Fraud in the Banking World – Do the penalties fit the crime?


A report recently released by the Australian Centre for Financial Studies criticises the penalties for corporate fraud in the banking world as being too lenient and not enough of a deterrent to reduce crime.

This report focuses mainly on superannuation and investment fraud, which the Centre says is becoming an increasing problem in Australia.

Australian superannuation funds are a major target for fraud, both from Australian criminals and those based overseas, but according to the report, the legislation that’s currently in place doesn’t offer enough protection for consumers.

Lenient penalties, little oversight and regulation and gaps in the system can be exploited by criminals and can lead to financial hardship for the victims.

What is superannuation fraud?

Superannuation fraud can cover a few different types of activities.

One of the most common types of superannuation fraud is when someone is persuaded to take money out of their superannuation early (before the age of 55) and move it into a self-managed superannuation fund.

Once the money has been transferred, the person doing the defrauding will then either take it all or a percentage.

Fraud that falls into the category of superannuation fraud can also take place when scammers assume a false identity and gain early access to a superannuation fund in someone else’s name.

They can then either steal the money directly or move part or all of it into another fund.

This is often done with unclaimed superannuation and can go undetected for long periods of time.

Superannuation fraud is a big problem in Australia, with growing numbers of older people being targeted as their superannuation funds mature.

With the number of self-managed super funds increasing, this in turn widens the pool of people who are vulnerable to exploitation through superannuation fraud.

The fact that many people don’t access their superannuation funds until after the age of retirement means that superannuation fraud has the potential to go undetected for lengthy periods of time.

This can make it more difficult to catch those who commit this type of fraud and make the idea seem more appealing to those who are looking for an easy target with little chance of detection.

What penalties have been handed-down for superannuation fraud?

Australia’s biggest ever superannuation scam, perpetrated by an organisation known as Trio Capital, defrauded investors of around $180 million.

The fraud was committed over a period of four years by Canadian born Shawn Richards, who hid the money in various offshore tax havens.

After Trio Capital collapsed in 2009, Richards was jailed for 2 ½ years, and was released at the beginning of this year.

Although investors had lost $180 million in total, Richards was only convicted for stealing $26 million.

Most of the funds have not been recovered from retirees who have been financially devastated by the fraud.

In another case last year, a securities advisor was sentenced to five years imprisonment after defrauding clients of more than $1.6m and pleading guilty to over 10 different counts of fraud.

The fraud was committed on both individual investors and self-managed super funds.

The defendant Glen Evans took clients’ money under the auspices of investing it, providing false reports and in some cases using his clients’ money as collateral for his own investments without first obtaining their permission.

In other countries, including the US, the penalties for those convicted of fraud can be much harsher and often include loss of any assets or gains made as a result of the fraud.

What are the main criticisms of the current regime?

Although overall it is believed that Australia’s regulations for containing fraud are generally well rounded and comparable to overseas regulators, there were a number of areas of weakness highlighted by the report.

The recommendations made include harsher penalties for those found guilty of superannuation fraud, improved disclosure of offshore investment structures, and a higher level of collaboration between industry professionals and regulators.

The current legislation means that many directors of superannuation funds where staff are involved in fraudulent activities don’t receive penalties beyond administrative banning.

This, it is said, provides little incentive for directors of self-managed super funds to change their behaviour or avoid fraudulent behaviour.

Pressure on the government to implement harsher laws for those found guilty of superannuation and other types of banking and financial fraud means that it is likely the issue will be tackled at some stage in the future.

However, it is important to keep in mind that not everybody accused of insurance fraud is guilty, and innocent people are often caught-up in the misdeeds of others in their organisation.

Those people may not only lose their jobs, but may face a stressful uphill battle of overcoming suspicions of fraudulent conduct.

Police in NSW can press charges if they have a reasonable suspicion that a person committed a crime.

This is a much lower requirement that the ‘probable cause’ test that is used in countries like the US.

It leads to innocent people being charged with offences who will then need to defend themselves against the charges.

If you are charged with fraud, ensure that you seek the services of criminal defence lawyers who are experienced in fraud cases and will fight to get you the best result.


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About Ugur Nedim

Ugur Nedim is an Accredited Specialist Criminal Lawyer and Principal at Sydney Criminal Lawyers, Sydney's leading firm of criminal and traffic defence lawyers.
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