Since making greenwashing in the financial services sector an enforcement priority, the Australian Securities and Investments Commission (ASIC) has been busy.

Over a 15-month period up to 30 June this year, the corporate regulator intervened in 47 cases where companies were claiming environmental, social and governance (ESG) credentials to bring in business, while secretly investing in prohibited areas such as fossil fuels.Ìý

It seems the ESG exclusionary screens that finance companies use to block non-compliant investments are riddled with holes.Ìý

Depending on the extent of the conduct, ASIC has either compelled the companies to correct their marketing misinformation, issued infringement notices that came with fines or, in rare cases, taken the companies to court.

Second big court win for the regulator 

In August this year, ASIC won the first greenwashing case it took to Federal Court against Mercer Superannuation. The court fined the company $11.3 million for including alcohol, gambling and fossil fuels in its ‘Sustainable Plus’ investment options, which it marketed to members who were “deeply committed to sustainability”.

The investments weren’t supposed to include any of these things, but it would have been difficult for investors to know they were there.Ìý

The most recent Federal Court win, against Vanguard Investments, has resulted in a record $12.9 million penalty, a reflection of ASIC’s assessment of greenwashing as “a serious threat to the integrity of the Australian financial system”.

In the case of the Vanguard Ethically Conscious Global Aggregate Bond Index Fund, around 74% of the securities by market value were not researched or screened at all, meaning Vanguard was calling them ethically conscious without bothering to check.

‘Essential that companies don’t misrepresent’ 

The Justice offered a view of why the company gave the fund the ESG tick of approval anyway, saying, “The misrepresentations enhanced Vanguard’s ability to attract investors to the fund and enhanced Vanguard’s reputation as a provider of investment funds with ESG characteristics.”

“Vanguard admitted it misled investors that these funds would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case,” says ASIC deputy chair Sarah Court.

The misrepresentations by Vanguard came in the form of product disclosure statements, a media release, statements on its website, a media interview, and a corporate fund manager event.

“It is essential that companies do not misrepresent that their products or investment strategies are environmentally friendly, sustainable, or ethical” says Court.

In August, ÌÇÐÄVlog covered an event in which Nobel-winning economist Joseph Stiglitz argued that Australia needs stronger laws around greenwashing. Consumers have the power to shop or invest ethically and help mitigate the climate crisis, Stiglitz said, but it will only work if the claims companies make can be trusted.

The post ASIC lands its biggest greenwashing fine yet appeared first on ÌÇÐÄVlog.

The scammers had the patience of seasoned criminals, luring their victim step by step.Ìý

The documents they used, the protocols they followed – it all convinced Jake that he was dealing with the real Securitisation Advisory Services (SAS), a subsidiary of Commonwealth Bank.Ìý

That illusion abruptly evaporated about seven months later when he attempted to log on to the fake SAS customer portal to check on the $100,000 he’d invested.Ìý

The site was no longer there. The scammer’s phone number was disconnected. His money was gone.Ìý

Commonwealth Bank had posted a warning about the scam on 17 February 2023, but Jake didn’t see it at the time. He fell for the ruse in late April.Ìý

Jake, a 47-year-old project manager with an executive role in the Victorian Government, doesn’t understand why CBA had not found a way to stop the scam in the intervening months.Ìý

“It was two months later and this organisation was still out there masquerading as Commonwealth Bank, taking people’s money. I never thought that a criminal organisation could pose as a clone of a household name like CBA, and they wouldn’t be swift to take action to bring it down.”

Fake Google ad sets the stage 

Like so many investment scams, it started with a sponsored fake ad on Google. Jake was looking for a better rate of return on his savings, one without too much risk.Ìý 

After filling in the contact form on the fake SAS site, he got a call from a woman with a British accent who Jake describes as “very personable and financially literate”.

Several phone calls and emails later, he agreed to invest in what he thought were investment bonds for Infrabuild, a Victoria-based steel manufacturer.Ìý

He was familiar with the business, which had large facilities in Melbourne.Ìý

At 12% fixed interest it seemed like a better idea than a savings account.Ìý 

To open his SAS account, Jake had to send a photo of himself holding his passport along with proof of address, and fill out detailed application forms. There was no sense of urgency from the scammers.Ìý

In late April 2023, Jake sent the money from his Bankwest account in four $20,000 transactions and one for $19,999.Ìý

But he first crossed over into the scammers’ hands with a $1 test transfer at their request.Ìý

The continuing attention to detail strengthened Jake’s belief he was dealing with the real Commonwealth Bank Securitisation Advisory Services.Ìý

When the scammers sent through his login for the fake SAS customer portal, that too looked legitimate.Ìý

“When I logged in, I could see my investment details like a normal banking or account management platform. I accessed the portal about once a month to check my portfolio, and everything looked normal.”

Loss sets victim back five years 

When the customer portal was suddenly not there one day in late November 2023, Jack said to himself, “this is looking really bad”.Ìý

“It’s about three years worth of savings, so it’s probably set me back about five years in terms of heading towards retirement. It’s depressing, obviously, to think that you went to work for a number of years and essentially just gave away the equivalent of all that.”

He reported the scam to Bankwest, and the employee he spoke to was sympathetic.Ìý

“She was very aware of the mental health implications of someone losing a large amount of money,” Jake says.Ìý

But any hope was short-lived.

In early February 2024, Bankwest emailed Jake “we have done our best to recover the funds, but unfortunately, we have not been able to do so”.Ìý

‘Vigilance the first line of defence’ 

Bankwest says their process involves contacting the bank the money was sent to and asking if there’s any money left in the scammer’s account.Ìý

If not, “recovery is not possible,” the spokesperson tells us.Ìý

Bankwest showed us the scam warnings it now displays online before customers raise the limit on transfer amounts.Ìý

This measure wasn’t in place when Jake was scammed in April 2023, but Bankwest says customers were still sent warnings to confirm account details before they sent money.Ìý

Vigilance on the part of customers is the first line of defence, the spokesperson tells us.Ìý

Commonwealth Bank says the fake SAS website lacked official CBA branding, which limited the bank’s ability to have the site removed.Ìý

“CBA and Bankwest cybercrime teams take down sites that impersonate or use company branding in an unauthorised manner,” the spokesperson says. (Bankwest happens to be owned by CBA.) 

CBA says it has also taken recent steps to protect customers from scams, including ‘CallerCheck’, which lets customers verify through their CBA app whether a call claiming to be from CBA is legitimate.Ìý

But the scammers still keep coming.Ìý

“We encourage customers to remain vigilant and reject suspicious calls, emails or texts,” CBA says.

Account name matching may have stopped the scam

Before sending any money, Jake checked that Securitisation Advisory Services had a legitimate Australian Business Number and financial services licence. He now knows that was not enough.Ìý

“I thought I was diligent and careful,” he says.Ìý

He also assumed Bankwest would flag $100,000 worth of transactions over a few days if they were going to a questionable account.Ìý

But Bankwest apparently didn’t undertake a confirmation-of-payee check, which involves matching the account and BSB number to the name on the recipient account to make sure the money’s not going to a criminal.Ìý

This is not currently a legal requirement for banks in Australia, though the industry recently committed to introducing a confirmation-of-payee system sometime in the next two years. In the UK and other countries, account name matching has proven an effective anti-scam measure.Ìý

But any forthcoming scam prevention steps in Australia will be too late for Jake.Ìý

“I have come to realise I do not have enough knowledge about the checks required or understand how deep these scammers and cybercrimes can penetrate.” 

(Editor’s note: ‘Jake’ is a pseudonym.) 

The post Scam victim loses $100K to Commonwealth Bank fake website: ‘It all looked so real’ appeared first on ÌÇÐÄVlog.

Four months after it became clear they had been scammed, Kim Sawyer and his wife are still trying to find out the names on the accounts they sent about $2.5 million to.Ìý

Each large deposit was ultimately transferred somewhere else by the scammers or their accomplices – probably overseas – and now looks to be gone for good.Ìý

The banks that held the accounts have declined to provide the information, citing privacy restrictions.Ìý

The Sawyers currently have no idea who they sent their money to. They made the transfers using account and BSB numbers only.Ìý 

How the scam worked

This multimillion dollar swindle started with a scam ad on Google for investment opportunities with ‘St George Capital’, a legitimate arm of the bank bearing the familiar dragon logo of St.George Bank. (Once the scam was discovered, the St George Capital domain was taken down and the name changed to St. George Private.) 

Kim and his wife clicked on the Google ad, left a contact number, and received a phone call from a man with a British accent.Ìý

He cultivated a relationship with the couple over a series of calls between July and September 2023, during which time the Sawyers made 26 transfers into accounts controlled by the scammers, many of them in the amount of $100,000.Ìý 

The con artist was engaging and friendly and used the name of a real St.George Bank employee.Ìý

“He always said, you know, have a good weekend or have a good night,” Kim says. “He mentioned that his wife was pregnant. We believed that we were dealing with St.George Bank.”

Not a get-rich-quick offer 

The scammers directed the Sawyers to transfer money to accounts at Westpac, ANZ, Commonwealth Bank, and Bendigo Bank. They thought it was going into term deposits under their name.Ìý

It’s possible that the scammers used “mule accounts” to transfer the money, a technique that involves using the legitimate bank account of someone not directly connected to the scam, known as a money mule, and paying them a percentage of the proceeds.Ìý

The investment opportunities didn’t seem far-fetched.Ìý

The promise was preservation of capital, protection from the ups and down of the share markets and a guaranteed return of up to 6.5%.

Later, the Sawyers were persuaded to send money to invest in so-called Commonwealth Bank corporate bonds paying a 9% rate of return. The bonds they received by email, for which they paid over $1 million, were fake.Ìý

It was all meant to be a safer way to invest money from their pension fund, with the smooth talking scammer leading them along with phone calls and other players with fake St.George Bank email addresses (such as info@stgeorge-capital.com or clients@stgeorge-capital.com) sending through confirmations of the money transfers.Ìý

Everything looked legitimate as far as the Sawyers were concerned.Ìý

In retrospect, there were signs that something might not be right. For instance, emails to one of the generic St.George addresses bounced back on several occasions, and login details for the “online client portal” sent by the scammer – where the Sawyers could supposedly track their investments – continued to fail.Ìý

The friendly tone of the back-and-forth emails between the Sawyers and the scammers as the huge money transfers were arranged is chilling and the realisation that they were communicating with criminals has left the couple deeply traumatised.

Response from the banks ‘just terrible’

As shocking as the scam was, the response by the banks only made matters worse, Kim says.Ìý

The Sawyers authorised money to be sent to the scammers’ accounts from three banks – AMP, Citibank, and Macquarie Bank.Ìý

Three months after they started sending money, they were contacted by Macquarie Bank and informed that their money was in the hands of a scammer. Macquarie was the only bank to contact the Sawyers, far too late to prevent their losses. The bank has refused to reimburse any of the funds, which total $850,000.

In an attempt to track down their stolen money, the Sawyers requested the names of the accounts controlled by the scammers at the receiving banks – Westpac, ANZ, Commonwealth Bank, and Bendigo Bank.Ìý

Bendigo Bank’s unhelpful response was typical: “All funds have been withdrawn. We are unable to return the funds and close our file.” 

“The scam was bad enough, but the response from the banks has just been terrible,” Kim says. “They wanted to write off the victims as quickly as possible. We don’t count and we have all the liability, which I think is very cruel.”

Account name matching sorely absent

At the time, there was no “confirmation of payee” system in place with any of the three banks involved in transferring money to the scammers, though the banking industry has since committed to establishing one over the next couple of years.Ìý

Such a system matches account and BSB numbers with account names to make sure a bank customer’s money is going where they think it’s going.Ìý

An initial check that the five account and BSB numbers provided by the scammers were for accounts with the Sawyers’ name on them would likely have stopped the scam in its tracks, but no such checks took place.Ìý

A Macquarie Bank spokesperson told us “we’re not able to comment on individual customer matters for confidentiality reasons” but confirmed that the bank doesn’t match account names and numbers, though it does alert customers about the danger of scams when money is sent to a new recipient.Ìý

AMP and Citibank didn’t respond to our inquiries regarding confirmation of payee checks.Ìý

Better scam protections overseas

Despite his requests, none of the banks involved have agreed to reimburse their share of the millions lost.Ìý

For Sawyer, it’s yet more evidence of the banks’ “blame the victim” mentality.Ìý

In recent years, support for scam victims has greatly improved in other jurisdictions, particularly the UK. On the back of recent banking reforms there, the five banks that reimbursed the most to scam victims reimbursed from 63% up to 91% of total losses.Ìý

A report by the Australian Securities and Investments Commission (ASIC) released in April last year found scam reimbursement rates by Australian banks were pitifully low by comparison, with 96% of scam losses borne by scam victims and banks reimbursing an average of just 2–5% of their customers.Ìý

Notably absent from the Australian banking industry’s recent commitment to establishing a confirmation of payee system is any commitment to reimburse scam victims.Ìý

Sawyer hopes going public with his case will help push lawmakers and regulators to enact reforms to better protect bank customers from scams, reforms that would put the liability on banks rather than victims.

What the banks say

St.George Bank

A St.George Bank spokesperson tells ÌÇÐÄVlog the bank took appropriate steps when it learned a scammer was posing as an employee.Ìý

“We posted warnings on our website and on social media, including images of the scam materials, and had the domain name [St. George Capital] removed.”

The bank says it works “proactively” with other financial institutions to stop scams through the Australian Financial Crime Exchange, the Australian Banking Association’s Scam-Safe Accord, as well as working with other authorities and regulators.Ìý  

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An ANZ spokesperson told us “the ways in which cyber-criminals are scamming and defrauding customers is constantly evolving” but the bank “is focused on keeping customers safe”.Ìý

ANZ says it’s using AI and machine learning to identify potential mule accounts and has detected nearly 1400 high-risk accounts since April 2023.

Bendigo Bank

A Bendigo Bank spokesperson suggested that mule accounts were probably used in the scam, saying “some money mules know they are assisting with criminal activity; others are unaware that their actions are helping to move the proceeds of crime”.

Bendigo says it has recently doubled the size of its fraud prevention and response team and stopped $38.6 million in fraudulent transactions, around $105,000 per day, in the last financial year.Ìý

Commonwealth Bank

Commonwealth Bank told us that when accounts are suspected of being involved in mule activity the bank will take steps to protect any money remaining and return it to the sending bank, though this hasn’t happened in the Sawyer’s case.Ìý

“Due to privacy reasons, CBA cannot disclose a customer’s account information to another customer or third parties. CBA is however permitted to share information with relevant authorities to assist with their investigations,” the spokesperson says.Ìý

CBA spent $750 million to combat scams in financial year 2022–23 and prevented the loss of, or recovered more than $200 million for customers, according to the bank.Ìý

Westpac

Westpac opted not to answer our questions about how the scammers moved money through the bank and why it didn’t trigger alarms.

‘They won’t accept liability for their failure’

One thing keeps coming back to Kim Sawyer. Both the scammers and the banks knew something that the Sawyers didn’t: bank transfers could be made with just an account and BSB number.Ìý

Only the banks were in a position to know the name of the accounts the money was being transferred to, and whether the transfers looked legitimate.Ìý

“The point is that the banks had that information, and if they would have only shared it with us, we would have known it was a scam,” Sawyer says. “They won’t accept the liability for their failure to protect us from that loophole.”

Kim Sawyer has lodged a complaint with the Australian Financial Complaints Authority (AFCA), but with no laws in place requiring banks to prevent scams and reimburse customers, he’s not sure the outcome will be of much help.Ìý

AFCA took on 8987 complaints related to scams in 2023, up 95% from 2022.Ìý

The post The $2.5 million scam that fooled both victims and banks appeared first on ÌÇÐÄVlog.

With hundreds of investment-related platforms available to Australian consumers these days, access to the share markets has never been easier.Ìý

Many of these platforms, in fact, urge their users to trade and trade often.ÌýBut easy access shouldn’t be confused with easy money.Ìý

Judging by research released by the Australian Securities and Investments Commission (ASIC) in August last year, Australian retail investors have a healthy appetite for risk.Ìý

(Retail investors are non-professionals – everyday Australians who, in many cases, try investing in hopes of having an additional source of income or, in other cases, landing a lucky windfall.)  

As a case in point, a survey that informed the ASIC research revealed that cryptocurrencies are the second most popular form of investing after Australian shares, and only one in five cryptocurrency investors considered the investment risky.Ìý 

The ASIC research also found that those who were new to investing were more likely to trade in cryptocurrencies than older and more experienced investors.Ìý

And over half of the new investors ASIC heard from were between 18 and 34 years old, a cohort whose risk tolerance appears to be on the high side.Ìý

Aside from their notorious volatility – a key dynamic of risk – cryptocurrency investments can often turn out to be cryptocurrency scams, which can disproportionately affect inexperienced investors hot on the trail of a big payday.Ìý

ASIC Chair Joe Longo said in August 2022 that half the people the regulator surveyed reported that they started investing because they didn’t want to miss out.Ìý

“This, coupled with more complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks,” Longo said.

Gambling on contracts for difference

But there’s another type of investment strategy that is perhaps even riskier than cryptocurrencies – contracts for difference, or CFDs.Ìý

A CFD is a contract you make with a CFD provider (such as a broker) through which you speculate on the short-term price movement of an asset. This could be a foreign exchange rate, a crypto asset, an individual share, or a market index (a collection of shares, like the S&P 500, that represents a particular segment of the financial markets). You are betting on the asset going either up or down.Ìý

Aside from the unpredictability of price movements, the dangerous thing about CFDs is that you only pay a small deposit (or ‘margin’) on the full value of your position upfront, a technique known as leveraging. You could pay as little as three percent, for instance, of the full amount of money at play.Ìý

This is possible because you never actually own the asset you are buying or selling; you’re only speculating on its price movement.Ìý

But while you only pay a small deposit upfront, your profit or loss will be based on the full value of your position.Ìý

If the price moves in your favour, the CFD provider pays up. But if the price moves against your CFD position, you’ll have to pay the difference in price to the CFD provider. This could be many times the amount of money you originally put in, because of leveraging.Ìý

You are also on the hook for any fees, charges and interest the provider may charge you. It’s a risky investment strategy and losses can be high.

There are other concerns as well, including whether you can trust the CFD provider (or ‘counterparty’) to hold up their end of the bargain.Ìý

But the risks haven’t stopped people from scooping them up.Ìý

According to the ASIC research, CFDs were the most frequently purchased investment product since March 2020, and 42% of the investors that were surveyed said they had either sold a CFD for less than they bought it or, in some cases, lost all their money.Ìý

Recent investors were significantly more likely to trade in CFDs than experienced ones.Ìý

ASIC imposes new CFD rules 

In October 2020, ASIC issued a product intervention order on CFDs for retail investors that placed limits on the ratio amount of money that could be leveraged) and put in place negative balance protections. The order also targeted “features and sales practices that amplify retail clients’ CFD losses”.

The intervention came after an ASIC investigation determined that retail clients of 13 CFD issuers lost a collective $774 million over a five-week period in early 2020

It wasn’t the first time the regulator had sounded the alarm. Reviews of the CFD market in 2017, 2019 and 2020 found that most retail clients lose money.Ìý

The intervention order took effect on 29 March 2021 and was expected to be in place for 18 months. In April 2022, ASIC extended it for another five years.

The order had the intended effect, reducing aggregate losses by retail CFD investors by 91% (from $372 million to $33 million per quarter on average) according to the regulator.Ìý

But it wasn’t of much help to people who suffered CFD losses before the March 2021 intervention.Ìý

Class action follows $800 million in CFD losses

In May 2023 the law firm Piper Alderman and litigation funder Omni Bridgeway announced a class action against UK-based IG Markets in a bid to enable Australians who traded in CFDs within the past six years to recoup some of their losses. IG Markets calls itself “Australia’s No. 1 CFD Provider”.

Up to 20,000 retail investors in Australia potentially lost a collective $800 million or thereabouts because IG Markets “marketed and facilitated the trading of complex CFDs to inexperienced investors” without adequately assessing their financial situations and objectives or disclosing the risks, according to the law firm.

Piper Alderman partner Kate Sambrook says “there is evidence that highly-leveraged CFDs should never have been marketed to everyday Australian investors who had little or no experience in trading such complex products”, adding that “the class action seeks to provide a remedy and recover these losses for retail investors who should never have been exposed to trading in such complex, high-risk products.” 

The lawsuit comes on the heels of other grievances. SInce 2018, there have been over 200 complaints to the Australian Financial Complaints Authority about IG Markets.

‘It’s easy to take a big hit’

One former retail CFD investor who spoke with ÌÇÐÄVlog says he’s no longer comfortable investing in a product that involves such high leverage .Ìý

“The thing with CFDs is that you’ve got leverage, so you can invest a small amount of money and have a rather big position in the market,” Markus (not his real name) tells us. “So it’s very easy to take a big hit.” 

After about a year of investing in CFDs, Markus had lost roughly half his money. He says he made some of this back, but was blindsided by another issue.Ìý

“I found out that they charge you interest if you’re on a margin. And that can vary a lot. Sometimes it’s a huge amount of interest, and it’s not easy to find this out. When I was expecting a win, it turned out to be a loss. Calculated as yearly interest, I found out they had charged me about 200%.” 

Markus says the interest rate disclosure was probably buried in the fine print.

‘Aggressively and effectively marketed’

Dr Elvis Jarnecic, a senior lecturer and investment expert at Sydney University, says contracts for difference can be particularly tempting for newcomers.Ìý

“These products are aggressively and effectively marketed and require minimal capital investment, hence they do attract mainly retail and relatively inexperienced investors,” Jarnecic says.Ìý

“From a behavioural perspective, very simply, they are attractive as they provide higher return opportunities, but also at greater risk.”

While stopping short of calling for a ban on CFDs, as in the US, Jarnecic says there is a case for continuing regulatory oversight.Ìý

“There are many non-financial products in the market such as lotteries and other forms of gambling that are no less risky and lack any fundamental information to guide investment,” Jarnecic says.Ìý

“CFDs are, however, mostly traded by retail investors and allow enormous leverage, and for that reason there is definitely a strong case for greater regulation, improved oversight and stricter limits on the exposure of individual traders.”

Markus’s experience with CFDs has led to a philosophy that would likely serve inexperienced investors well. “There are a lot of advertisements out there that make you believe you can make a fast buck, which of course is not true,” he says. “Most who try, fail.”

The post Risky choices for inexperienced investors  appeared first on ÌÇÐÄVlog.

On this page:

• What is Raiz?
• Depositing money into Raiz
• Choosing a Raiz investment portfolio
• Withdrawing money from Raiz
• How to close a Raiz account
• Raiz fees
• Is Raiz a good investment tool?
• Raiz vs CommSec Pocket

It’s no secret that Australia’s young people are struggling financially.Ìý

A 2020 study shows the scale of the problem, finding that in the decade since 2008, incomes of people aged 15–34 declined, while the incomes of other age groups had continued to grow.

This came after a 2019 report by the Grattan Institute think tank warned that the current youth cohort is in danger of being the first generation in memory to have a lower standard of living than that of their parents.

So it’s little wonder that for many young Australians, finding the spare funds to make substantial investments in their future can be challenging.

Micro-investing apps, such as Raiz, may offer a solution. But how do they work, and are there any risks?

Traditional investing vs micro-investing

Traditional investing often means dealing in relatively large sums of money – to trade on Australia’s stock market (ASX), for example, you first have to buy at least $500 worth of shares.

But micro-investing apps such as Raiz and CommSec Pocket let you enter the market with smaller amounts of money, making investing accessible to people with limited disposable income or savings.

These apps, which you install on your smartphone or other device, are generally easy to use and require no background knowledge of financial markets or trading. And they offer a range of ready-made investment portfolios to choose from.

What is Raiz?

Promising to “enable a new class of investors”, Raiz (previously known as Acorns) was one of the first micro-investing apps to launch in Australia back in 2016.

The company claims millennials as the mainstay of its business, and in 2022 was the Australian micro-investing market leader by total number of accounts.

As of November 2022, it was hosting over 600,000 accounts, had more than 280,000 active users, and was managing more than $1 billion in funds. (These statistics include the figures for its superannuation product.)

The business also has customers in Indonesia and Malaysia, and has plans to expand into Thailand and Vietnam.

As a managed investment scheme, Raiz allows users to invest in ready-made investment portfolios or one they’ve built themselves, with a minimum contribution of $5.

Users can then withdraw or put more money into their portfolio as its value fluctuates. These investments may also pay dividends from time to time and Raiz automatically re-invests these into a user’s portfolio.

Each of these portfolios features a mix of exchange traded funds (ETFs), which are essentially bundles of shares or other assets, meaning Raiz’s portfolios are themselves really a bundle of other portfolios.

ETFs are designed to reflect the performance of certain indices or benchmarks, such as the top 200 stocks on an exchange, and most are passive investments that don’t try to outperform the market they’re following.

Buying a single ‘unit’ of an ETF yourself on the sharemarket would require stumping up hundreds of dollars, but Raiz allows users to invest for much less by pooling all the funds it receives.

For example, if 100 Raiz users deposit $9.50 each, Raiz will arrange the purchase of a $950 ETF unit and give each of those customers a 1% stake in it.

All of Raiz’s portfolios are comprised of ETFs, but one also includes a 5% investment in the bitcoin cryptocurrency.

Raiz users with children or dependents can set up accounts on a minor’s behalf with the Raiz Kids service. As mentioned previously, Raiz also has a superannuation arm, but this has been controlled by AMG Super since December 2022.

Depositing money into Raiz

Upon signing up for Raiz, new users are required to link the service to a bank account. Once this is done, there are three ways they can take money and put it into their Raiz investment account:

1. Round-ups

Activating this feature on the Raiz app will see transactions from your linked bank account rounded up to the nearest dollar, with Raiz investing the ‘spare change’ into your portfolio.Ìý

For example, if you buy a coffee for $3.50, Raiz can round up the transaction to $4 and put the extra 50 cents into your Raiz investment account.

2. Lump sum

If you have spare money available, you can make a one-off deposit into your Raiz investment account.

3. Recurring deposits

You can arrange for a set amount of money to be deposited into your Raiz investment account on a daily, weekly or monthly basis.

Raiz also runs its own cashback service, Raiz Rewards, which deposits a dollar amount or a percentage of your transaction into your investment account when you shop with companies Raiz is partnered with.

Choosing a Raiz investment portfolio

Once you’ve put some money aside, you’re ready to choose which portfolio to invest in:

1. Risk-based portfolios

There are five standard Raiz portfolios that differ by their level of risk, ranging from ‘Conservative’ to ‘Aggressive’ and each consisting of a mixture of ETFs listed on Australia’s stock exchange.

Each of these ETFs tracks the value of a different asset class, such as the top Australian, Asian, US or European stocks, Australian government bonds or the Australian money market (the level of interest being paid on bank deposits in Australia).

The difference between these risk-based portfolios is the percentage of your funds allocated to each of the ETFs, as some carry a higher risk than others.

The more conservative the portfolio you choose, the more of your investment will be in ETFs tracking cash and bonds, which are safer, while the more aggressive portfolios will have a bigger allocation in Australian and international shares, which can be riskier.

2. Emerald portfolio

Raiz’s sixth portfolio is its “socially conscious” option, investing in companies that meet ESG (environmental, social and governance) criteria as well as Australian Government Bonds and the Australian Money Market.Ìý

The risk level of this portfolio is relatively high, roughly the same as the ‘Moderately Aggressive’ portfolio.

3. Sapphire portfolio

This portfolio aims to include a 5% investment in bitcoin – a strategy Raiz itself admits makes it a “very high risk” option – and a mix of the same ETFs included in the risk-based portfolios.Ìý

Sapphire has the highest risk level of any of the portfolios, higher than the ‘Aggressive’ portfolio.

4. Custom

This option allows you to choose how you want to spread your investment across 16 ETFs (pre-selected by Raiz) and bitcoin, although investment in bitcoin is capped at 5%.

You can change your portfolio without paying any fees.

Withdrawing money from Raiz

You can withdraw funds at any time via Raiz’s app or website and you won’t have to pay any penalties or fees for doing so.

Keep in mind, though, you won’t be able to get your money back instantly – Raiz says it may take up to five days until the cash is available in your bank account.

Withdrawals may also be subject to rounding, which occurs when a withdrawal results in the value of your investment falling below the $5 minimum (or 5% when your balance is less than $500). In this case, Raiz will round up your sale and cash out your whole portfolio.

Do you pay tax on income from Raiz?

Yes. Any return you make on your Raiz investments will be subject to capital gains tax – a tax that applies when you sell an investment for more than you bought it.

Capital gains are taxed at your marginal rate (the same rate as what you pay on your income), which means if you make $2000 from Raiz, the ATO will take the same amount of that money in tax as it would if you got a $2000 pay rise.

How to close a Raiz account

Just as you can withdraw money at any time, Raiz also lets you cancel your account with them whenever you want to.Ìý

You can do this by opening your Raiz account and going to My settings > Support > Close account.

It’s important to follow this process and to get in touch with the company directly if you’re struggling. Just deleting the Raiz app off your phone will not cancel your account or any pending transactions.

Once you’ve closed an account, you’ll still be able to log back in and access tax details and other statements in case you need them later.

Raiz fees

Maintenance fees

Raiz makes it free to set up an account and charges no brokerage fees, but will charge ongoing admin fees once you deposit money.

If you have one of the five main risk-based portfolios or the Emerald portfolio, you’ll be charged a $3.50 monthly fee if your balance is under $15,000.

The Custom portfolio attracts a slightly higher fee of $4.50 per month when it contains less than $20,000, while holders of a Sapphire portfolio will pay $3.50 each month, regardless of their account balance and in addition to an account fee.

Account fees

If you have more than $15,000 in your risk-based or Emerald account (or $20,000 if you have a Custom portfolio), Raiz stops charging the monthly maintenance fee and instead charges an account fee of 0.275% per annum, levied monthly.

This means that if you had $20,000 in your account, for example, you’d pay an account fee of $55 per year.

The same account fee applies to all portfolio types, but if you have a Sapphire portfolio, you’ll be paying this on top of the maintenance fee, regardless of your account balance.

ETF management fees

While Raiz is pretty upfront about its maintenance and account fees, you may not be aware that the issuers of the ETFs also charge their own management fees.

These range from 0.04% pa to 0.59% pa and reduce the value of your Raiz account.

Netting

Put simply, Raiz sometimes pockets a small amount when it buys and sells ETF units on behalf of customers. (It does this in lieu of charging brokerage fees.)

Advertising and data

Raiz hosts links to third-party businesses, including credit services, on its app and website.

The company also says it may collect data about you from the various services you can link to your Raiz profile, such as information about purchases that you make on credit or debit cards linked to your account.

Raiz says it might also provide your personal information to third parties who offer goods or services you may be interested in, but says it complies with the requirements of privacy laws.

Check the details in the company’s .

Is Raiz a good investment tool?

Raiz is quick to tell users it’s “not a get rich quick scheme” and often describes itself as a “saving” tool in its messaging, advising potential clients that it can take several years for their portfolio to grow.

Associate Professor of Finance at RMIT Dr Angel Zhong says micro-investing services like Raiz are an “accessible, affordable and empowering” option for people looking to start investing and one where they can diversify their investment with relative ease.

However, she advises anyone considering using Raiz to weigh up how much they plan to invest and compare its charges with those on other platforms – because whether the service is a good deal or not depends on the amount you invest.

“[Raiz] says the cost is low, but it actually depends on the amount of your investment. If you only have $100, you still need to pay $3.50 dollars per month. That works out to be 3.5%, which would even be higher than a traditional [trading] platform,” she explains.

“If you put in just a small amount of money, you pay a higher management fee. So, whether it is low cost really depends on the amount of [your] investment.”

Raiz’s fees have also proven a sticking point for finance commentators, with ‘The Barefoot Investor’ author Scott Pape previously describing it as a “great introduction for novice investors but ultimately … after a certain point [its] fees are too high for what amounts to a cute index fund app”.

Who holds the ETFs and what happens if Raiz goes bust?

When you deposit money into your Raiz account, Raiz uses the funds to buy ETFs on your behalf. But those ETF units are not held by you, nor are they held by Raiz.

Instead, they’re held by an independent custodian: a third party who has the legal title to the investments on behalf of investors.

This means that if Raiz went broke, the assets would still be safely held by the custodian and the value of the ETFs would be returned to the investors, not to Raiz.

Raiz vs CommSec Pocket

The Commonwealth Bank’s CommSec Pocket is another big micro-investment app on the market.

Here’s how its fees and portfolio options compare to Raiz’s.

The post The Raiz micro-investing app explained appeared first on ÌÇÐÄVlog.

When the Future of Financial Advice (FoFA) reforms finally became a reality in 2013, it was the culmination of nearly 25 years of campaigning by ÌÇÐÄVlog and other consumer advocates.Ìý

A centrepiece of the reforms was a ban on conflicted advice – where financial advisers make recommendations to their clients based on the commissions they stand to receive.Ìý

This longstanding practice had seen many consumers suffer financial losses at the hands of advisers who put their own interests above those of their clients.Ìý

That’s why the reforms also included a ‘best-interest duty’ – an obligation that financial advisers put their clients’ interests first.Ìý

Although the FoFA reforms changed the rules, they didn’t necessarily change the industry.Ìý

Barbara’s story

Just ask Barbara, one of many victims of the recent collapse of Dixon Advisory, a financial advice firm that seems to have operated as if FoFA had never happened.Ìý

Barbara spent 14 years working multiple, modestly paid jobs to build up her own self-managed super portfolio, made up of well-established companies with long-term track records. Her investment choices were at the lower end of the risk scale.Ìý

‘They groomed me’

Barbara resisted the initial overtures by Dixon. But the firm’s advisers came on strong, hyping big returns and leveraging the reputation of Daryl Dixon, a respected pensions expert, who founded the firm in 1986.

It took a lot of persuasion to make Barbara sell-off her holdings in favour of Dixon’s opaque scheme, but eventually she did.Ìý

“They groomed me for a couple of years, and then they moved in, sending me recommendations and backing them up with phone calls,” she tells ÌÇÐÄVlog. “They wouldn’t hang up until they got a yes.Ìý

“I ended up losing all my confidence in my own investment ability and handed it all over to them, because they were the professionals. They just exploited the Daryl Dixon factor. He was held up as the guru of superannuation and wealth management.” 

Ads for Dixon Advisory in the financial press and on the radio also helped break down Barbara’s resistance.Ìý

Compensation request

Barbara has asked for a maximum of $550,000 in compensation from the Australian Financial Complaints Authority (AFCA), but that doesn’t include the dividends she’d still be receiving had she not allowed Dixon to shepherd her assets into its dodgy property fund.Ìý

Given the continuing rise in value of many of the shares she sold on Dixon’s recommendation, she reckons she’s lost a lot more.Ìý

Barbara says the Dixon advisers were relentless. When she asked them whether they were getting commissions, she says they said no.

“I’d get an information sheet, a recommendation, and then they’d follow up with a phone call,” says Barbara. “They used every tactic in the book.Ìý

“They wouldn’t get off the phone with you. It was like they knew something that you didn’t. It was scammer talk when I think about it now, but you don’t see it as scammer talk when you’re talking to professionals. When I think now how stupid I was. I had all my blue chips, and they trashed them.” 

ASIC hits Dixon Advisory with $7m penalty 

In September 2020, ASIC started legal proceedings against Dixon Advisory for providing conflicted advice and failing the best interest duty.Ìý

In July 2021, Dixon agreed to pay a $7.2 million penalty, plus another $1 million to cover ASIC’s costs. (The court has yet to confirm the agreement.) 

In February this year, the regulator suspended the defunct firm’s financial licence.

Trust in the sector still shaky 

The FoFA reforms were meant to restore trust in the financial advice industry, but it seems consumers are still wary.Ìý

We recently asked 1200 ÌÇÐÄVlog supporters for their views on the matter, and the results were telling.Ìý

Only one in three (33%) said they trust financial advisers or super funds to provide high-quality advice that meets their needs, and seven in 10 (70%) said they didn’t trust financial advisers who get paid commissions.

Compensation scheme of last resort 

Victims of failed financial services firms like Barbara have only one hope left – a government-backed compensation scheme to cover their losses.Ìý

Late last year, we reported on the collapse of the Sterling First investment scheme, which left about 100 older Australians financially devastated and, in some cases, without a place to live.Ìý

As it stands, victims such as these who have filed a complaint with AFCA and won their cases would see any compensation capped at $150,000 – a far cry from the scale of Barbara’s losses. And that’s only if such a scheme is actually enacted. (ÌÇÐÄVlog is calling for any compensation caps to be set in line with AFCA’s limit, which is currently $542,500, just short of what Barbara is hoping to recover.)

As of August 2021, AFCA had a backlog of 1165 such cases, on hold until a scheme is established. Barbara filed a complaint with AFCA in January this year, but it’s also on hold because Dixon Advisory went  into voluntary administration in January.

‘I just want something back’

With Dixon Advisory now undone and her money gone with it, Barbara is waiting anxiously for the government to step in. Trying to get in touch with her former financial advisers is not an option.Ìý

“They wouldn’t leave me alone for years and then you couldn’t get anyone to ring you or return your calls,” she says. “They just went to ground.Ìý

“The compensation scheme has got to be increased. But it hasn’t even been legislated yet. I just want something back from the mongrels.”

What we’re calling for 

• A ban on all remaining conflicts of interest in the advice industry – including existing commissions, asset-based fees and ‘vertical integration’ (where advisers recommend products from the firms that pay them).
• Keeping the best-interest duty intact.Ìý
• Access to quality financial advice outside the professional financial advice industry, such as through government and other independent organisations.Ìý
• A compensation scheme of last resort for victims of financial misconduct.

The post Can you trust your financial adviser?  appeared first on ÌÇÐÄVlog.

When Dallas Robson and her husband Jim saw an ad for cryptocurrency investing on Facebook featuring Australian entrepreneur Dick Smith and other prominent Australians, it looked pretty convincing.Ìý

The Gold Coast couple pride themselves on taking alternative approaches to things, including investing, and it seemed cryptocurrency was the way of the future.Ìý

But now their financial future is in jeopardy.ÌýAfter clicking on the Facebook link, they got a call from someone claiming to be a retirement investment adviser, apparently from the UK.Ìý

Over the course of about two months, the man convinced the couple to invest their entire pension entitlement, $330,000, in his alleged cryptocurrency scheme. That money is now gone.Ìý

How the crypto scammers work

“He called both of us every day for a month or more and gave us access to what was supposedly a cryptocurrency website,” Dallas says.Ìý

“We started with a small amount of money, and all the time we were shown on this cryptocurrency web link that the money was going up every day. We’d never dealt with cryptocurrency, so we didn’t know what it was supposed to look like.” 

As the days went by and the amounts the Robsons invested went up, their adviser added a personal touch.Ìý

“He sent photos of his so-called grandson and dog, and said he was divorced and had six properties in Noosa [Queensland],” Dallas says.Ìý

The adviser explained that their investments would be protected by blockchain technology, the digital ledger that keeps track of cryptocurrency holdings.Ìý

“It was supposed to protect us from anyone coming in and taking that money,” says Dallas. “And we had heard about that.”

Scammers ramp up the pressure

But then the man who’d been calling them every day for months claimed to have fallen ill with COVID-19, and a new man started calling.Ìý

“And all he kept saying was, send us more money, send us more money,” Dallas says. “My husband and I both emailed him and told him, ‘We don’t have any more money. You’ve got it all’. And he said, ‘Oh, what about the house?’.” 

The scammers apparently worked as a team.Ìý

“Another man rang us who was supposedly from a firm who got money back from scammers,” Dallas says. “It was also a scam and we lost a further $10,000 on our credit cards. A very big lesson in trust, sadly.” 

Couple loses everything

The Robsons contacted the ACCC in an attempt to recover their funds, but the agency said there was little they could do as the scam had originated overseas.

According to our national survey, Australians who are interested in buying a cryptocurrency, but have yet to do so, are mostly worried about losing their money. The second-biggest worry is scams.Ìý

Dallas Robson is not particularly optimistic about getting her money back, but she wants to do what she can to prevent others from falling prey to a cryptocurrency scam.Ìý

“If we can stop one person from getting into this situation, then I would be absolutely over the moon,” she says. “I don’t want anyone else to feel like we felt.”

Crypto volatility costs investors 

A little more than one in 10 Australians bought a cryptocurrency such as bitcoin or ethereum over the past 12 months, according to our survey. More than seven out of 10 (71%) who reported being interested in the crypto market declined to make a purchase because of concerns about volatility, being scammed or otherwise losing their money.  

Aside from the scams, it’s not hard to see why. In mid-May, billions of dollars’ worth of cryptocurrency assets vanished practically overnight, as the crypto market took a nosedive and lost about half of its value.Ìý

Bitcoin, arguably the best-known cryptocurrency, dropped below $US25,500, down from a record high of $US69,000 in November 2021, according to reports.Ìý

This was just the latest spate of volatility. Dizzying ups and downs are a regular feature of the cryptocurrency market.Ìý

Our nationally representative ÌÇÐÄVlog Consumer Pulse survey of 1034 Australians in March and April also revealed that more than half of us don’t know whether cryptocurrency trading comes with consumer protections similar to those that apply to the stock market. About the same number of people believe that such protections should be in place.Ìý

As it stands, enforceable protections in the unregulated cryptocurrency market are somewhere between negligible and non-existent. In a submission to the federal government, ÌÇÐÄVlog is calling for a regulatory regime to help put an end to consumer harm.

Crypto rife with scams

For the many Australians who have lost money to cryptocurrency scams, a few basic protections might have led to a better outcome.Ìý

Earlier this year, we reported that Australians lost $99 million to crypto investment scams in 2021 (the total loss for crypto scams in general was $129 million). It was the country’s costliest scam at the time, and probably still is.Ìý

In March, the ACCC started legal proceeding against Facebook (or Meta Platforms), alleging that it engaged in false, misleading or deceptive conduct by publishing cryptocurrency investment scam advertisements featuring Australian public figures, including businessman Dick Smith, TV presenter David Koch and former NSW premier Mike Baird (none of whom had anything to do with the advertised investment schemes).Ìý

It’s the very scam that lured in the Robsons.Ìý

‘I did lots of research and still got scammed’

We’ve recently heard from a number of consumers who learned the hard way that the crypto market poses many risks.Ìý 

“I did lots and lots of research and took every precautions but still got scammed and lost $30,000,” Steven* tells us.Ìý

“I was conned and lost $50K,” Wilson* says.Ìý

‘My bitcoins are still out there’ 

But even when you’re not caught up in a scam, the crypto market can all too easily run off with your money.Ìý

“The bitcoins went up in value for a short time after I purchased a small amount, but then quickly retreated to a value lower than the purchase price,” another crypto customer tells us.Ìý

“I decided to leave my small amount in place as I thought it would go up again. What I didn’t and couldn’t know was that the company that held my bitcoins was in trouble and was taken over by another company. When I approached the new company I didn’t receive a reply. I never made any money out of my bitcoins, which I believe are still out there somewhere, if I could only find them.” 

Hard-sell tactics

Aside from the Robsons, we’ve heard from others who report being subject to hard-sell tactics.Ìý

“The seller continued to push me to top up,” says Sherry*. “I tried to sell but was being told otherwise. Finally, I just got sick of it and cut contact with those wolves. I’d rather lose the money that I already put in than be bothered every day.”

*Not their real names.

What we’re calling for 

In light of the data, which shows the increasing interest in crypto trading, the rise in aggressive marketing and the huge growth in scams, ÌÇÐÄVlog is urgently calling for better regulation.Ìý

“The crypto market is booming, but our laws are lagging behind,” says ÌÇÐÄVlog senior policy adviser Patrick Veyret. “More and more Australians are purchasing crypto assets such as bitcoin and etherum without adequate consumer protections.”

ÌÇÐÄVlog is hearing from many Australians about financial loss and other harm caused by purchasing crypto assets that were not what they appeared to be.

“There’s been a number of recent collapses of exchanges where people have lost all of their savings with no ability to get their money back,” says Veyret. “The recent collapse of the supposedly ‘stablecoin’ terraUSD (recently relaunched as luna) is a clear example of the extreme volatility in this unregulated market.

“ÌÇÐÄVlog has also seen a huge surge in scams on crypto exchanges. Our research shows that two in five people who are interested in crypto are not investing due to the risk of scams.”

Our submission to the federal Treasury

In our submission to the federal Treasury, we call for:

• a single definition for crypto assets for the purposes of regulation 
• a licensing regime for all exchanges that sell or are in control of crypto assets in line with the Australian Financial Services Licence regime 
• crypto exchanges to be bound by consumer protection provisions including a prohibition on misleading and deceptive conduct, unconscionable conduct, and unfair contract terms
• crypto exchanges to have measures in place to prevent fraudulent payments and to reimburse consumers when they occur.Ìý

“The new federal government needs to rein in the unregulated crypto industry as one of its financial services reform priorities,” says Veyret.

“Australians expect the same level of consumer protection and regulatory oversight for crypto assets as they do with other financial products.”

The post ÌÇÐÄVlog calls for better protections in the cryptocurrency market  appeared first on ÌÇÐÄVlog.

Living on a disability support pension, it took Gewa (not her real name) years to save up $4000, which she planned to spend to travel back to her home country of Myanmar to see her elderly mother one last time.Ìý

Gewa’s plans to travel were put on hold due to the COVID-19 pandemic, and when a friend in the Burmese community told her about an investment opportunity last year, she thought she could grow her savings while she waited for borders to reopen.Ìý

Gewa, who is in her 60s and lives in Melbourne’s western suburbs, fell for what turned out to be an investment scam. She lost all her savings after she got a friend to help her transfer the money. Her other friends in the Burmese community also fell prey and lost thousands.Ìý

“I lost everything I had, I was feeling very depressed and it hit me very hard,” she tells ÌÇÐÄVlog, through a Burmese translator.Ìý

Gewa’s bank initially refused to refund her the money she lost. But after some pressure from the community legal centre, which included escalating a complaint to the Australia Financial Complaints Authority, the bank eventually came around.

Banks’ responses inconsistent

Joseph Nunweek, the legal director at WEstjustice’s economic justice program, says the response from banks varies greatly when it comes to reimbursing people who’ve been scammed.Ìý

“Gewa is one of the lucky ones,” he says. “Some banks have been willing to consider the unique hardship and risk exposure circumstances that customers like Gewa face, others have just endlessly kicked the can or not been responsive.Ìý

“It’s a pity that we don’t have consistent approaches across the industry and that people have to hope they chose the right bank for when something goes wrong.”

Scams on the rise 

Scams across Australia have been on the rise in recent years, but the growth in losses has been more pronounced in culturally and linguistically diverse (CALD) communities like Gewa’s, according to an ACCC report. In 2020 alone, CALD communities lost $22 million to scams, an increase of some 60% on the 2019 figures.Ìý

CALD communities ‘more vulnerable’

Delia Rickard, deputy chair of the ACCC, tells ÌÇÐÄVlog these figures, which are only the losses reported to ScamWatch or financial institutions, are probably a gross underestimation.Ìý

She says CALD communities are probably less likely to report scam losses than the broader community due to cultural factors and the spectre of shame in small, tight-knit communities.Ìý

“Certainly the CALD communities are more vulnerable to some types of scams, we have seen more threat-based scams and visa-based scams,” Rickard says. “We see lots of investment-based scams as well, particularly in the last few years. Some of these will be in-language targeting people of a particular community.”

Investment and romance scams remain the two biggest reported scam types affecting CALD communities, as well as the broader population. But there are other scams, such as callers impersonating Chinese government authorities, that are specifically targeting migrants, she says.Ìý

Chinese authority scam 

Qing is a Chinese international student studying law in Sydney. In April this year she was contacted (in Mandarin) by scammers pretending to be from the Chinese social media company WeChat. They then forwarded her on to someone else pretending to be from the Chinese police.Ìý

Qing was told her identity had been used in a case of fraud in China, and over several days the scammers tried to get more information out of her, including banking statements. Qing says the scam was sophisticated and that they already had some of her identification information when they initially contacted her.Ìý

‘I don’t want to get into any trouble’

“I was suspicious, but I thought there was the slight possibility that it might be true, although just a slight possibility,” she tells ÌÇÐÄVlog. “I don’t want to get into any trouble or anything.”

She says the scammers eventually gave up after Qing grew increasingly suspicious and declined to provide certain information. Qing says she was lucky not to lose any money, but knows it could easily have been different.Ìý

“I can see how people would get scared, when you’re scared and you’re worried you might give them what they want, and especially because you’re not in China, there’s nothing you can do about it,” she says.Ìý

Preventing scams and protecting communities

Donna Askew, director of partnerships and community development at in Melbourne, says they have worked extensively in collaboration with local community groups to develop scam prevention and education materials delivered in English and translated into 12 community languages.

“We absolutely do see targeting by scammers preying on vulnerabilities of certain communities,” she says.Ìý

“People can be targeted across all ages and cultural and socioeconomic backgrounds – but in particular CALD communities, older people, those experiencing financial distress, and people with English as a second language and sometimes lower levels of literacy or unstable visa status.”

Askew says the impact scams have on culturally diverse communities are huge, in part because they’re comparatively small.

“There’s so much shame associated with [scams], which impacts not only the person, but the broader community,” she says. “And it also impacts people’s lives, their ability or willingness to reach out for help, because there is so much shame attached to being scammed.”

Askew says programs aimed at preventing scams and helping victims should be developed in close consultation with culturally diverse communities.

Labor says more needs to be done 

The Labor party last year called for the creation of a National Anti-Scam Centre, which would bring together police, consumer groups, banks, telcos and regulators to combat scams. Labor accused the government of failing multicultural communities and the broader Australian public by not doing enough to stop scams.

ÌÇÐÄVlog sent questions to the office of Stephen Jones, Labor’s Shadow Minister for Financial Services, asking how the proposed National Anti-Scam Centre would differ from the ACCC’s ScamWatch, but we didn’t get a response.Ìý

Government defends its record

Meanwhile, Assistant Treasurer Michael Sukkar last year said “it’s simply untrue to say the government isn’t acting when it comes to scams”.

“Last year, we implemented the ‘Reducing Scam Calls Code’, which requires telcos to detect, trace and block scam calls,” he says. “We’ve seen over 214 million calls blocked already as a result.

“The ACCC works with its partners across government and industry to disrupt scams. We’ll continue to work with banks, telcos and regulators to support and protect Australians against scams.”

Banks need to do more 

Gerard Brody, CEO of the in Melbourne, says it’s not good enough for banks to be deciding on a case-by-case basis whether they help scam victims or not. He called on the government to force banks to be responsible for scam transactions.Ìý

“If we had that clearer obligation on banks and obligation to reimburse customers affected by scams, then that would provide a greater incentive for banks to invest in measures at a systems level to detect and prevent scams,” he tells ÌÇÐÄVlog.Ìý

We’re taking action, banks claim

But the Australian Banking Association tells ÌÇÐÄVlog the banks are already investing heavily in preventing scams.Ìý

“Australia’s banks work hard to prevent customers from becoming victims of any kind of financial crime, be it internet fraud, phone scams or identity theft, and over the past year, banks have prevented or recovered up to 60% of customers’ reported scam losses,” a spokesperson says.Ìý

“Over the course of 2021, Australian banks spent around $19 billion on IT systems to build resilience, including against scams. Banks have implemented tools to prevent SIM swap scams, and to detect unusual behaviour such as excessive login attempts. Westpac recently implemented an automatic block on suspected scam purchases that will save customers an estimated $120 million per year.” 

The association also pointed out that banks provide resources and funding to scam prevention education organisations.Ìý

Systemic reform needed

But Brody says that although some banks are doing more than others, this very inconsistency is part of the problem and that industry-wide systemic reform is needed.Ìý

“We need a better, more systems-based intervention, like these clear obligations on banks,” he says. “Education will always play a role, but I don’t think on its own it will work to reduce scam losses.”

Rickard agrees that some banks can do more. “I think the banks can do more, some do more than others, but certainly more needs to be done to prevent scams,” she says.Ìý

Find out more about protecting yourself from scams and reporting scams at .

The post Scams targeting multicultural communities on the rise appeared first on ÌÇÐÄVlog.

On this page:

• How a crypto transaction works
• How to invest in crypto
• The different types of cryptocurrencies
• Wallets vs exchanges
• Problems with cryptocurrency
• The origin of cryptocurrency

Hardly a week goes by without a cryptocurrency story in the news, whether it’s hype about investing in digital currencies, regulators looking to track earnings or governments grappling with how to recognise it as legitimate currency.

Equally, there are the stories of wild fluctuations in the value of cryptocurrency, the scams, and investors losing huge sums of money.

Volatility goes hand in hand with cryptocurrency because its value isn’t tied to any external measure, it’s not regulated in Australia, nor is it recognised as legal tender. This means the price can be affected by a range of external factors, from media announcements to celebrity investors.

If you’re looking to dip a virtual toe in the water, here’s the essential information to arm yourself with.

How a crypto transaction works

To understand the nuts and bolts of how cryptocurrency works, it helps to take a single transaction as an example.

Step 1. Transfer instructions created

A transaction starts as an electronic message from Person A to the network that specifies the quantity of currency to be sent to Person B, address (like a crypto account number) and time stamp that records when the block was mined and validated.

Step 2. Transaction is ready to be processed

All recent transactions will be grouped into a block, which is turned into a cryptographic code, and then ‘miners’ work to solve the code to verify it for processing.

Step 3. Build blocks of the blockchain

When the cryptographic hash, or code, is resolved, this new block of transactions is added to the blockchain, or distributed ledger, for that currency.

Step 4. Funds arrive

Once the transaction is confirmed, the cryptocurrency amount as specified in the original instructions is transferred to the recipient, Person B.

How to invest in crypto

Cryptocurrency is bought and sold on crypto trading platforms, or exchanges. You can use traditional currency or crypto to buy an amount of a particular currency. This will be stored in a digital wallet that contains the codes, or private keys, needed to authorise transactions to the blockchain network.Ìý

Crypto wallet

A crypto wallet will store each transaction and also track your individual cryptocurrency balance. Some wallets can store numerous different cryptocurrencies; others are attached to a particular asset and will only store that one type of cryptocurrency.Ìý

Cold/hardware wallet

A wallet that is not continually online is also known as a ‘cold wallet’ or a ‘hardware wallet’. These are downloaded and reside offline on a piece of hardware such as a USB drive or smartphone. A ‘hot’ or ‘software’ wallet is always live and connected to the internet, and therefore any currency stored in them is at greater risk of theft or hacking.

The different types of cryptocurrencies

Bitcoin might occupy many of the headlines, but it’s by no means the only cryptocurrency there is. There are said to be more than 10,000 different types of cryptocurrencies, each with its own features and uses. Here are a few of the more common ones:

Bitcoin

This is regarded as the original cryptocurrency and has become a global system for payments through the network of bitcoin miners. Computers in the network use software to validate transactions and earn bitcoins through this mining process. 1BTC is worth about $63,000 as of April 2022, according to tracking site CoinDesk.

Ether

Ether is the cryptocurrency that runs on the Ethereum network and is able to handle payments along with contracts and some other programs. Miners can earn ether that can be used for payments in the network. 1ETH is equal to $4494.

Litecoin

This was modified from bitcoin and is another cryptocurrency and global payment network. It has a faster processing speed and more coins in circulation than bitcoin. 1LTC equals $172 as of April 2022.

XRP

XRP is a purpose-built digital asset designed as a payments network for fast, permission-free transactions that the developers say can process in three to five seconds. 1XRP is equivalent to $1.14 as of April 2022.


Wallets vs exchanges

There are different types of wallet that enable you to trade in crypto.

Desktop wallets such as Electrum, Exodus and Copay/Bitpay run from a computer and require a long string of words, known as the ‘seed phrase’, which is the basis of the privacy crypto key used to unlock transactions.

App-based wallets such as Coinomi or Edge are more geared toward using crypto when making payments. But note that losing a phone with a crypto app could let someone access your money.

Online (or ‘hot’) wallets usually belong to a cryptocurrency exchange and are accessible from any internet-connected device, which can be a target for cyber criminals.

Crypto exchanges are the other way of trading in cryptocurrencies, where transactions and the privacy key are held in the exchange. But these can be risky because they can be hacked – there are many examples of exchanges such as crypto.com having millions of dollars worth of crypto stolen.

Problems with cryptocurrency

The cryptocurrency market has been likened to the digital Wild West and it’s had its fair share of scams and hacks. It’s certainly a high-risk investment, given the incredible price volatility and million-dollar thefts.Ìý

$129m in scams

It’s clear that scams are on the rise as the interest in cryptocurrencies grows. In 2021, crypto scams topped $129 million, and when the value of a currency hits a high, so too do the scammers, with many looking to target new, inexperienced users. Any crypto-related scams should always be reported to .

Lack of regulation

At the moment, many crypto assets are not considered financial products and are therefore not regulated by the Australian Securities and Investments Commission (ASIC).Ìý

Cryptocurrencies are not recognised as legal tender in most currencies and, again, this means any legal protections around theft or scams will be quite limited. Hackers have targeted crypto exchanges because a single hit can net millions of dollars that are permanently lost and never recoverable because crypto transactions are not reversible.

The platforms to buy and sell crypto assets are unlikely to be regulated by ASIC, whereas when trading through the ASX there are operating requirements specified in law.Ìý

Also, not all crypto trading platforms are registered in Australia and there is no recourse through the Australian Financial Complaints Authority (AFCA) if something goes wrong. The Australian government has announced plans to regulate parts of the industry, but it’s unlikely we will see any new laws passed until 2023.Ìý

Carbon cost of cryptocurrencies

Finally, there’s the issue of the environmental footprint of cryptocurrency, as it requires computer processing to mine transactions, which all need to be powered. Bitcoin alone has a carbon footprint equivalent to that of the Czech Republic, emitting 114 megatons of carbon dioxide in a year, according to the Digiconomist’s Bitcoin Energy Consumption Index.

The origin of cryptocurrency

Digital currencies were first mooted in the 1980s, although there wasn’t much widespread take-up.ÌýIn 1998 computer engineer Wei Dai defined the modern version of cryptocurrencies.Ìý

Following this, in 2009 a white paper outlining the fundamentals of blockchain and the first digital currency, bitcoin, was published under the pseudonym ‘Satoshi Nakamoto’. But it’s unclear whether this was a single person or group, as their true identity has never been confirmed.

Since then, numerous other cryptocurrencies have been launched, joining bitcoin in a growing market around the world. The spread has meant governments and regulators are grappling with how to deal with digital currencies, as investors risk theft, scams and wild currency fluctuations that are all too common.

So will we buy groceries with crypto in the future?

There’s often a headline-grabbing story or two about a new Bitcoin ATM or retailer accepting payments. But beyond the hype, crypto is power hungry, vulnerable to crimes and scams, and still accounts for a tiny percentage of viable economic transactions.Ìý

Although many governments and regulators have crypto in their sights for taxation, money laundering and financial protection, we’re a long way from using crypto at the supermarket.Ìý

The key to wider acceptance will be making sure that regulation and protections keep pace with technological advances, and that crypto’s uses appeal to everyday buyers and investors.

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For many people, cryptocurrencies are a no-go zone. And for good reason. They’re the coin of the realm where no realm exists, and their slippery value depends entirely on what people are willing to pay for them.Ìý

In recent years, some people have been willing to pay substantial sums for established cryptocurrencies like bitcoin. Some have bought low, sold high, and made a lot of money. Others have come out on the losing end when trading these volatile digital tokens.Ìý

Despite the uncertainties, more and more people appear to be jumping on the cryptocurrency bandwagon in hopes of a windfall. In recent years, many of them have been scammed.Ìý

What is cryptocurrency?

Cryptocurrencies (also known as crypto) are digital tokens that, when accepted, can be used for payment from one person to another using complicated online systems.Ìý

They are stored in ‘digital wallets’, and some businesses accept them as payment for goods and services, although they are not currently accepted as legal tender in Australia. The crypto market is also not regulated in Australia.Ìý

Some of the most popular cryptocurrencies include bitcoin, litecoin, ether and XRP, though each of these has different characteristics.Ìý

You can buy or sell crypto via online platforms using Australian dollars and cryptocurrency itself. Transactions are made using blockchain technology, basically an extensive database system. Though the use of cryptocurrency is on the rise, it remains an emerging field with many uncertainties.

Find out more about the basics of cryptocurrencies.Ìý

Crypto scams hit $129m in 2021

When we contacted the ACCC in mid-February this year, the agency told us it had received 10,412 reports about cryptocurrency scams in 2021, with losses of about $129 million for the year.Ìý

Nearly half (4730) of the 2021 reports were about cryptocurrency investment scams, which cost Australians a total of $99 million. (A cryptocurrency investment scam would generally mean investing your dollars or legitimate cryptocurrency in a fake cryptocurrency investment scheme.)

Boom times mean more scams 

Professor Talis Putnins, professor of finance at the UTS Business School and chief scientist of the Digital Finance Co-operative Research Centre, Sydney, tells ÌÇÐÄVlog that trends in cryptocurrency scams generally follow the state of the cryptocurrency market.Ìý

“We find that cryptocurrency scams, including pump and dump schemes, tend to correlate with the overall cryptocurrency price levels – when cryptocurrency markets are booming, so too are scams,” says Putnins. “Then when cryptocurrency markets fall, there are fewer new scams.

“These findings suggest that scams largely rely on the influx of new users that appear when cryptocurrency markets are booming and particularly investors looking to make a quick return.” 

New crypto investors especially vulnerable

Putnins says the shadowy nature of cryptocurrency transactions allows scammers to deceive profit-seeking investors, especially those new to the cryptocurrency market.

“The role of the decentralised exchange in enabling such scams is important – they effectively enable a market where neither the creator’s identity nor that of investors is verified or checked,” says Putnins.

“This enables scammers to easily run off with investor money and remain difficult to track down.”

How to recognise a cryptocurrency scam 

The hallmarks of a cryptocurrency scam often include promises of big returns on your investment through some ‘groundbreaking’ cryptocurrency trading system backed by fake celebrity or government-agency endorsements. Scammers often make contact through social media or text messages.Ìý 

Dating apps have also been used to build fake romantic connections and groom victims for a cryptocurrency scam.Ìý

In the beginning, cryptocurrency investors often receive small returns that come from other people’s deposits, as in most . Then the scammers take the real dollars you gave them and run.Ìý

‘Pump and dump’ scams are also common. Scammers hype an otherwise non-existent cryptocurrency investment to drive prices up, then sell and leave other investors stranded.Ìý

Here are some other crypto scams to watch out for.

Fake apps

In early February this year, it was reported that cryptocurrency scammers were using fake apps available on Google Play to lure victims.Ìý

Through the apps, the scammers tricked cryptocurrency investors into revealing their ‘seed phrase’ (a series of words that serves as a password), which grants access to the digital wallets where cryptocurrencies are stored. Once they had the seed phrases, the scammers drained their victims’ wallets.Ìý 

ATO warnings 

Earlier this year the ATO warned of fake ATO text messages saying the recipients had been involved in cryptocurrency-related tax evasion and instructing them to ‘connect their wallet’ and provide personal information via a link. The link led to a fake MyGov page set up to steal personal information.

Celebrity promoters and influencers

According to Putnins, one scam in particular, a version of pump and dump, has become increasingly popular.Ìý

“Scammers create a cryptocurrency or token associated with a project they claim will be very valuable, then strike a deal with one or several celebrities or influencers, giving them a bunch of the tokens,” Putnins says.Ìý

“The influencers then post to social media about the token, getting their followers to invest. As the price rises, the scammers sell out and in the end the project is left worthless.” 

It doesn’t help that the celebrities or influencers fail to disclose that they’ve invested in the token and are paid to promote it, which Putnins calls a “major conflict of interest”.Ìý 

(In January, a lawsuit was filed in the US accusing celebrity Kim Kardashian and others of taking part in a pump and dump scam.)

The ‘rugpull’ scam

In a rugpull scam, the scammer goes to extra lengths to appear legitimate. They create a fake cryptocurrency token and often put together a ‘white paper’ to outline plans for the project, including timelines and a website or Twitter account.Ìý

Then the scammer gets the scam token listed on a decentralised cryptocurrency exchange along with a legitimate cryptocurrency.Ìý

“At that point investors that have noticed the project and want to get in early while the token is cheap can buy it on the decentralised exchange,” Putnins says.Ìý

“Once a sufficient amount of investor interest has accrued, the scammer sells their holdings of the token on the decentralised exchange, draining the market entirely of the legitimate asset and leaving the token worthless. The project founders and developers disappear at that point.”

An iffy investment 

Aside from the very real possibility of being scammed, the cryptocurrency market is highly volatile and investments are high risk.

In June 2009, when it was launched, a bitcoin was worth 1/100 of a US cent. At the start of 2017, a bitcoin was worth about $US1000, and it jumped to about $20,000 by the end of the year. In early 2018, it was down to about $US7000. (In mid-February 2022, a bitcoin was worth about $US45,000.)

Transactions are peer to peer and take place through the abstruse intricacies of blockchain technology, with no bank or other intermediary to make sure everything’s legitimate. (The blockchain serves as a kind of database ledger that records transactions.) 

Another unsettling fact about cryptocurrency is that anyone who knows how can create one, meaning an infinite number of cryptocurrencies can be in circulation at any given time.

Not legal tender in Australia

Cryptocurrencies aren’t accepted as legal tender in Australia, but it costs real money to buy them.Ìý 

“Unlike some other products you can invest in, crypto is also a payment method – this means it is not only used by scammers in investment scams, but also as a form of payment,” an ACCC spokesperson tells ÌÇÐÄVlog. “This provides more opportunity for financial losses.Ìý

“Cryptocurrency is also technically complex. There is no product disclosure statement [PDS] or prospectus about how the asset operates. Interacting with platforms and networks is also unfamiliar to many people. When something is unfamiliar they are going to be more vulnerable to scams.” 

Cryptocurrency is also generally unfamiliar to the traditional financial advice industry, so professional guidance is hard to come by.

Crypto scam alert: What to watch out for 

• Know who you’re dealing with. Watch out for cryptocurrency project founders that choose to remain anonymous, or founders with no track record of legitimate projects in the past.Ìý
• Don’t blindly trust people who contact you directly offering an investment opportunity.Ìý
• Watch out for project ‘white papers’ or plans that lack detail and/or are poorly written, or the absence altogether of a white paper and clear project plan.Ìý
• If you have the knowhow, watch out for blockchain data showing that the token creator holds large amounts of the token – this can be a red flag that they may dump it and disappear.Ìý
• Again, if you have the knowhow, look for malicious code in the token’s smart contract that would let the scammer steal investors’ money.
• Check for grammatical errors, spelling mistakes and inconsistent information about the investment in different forums. These may also be signs the investment isn’t legitimate.Ìý 
• Watch out for cryptocurrencies with names that are very similar to other well-known cryptocurrencies of decentralised finance projects. Many scams try to mimic other legitimate projects.
• Never share your private key or wallet seed phrase with anyone.
• Use your judgement. If it seems too good to be true, it’s probably a scam.

Note: Assessing data in a blockchain or looking for malicious code are likely to be techniques beyond the skills of many would-be crypto investors – all the more reason to proceed with great caution.Ìý

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