Investment fraud takes $113 million in five years – meet the average victim

Meet the average target of investor fraud – male, about 50 years old, and perhaps even a small business owner too, with a self-funded retirement account. They are highly educated, they are well-read, and like to manage their own finances.

About 2,600 victims – many like the type described above – have lost $113 million through investment frauds during the past five years, according to a new report compiled by a joint taskforce of the Australian Crime Commission and the Australian Institute of Criminology.

ACC taskforce head Warren Gray says this may be a conservative estimate, as victims shy away from reporting their experiences due to embarrassment. He warns entrepreneurs need to be even more aware than usual.

“As an entrepreneur, you need to be so aware. You’ve invested all your money into your business, and all your time, and it’s heartbreaking to see it lost.”

Gray says many victims won’t come forward because they don’t want to admit the reality of what’s happened to them.

“People are very shy to come forward and report these types of instances. They obviously feel very stupid about these sorts of things.”

“But that’s not something they should feel. Perhaps back in the days of Nigerian scams, sure, but these frauds are very sophisticated with the back-up of technology and the internet to make everything seem more believable.”

The report found the average amount transferred by victims was $18,174, although the range extends as far as $1.2 million. The targets can be broken down into two categories, the ACC said: trusting investors and entrepreneurial investors.

The trusting investors are more likely to be influenced by the relationship developed by the caller – most of the investment scams are introduced via cold calls.

The entrepreneurial investors are more interested in the opportunity to make money. “They understand that high returns equate with high risk, but they… are prepared to do this for such high level investment opportunities”.

Part of the problem, Gray says, is that many of these investments don’t offer outrageous returns, only slightly above average rates.

“Many investors are still catching up from poor returns during the financial crisis, and these types of investments aren’t offering outrageous returns, just a little better than average.”

With more small business owners in the public domain due to registers and so on, Gray says it’s imperative they protect themselves by performing due diligence.

“Most of these investment scams start with a cold call. So, firstly, anyone should go through the government resources that have been provided.”

“And also be aware from cold calls that are coming overseas. You’ll need to do a deeper level of due diligence in that case.”

Many investors don’t realise the scam until it’s far too late – when they ask for money back. In many cases, Gray says, due diligence hasn’t been conducted.

“They just rattle off these scripts they’ve practiced many, many times, and it all sounds legitimate.”

“But you just need to be aware: put in the due diligence beforehand. And you really have to ask yourself, when it comes to investment, what’s the hurry?”