AFCA itself a pawn in some scams

The Australian Financial Complaints Authority (AFCA) has been given new scams jurisdiction but has been told that it has itself been used as an unwitting pawn in sophisticated scams.

The Stockbrokers and Investment Advisers Association (SIAA) has cited a tactic used by scammers who have taken over a victim’s account to use AFCA complaints as a means of falsely claiming credibility.

In a submission to AFCA, the SIAA pointed to the existence of international fraud syndicates driving sophisticated scams.

“By way of example, a scam and fraud syndicate operates a scam compound in Myanmar that holds 60,000 slave labourers from countries such as the Philippines and Thailand who are required to meet scam KPIs. These slave labourers are tasered or beaten if they do not meet their scam targets,” the SIAA submission said.

“These syndicates engage in identity ‘takeovers’ of unsuspecting victims to open accounts and facilities in the victims’ names without their knowledge or consent. This fraud and scam threat to Australian consumers is continually evolving. AFCA needs to be aware of ways that scammers and fraudsters exploit AFCA’s systems and processes.

“One tactic used by scammers who have taken over a victim’s account is to make a complaint to the financial firm as evidence of ‘proof of life’ so that the financial firm is deceived into thinking that the scammer is a real customer. Our members report that scammers and fraudsters also make complaints to AFCA as part of this deception. It is all too easy for a savvy scammer to threaten them with an AFCA claim for the simplest of dissatisfaction reasons. Under the current rules our members have no protection from say a $500 compensation request where the customer threatens to go to AFCA – a step that triggers a $1,000 cost to those larger firms who are unable to avail themselves of AFCA’s five free complaints process.

“Clearly this opportunity for manipulation of AFCA’s processes by scammers and fraudsters is of concern to our member firms. We are interested to know the guardrails that AFCA will put in place to ensure that its processes are not being exploited by scammers and fraudsters in this way,” the submission said.

The SIAA has recommended that AFCA address the problem by introducing a “verification” fee which needs to be paid before a complaint can progress.

It said that if a complainant is unable to be verified then the case can be closed, but if verification is successful then the complaint can be sent back to referral to be dealt with by AFCA.

“This recommendation could introduce friction into AFCA’s systems to avoid financial firms commercially settling with fraudsters and scammers and could be used by financial firms who suspected fraud,” it said.