After the ACCC reported that over $2 billion was lost to scams in 2021, two cyber security experts have called for increased education and due diligence by organisations and individuals.
Speaking ahead of a cyber security webinar hosted by FINSIA, KordaMentha partner Brendan Read said that organisations should adopt a two-pronged approach to preventing scams, beginning with a focus on education.
“Educating employees about the types of scams that are occurring, the potential consequences of being scammed and the need to always verify sources,” he said.
“Secondly is building a network of trusted resources, either internal or external, that can assist with verification and containment of potential cyber risk.”
The ACCC found that investment scams caused the most financial loss last year ($701 million) followed by payment redirection scams ($227 million) and romance scams ($142 million).
Mr Read, who was previously a detective with Queensland Police’s high-tech crime investigation unit, noted that advanced fee or upfront payment scams were historically the most prominent.
“In 2021, we saw a significant increase in investment scams, with losses from scams offering fake investment opportunities doubling from 2020,” said Mr Read.
“I believe this is fundamentally due to a lack of due diligence and often a lack of understanding of what people are investing in, with the offer often too good to be true.”
UNSW Institute for Cyber director (enterprise) Nigel Phair stated that the true cost of scams to the economy was likely to be much higher than $2 billion.
“Cyber crime in general is costing the Australian economy $42 billion per year,” he said.
“Obviously, current measures are not working in protecting individuals or businesses. Responsibility lies with all parties of the online ecosystem and as a nation, we need to do much better.”
In its Targeting Scams report released earlier this month, the ACCC said that the Scamwatch service received over 9,600 reports about investment scams during 2021, up by 42 per cent, along with a 169 per cent rise in reported losses to $177 million.
“We have seen a marked decline in some of the older, low-end scams and an enormous increase in more sophisticated ‘white-collar’ fraud, such as cryptocurrency investment scams,” ACCC Deputy Chair Delia Rickard said at the time.
The consumer watchdog said that 221 reports were received by Scamwatch about imposter bond scams during 2021 with almost $16 million in reported losses.
Additionally, over 2,000 reports about ponzi scams and pyramid schemes were received by Scamwatch during the year with $8 million in losses, up by 368 per cent compared to 2020.
“If an investment opportunity seems too good to be true, we urge all Australians to not go anywhere near it,” Ms Rickard concluded.
In a recent episode of the ifa show podcast, Shane Bell, cyber partner at specialist advisory and restructuring firm McGrathNicol, urged financial advisers to take cyber threats seriously following a landmark ruling by the Federal Court.
In May, RI Advice was found to have breached its licence obligations with the Court ruling that it did not act efficiently and fairly when it failed to have adequate risk management systems to manage its cyber security risks.
Easy solution. Those pesky advisers are to blame because they aren’t educating the clients who won’t use them. Another compensation scheme should do the trick since financial advisers have money trees growing in their back yards…
One of the biggest causes of scam losses by Australian consumers is our regulators’ focus on persecuting honest, licensed, professional advisers, while largely ignoring dodgy unlicensed providers. This pushes consumers away from the relative safety of professional advice and into the clutches of scammers.