And $1.3 billion is a good incentive not to break the laws.
Depends on how much they made or cost us all from allowing the offences. A one time fine for possibly years of inaction would be a happy circumstance if it only equates to $50 odd dollars per offence against what they got in fees and charges for larger sums and the actual harm caused to people eg those children who were abused or those affected by Terrorism and those affected by Criminal activity. If they assisted Child Molestation by inaction or action they should be on a register of Child Sex offences and on lists for material support of terrorism for the support their actions or inactions gave to Terrorism. Sadly as a company they can’t go to jail for these and the assistance their procedures or lack thereof gave to criminal networks.
that someone “forgot” to put the AUSTRAC reporting into
Fixed that for you. 
“Where was AUSTRAC?” is a valid question in respect of FinCEN i.e. banks doing the “right” thing and reporting any suspicions - but reports going into a blackhole of government inaction.
It’s not a valid question of AUSTRAC in respect of the CBA and Westpac incidents where no reports were being made and AUSTRAC can’t be expected to be psychic (as you wrote).
It would still be a valid question of government as a whole. For crimes that happen in the real world, governments have other means of detecting crimes and are not exclusively reliant on reports from banks about movements of money.
You can easily calculate that the average transaction was under $500. We don’t have a full distribution of number of transactions for size of transaction but perhaps the investigating authorities do now.
Whether they make more in fees and charges for larger sums is an open question. It can be that they make more on lots of little transactions - but you would have to look at the Terms and Conditions for that product.
Here’s a little trick that I learned many years ago: If someone mentions “child sex” in an article or post that is not actually overall about “child sex” then reader alert level should immediately go to amber.
99.999% of the unsurveilled transactions were not “child sex” transactions, so to characterise this as about “child sex” looks like “doing a Conroy”.
The harm done to even one child is not and should not be a bearable cost. My point above was it was not only the monetary cost and I quote “and the actual harm caused to people eg those children who were abused”, I also made the point about terrorism support. There is also the support it gave to criminals (whether organised or not). If the headlines create an action that makes a Business or Govt behave in a more moral fashion, that at least holds enough portion of the truth to not be liable then I think it has achieved some positive benefit. If you think my post was purely about Child Exploitation or to garner more “impact” then perhaps I had not phrased it well enough to make myself clearly understood (this happens often enough) and so I apologise for not being that clear. Hopefully my edit has made it clearer to readers.
As for AUSTRAC they failed to take strong remedial action until much later into the process, they did get reports that while they might have been late allowed them to see that CBA at least, was allowing traffic of money that was highly suspect. They warned the Bank then what…some period after they take Court action, where was the oversight to ensure the Bank adhered to the warning before that Court proceeding, where was the audit? I don’t excuse the Bank/s whatsoever and as I said they are “big adults” but that still meant that AUSTRAC, ASIC and APRA at least did not carry out their due diligence to ensure that the Financial Institutions really altered their behaviours or adhered to the rules. It was a dual or multi player failure to be responsible organisations by them all.
It was revealed in the RC (the one we were told wasn’t needed) that much of this oversight and response to oversight was a mates club…
The 2017 Court Action came after
“Austrac alleges CBA was too slow to report 53,506 transactions of more than $10,000, the threshold at which banks must report cash transactions to authorities within 10 business days, and did not carry out an anti-money-laundering risk assessment before rolling out the ATMs in 2012”
The money was already gone by 10 business days and a report could have been 14 days “real days” old even by that allowed limit and they don’t say how late late may have been for most eg a few days late, and they knew this problem existed with the ATMs since 2012 ie 5 years before Court action. I say a fail by AUSTRAC to properly control their patch.
10 business days is such a long time in Internet time, Funds transfers and so on. Even if they had reported the transactions on the last possible legal day what use is that beyond a meander down “what coulda been” street.
