The Australian Securities and Investments Commission (ASIC) has issued updated guidance for Australian financial services (AFS) licensees following an increase in reports of stolen shares due to identity theft.
The new guidance, Information Sheet 237 Protecting against share sale fraud (INFO 237), outlines better practices for licensee prevention and detection of share sale fraud.
“In the last four years, ASIC analysis has identified a sevenfold increase in the number of share sale fraud reports made by market intermediaries,” ASIC commissioner Simone Constant said.
“There are terrible stories out there, where in some cases entire investment portfolios are lost, and millions of dollars are involved.”
The corporate regulator said AFS licensees have a critical role to play in preventing and detecting share sale fraud, which involves a person who is not who they claim to be selling or transferring shares that do not belong to them.
In the information sheet, ASIC outlined extra due diligence for licensees. This included monitoring trading behaviour and conducting additional due diligence where trading is unusual for a client or a client makes large withdrawal requests or newly opened accounts are observed.
Licensees could also reduce risks by introducing a value threshold for share sale transactions that triggers a client callback for further due diligence and conducting further due diligence when clients add or request changes to personal information, such as postal/email addresses and bank accounts.
“AFS licensees should be vigilant when communicating with clients by email and should generally not accept client instructions to change personal details by email alone,” the information sheet stated.
Licensees also need to be careful when onboarding new clients and should be requesting multiple forms of primary identification, and also being alert to the potential use of stock images, fakes and forgeries. They should independently verify the authenticity of documents whenever possible.
“Vigilance is key as share sale fraud is often difficult to detect,” Constant added.