Every so often we see a fake email purporting to be from the ATO and asking for bank account details to obtain their refund. These emails have been around for a few years now and most people are aware that providing any personal information – particularly financial details over email or the internet is a big ‘no no’. However, some scams that we do come across are not always obvious to the individual.
Take today’s example, we had a client that was presented with an amazing investment opportunity (Warning bell #1).
All they had to do was lend a large amount of money to a foreign individual and they would receive the principal plus 50% interest after just a period of 2 months. Sounds too good to be true doesn’t it. (Warning bell #2).
There was a formal loan agreement prepared that stated that the client would be able to take security over the borrower’s property – to the client it looked like it had been prepared by a professional. However, the issues we identified with the “investment” included –
(Warning bells galore here….)
1. The Borrower was only known to the client by the name in the loan agreement, no further details or address was known.
2. The Borrower was a foreign individual currently overseas with no details on when they would be in Australia.
3. There were no details of any property that the borrower might actually own and no proof that they actually owned it.
4. There were no details of their capacity to repay the loan.
5. There were no repayment terms in the agreement.
6. The money had to be deposited to an overseas bank account, even though it was intended to help purchase an Australian property.
7. The document had to be signed asap and money transferred the same day.
8. The client was also encouraged not to see their Solicitor – that it wasn’t necessary as it was just a quick investment with a simple loan agreement. (Warning bell #9).
Luckily, our would-be lender’s scam sensor was going off. They were uncomfortable, had butterflies and were “worried sick” about signing the document. They called us and we were able to walk them through the document and help them review the investment independently and without the pressure coming from the person presenting them with this investment. We recommended they speak with their solicitor and let the solicitor confirm how enforceable the agreement was.
The “investment” didn’t proceed. Whether it was definitely a scam or not, may not ever be known but the lessons we can learn from this are still valuable –
1. Trust your gut feeling. If it seems too good to be true, then it probably is.
2. High returns are there to compensate for higher risk. If the return appears to be over the top, then perhaps the risk is too.
3. If you are still considering an investment, do your own due diligence – know everything you can about the investment including the expected period of time money will be tied up, the estimated return, who are the people running the investment – what are their qualifications & experience, what security do you have if the investment goes bad?
4. Understand how the person presenting you with the investment is benefiting from the transaction – do they receive a commission or other payment?
5. Always have your solicitor involved in large transactions.
6. Ask as many questions as you need to. Then call your accountant and run it by them. Get your accountant to ask more questions.
7. If you’re hearing too many bells ringing then it may be time to walk away.
Concerned about an investment or would like a recommendation to a reputable solicitor, call our office on 07 3849 3816 or email firstname.lastname@example.org.
Karen Goad is Principal of Goad Accountants and Simply Business Bookkeeping. Karen is a Chartered Accountant and Certified Tax Adviser with over 17 years of experience advising small and medium business and helping them get the most out of their business through accurate record keeping, tax advice, KPI monitoring and profit improvement strategies. Goad Accounts also specialises in tax for property investors and self-managed super fund administration.
Disclaimer: The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website are of a general nature only and are based on Goad Accountant’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.