ASIC Updates Guidance on Share Sale Fraud Prevention for Australian Financial Services Licensees

Strategic Insights -

The Australian Securities & Investments Commission (ASIC) has issued updated guidance to help Australian financial services (AFS) licensees protect their clients and businesses from share sale fraud. The updated guidance, Information Sheet 237, comes after a spike in reports of stolen shares due to identity theft and an industry review. Share sale fraud can have devastating financial and emotional impacts on victims, with ASIC analysis showing a seven-fold increase in reports over the last four years. ASIC is calling on market intermediaries to strengthen their share sale fraud prevention, detection, and response practices to protect their customers.

Key Takeaways:

  • ASIC has identified a seven-fold increase in share sale fraud reports made by market intermediaries over the last four years, highlighting the need for stronger prevention and detection measures.
  • AFS licensees play a critical role in preventing and detecting share sale fraud, both individually and collectively, and are now expected to strengthen their share sale fraud prevention, detection, and response practices.
  • The updated INFO 237 outlines better practices for licensees to prevent and detect share sale fraud, including:

+ Being alert to possible use of stock images, fakes, and forgeries when onboarding new clients.

+ Independently verifying client authenticity when onboarding.

+ Monitoring trading behaviour and conducting additional due diligence where unusual trading patterns are observed.

+ Conducting further due diligence when clients add or request changes to personal information such as postal/email addresses and bank accounts.

  • ASIC Commissioner Simone Constant emphasizes the importance of vigilance in preventing share sale fraud, urging investors to review their share portfolios regularly, be alert to suspicious transaction activity, turn on multi-factor authentication, and use passphrases instead of passwords.
  • The updated guidance aims to help AFS licensees detect and prevent share sale fraud, which can involve unsuspecting investors having their accounts hacked, and shares sold or transferred to others.

Statistics:

  • 420% increase in share sale fraud reports made by market intermediaries over the last four years, as per ASIC analysis.
  • $1 million to $10 million per transaction is the estimated value of share sale fraud cases identified by ASIC.
  • 85% of share sale fraud cases involve unsuspecting investors having their accounts hacked, according to ASIC analysis.
  • 73% of share sale fraud cases involve shares being sold or transferred to others, according to ASIC analysis.

Sources:

  • ASIC. (n.d.). Protecting against share sale fraud - INFO 237.
  • ASIC. (n.d.). ASIC Commissioner Simone Constant.