Posted

January 06, 2020 06:06:09

They ride the high seas of the global financial system, preying on everyday Australians and stealing millions of dollars. They are the outlaws of the digital world and authorities seem powerless to stop them.

Jane Smith* had run a successful business for years and was finally in a place where she could think about investing her and her husband’s retirement fund.

They had both worked hard and put aside a sizeable nest egg, but she was worried as she neared retirement age they needed a top-up.

So when a simple offer promising a healthy return popped up on her Facebook feed, she thought she would give it a try.

It sounded similar to something she had heard about from a friend whose son worked for a major investment firm that was using automated trading software on currency exchange markets.

And it came from a firm with a slick-looking website and a friendly investment manager who sounded highly educated and knew current market trends.

Little did she know her savings would be flushed into a river of cash flowing out of Australia and into a global network of offshore accounts, where it would be laundered and channelled into the pockets of highly organised criminals.

Scammers who are smarter than us

Jane’s life has changed irrevocably since she was targeted.

She is now forced to contemplate a future where she and her husband will have to keep working, then when they get too old perhaps turn to the Government for support.

And Jane is far from alone.

Many of us think we are too smart to fall for scammers, but investment scams cost Australians at least $86 million in 2018 — topping all other forms of scams that robbed people of their savings.

Fake investment offers in cryptocurrencies, such as Bitcoin, are becoming more popular, resulting in record losses in 2019, according to the Australian Competition and Consumer Commission (ACCC).

But despite the massive cost, victims say when they report these crimes, action is rarely taken.

An ABC investigation has peeled back the glossy facade of the scam that robbed Jane of her savings, to reveal an extensive global network including shell companies, sophisticated marketing and high-pressure sales tactics all designed to get what it wants — your money.

Fake news and bogus endorsements

For Jane, the scam started at her home in the West Australian city of Bunbury.

From there, it went all the way to the regulatory havens of the Caribbean, Europe and Asia that allow these financial pirates safe harbour.

It began with a fake ABC news story about a bogus endorsement by mining billionaire Andrew Forrest for a financial scheme that promised great riches.

There are endless variations of this ad floating around Facebook, LinkedIn and other social networks, but the formula remains the same.

A name-brand celebrity like Microsoft founder Bill Gates or Virgin billionaire Richard Branson is ostensibly interviewed by a reliable news outlet, with public comments from supposed clients raving about the money they say they have made:

“Is this really working? Has anyone tried it yet?”

“It really is! I already earned 1352$ [sic] and it just keeps coming. I can’t wait to earn more with the app.”

“I’m very surprised that this is fully legal, with the amount I’m earning.”

Australian versions of the scam also feature former NSW premier and now NAB banking executive Mike Baird.

Jane read the article and was intrigued. She followed the links and found herself on a website using the name HybridReserve.

“HybridReserve set out to allow ANY person sitting at home or in the office to be able to invest modest sums of money and offer them the 100% support and guidance needed for beginners,” the site claims.

“Confusing terminology and complicated technologies, are not our thing.”

She started off with small amounts, but as the returns flowed in and she received some early payouts, she was encouraged to invest more heavily.

She eventually deposited $670,000 over several months into HybridReserve’s online trading platform, believing it was being invested on her behalf.

But once the money was deposited, her investment manager suddenly became hard to contact, despite the previous daily calls and emails.

And heading over to their office to speak to him was not an option.

HybridReserve lists a main address in the picturesque Caribbean nation of St Vincent and the Grenadines.

The tiny nation lies in a chain of tropical islands that also includes famous offshore tax and regulatory havens such as the British Virgin Islands, the Cayman Islands and The Bahamas.

When the ABC called the only number listed on HybridReserve’s website that was still connected, the man who answered claimed no knowledge of HybridReserve.

He said he was only there to “connect” callers to other agents, but also that he was available for anything the ABC “wished to do that considers trading, and such”.

He then said he would put the call through to management, and hung up the phone.

A very busy address

The address listed by HybridReserve — Suite 305, Griffith Corporate Centre, Beachmont, Kingstown — is well known to authorities and IDCare, a not-for-profit identity theft and cyber fraud support service.

The man who answered the phone said he was in St Vincent and the Grenadines, at “Suite 305 Griffith”, but later backtracked, saying he could not reveal where he was located.

In the past two years IDCare has dealt with 41 complaints linked to that address out of 583 cases of alleged investment fraud.

The Australian Securities and Investments Commission (ASIC) also lists 12 business names or entities associated with this address on their companies you should not deal with list.

It is a modest office block that sits in a semi-industrial part of the capital, Kingstown, next door to a private medical centre.

The ABC does not suggest all firms linked to this address are involved in fraud, as there are legitimate reasons for incorporating your business offshore.

But a number of brokers who are the subject of complaints by Australian investors have this listed as their main address.

Griffith Corporate Centre is advertised online as offering virtual office space and registered office services.

The ABC made repeated attempts to contact the centre, but received no reply.

There are legitimate locations like this one all over the world. Often they are just post office boxes.

They can be used by people who want to incorporate a company in a particular jurisdiction, but either don’t have their own property located there or want to list a different location to their bricks and mortar office.

Bank accounts can then be opened in the names of incorporated companies, which can be useful for people wanting to move large amounts of money around the globe.

In Saint Vincent and the Grenadines, an incorporated company must have a locally registered office and agent, although the directors and owners can be located offshore.

A firm offering offshore company incorporation services, which is headquartered at Suite 305 at the Griffith Corporate Centre, is Wilfred International Services (WIS).

WIS managing director Merma DeFreitas said the majority of her clients used WIS as their registered office, but she denied knowing anything about alleged fraud committed by firms incorporated at the address.

“Wilfred Services Ltd is the registered agent ONLY and does NOT own or operate any of the entities that are incorporate[d] through our firm,” Mrs DeFreitas said in a written statement to the ABC.

“Therefore our firm is NOT linked to OR aware of any alleged fraud committed against any individuals.”

The ABC requested information about 10 firms that list this address — including HybridReserve — which have had complaints against them registered with ASIC or IDCare.

Mrs DeFreitas said she could not make any comment about these firms as WIS only responded to requests made by local financial regulatory authorities.

Why harbour in the Caribbean?

Saint Vincent and the Grenadines is renowned worldwide for its soft sand beaches and tropical paradise image — which saw it feature as the backdrop to the blockbuster Disney film series Pirates of the Caribbean.

But it is famous for another reason in the global financial community.

The cluster of islands often referred to as SVG is known for its lack of financial transparency, to the extent that firms specialising in offshore businesses, such as offshore-protection.com, spruik it as having “one of the most restrictive confidentiality laws globally”.

SVG has issued public warnings that currency trading businesses registered in its jurisdiction are not regulated by the government, but its response to tackling the problem has so far been limited.

SVG has flagged changes to comply with European Union requirements for good governance, after it was threatened with blacklisting as an uncooperative tax jurisdiction.

But those reforms have focused so far on local taxation and not on “economic substance” reforms, which could require companies to have a physical presence in the country and local staff.

The ABC approached the country’s Financial Services Authority for information relating to businesses incorporated at the Griffith Corporate Centre, but it was not provided.

The Estonian connection

HybridReserve’s international connections are not limited to Saint Vincent and the Grenadines.

The terms and conditions say the website is owned by a company called Singlebell OU, which is incorporated in the eastern European Baltic state of Estonia, and that this firm is fully liable for claims, losses, costs or damages.

Estonia also allows people to incorporate companies from offshore, and this is often done with the assistance of law firms that can register multiple entities at any single address.

But Estonia is more open than St Vincent and the Grenadines, as it does make company records available.

Company documents from Estonia show Singlebell OU is registered to an address in the capital, Tallinn.

ASIC lists another 10 firms all appearing to offer brokerage services linked to this address on their companies you should not deal with — unlicensed companies list.

The Cypriot

Company records from Estonia show Singlebell OU was registered in March 2018, but the members of the management board changed the following month.

The management’s location shifted south to the Mediterranean.

The new solo management board member, Serge Michou Tchio Daloko, listed an address on the business registration in the Cyprus capital of Nicosia.

But Mr Daloko’s tenure on the board of Singlebell, and its status as a Cyprus-listed company, lasted little more than a year.

In July this year, Singlebell’s management board changed again, shifting across the Atlantic Ocean to Central America.

The new structure saw Mr Daloko replaced on the business registration by a man named Daniel Lopez Romero, who listed his address as a small two-storey building in a quiet residential street in Mexico City.

Exploiting the global network

ASIC executive director for assessment and intelligence Warren Day has spent years chasing criminals who seek to defraud Australians.

Mr Day said criminals registered official companies and bank accounts to look legitimate and move money across the globe to avoid detection.

“What we know is the minute those funds hit those accounts they move on to another account in another country, and then probably another country again, so that the trail goes cold,” he said.

“So it’s very hard for regulators and money tracking authorities such as AUSTRAC to identify where they’ve gone.”

He said these scams had become an “intractable problem” because of the mobility of the perpetrators and the way money could be quickly moved.

“Effectively trying to arrest someone, and let alone get a successful prosecution, the chances of that are low to non-existent,” Mr Day admitted.

“That’s cold, that’s really cold news to a victim, and the best thing we can say is, ‘you’ve been scammed’. But the good news is, by you telling us, you’ve prevented other people from losing a lot of money as well.

“I fully acknowledge that’s really cold comfort to the person who may have lost tens to, in some cases, hundreds of thousands of dollars.

“But the reality is, these people have disappeared, they were never here in Australia, they’re not even in the countries they say they operate in.”

Australia seen as an easy target

The former head of the Australian Crime Commission, David Lacey, has seen first-hand the impact of investment fraud after he started IDCare, a charity that supports victims of identity fraud.

He has seen calls about investment fraud to his service quadruple in the past 12 months.

“Often for a lot of people they are life-changing events,” Mr Lacey said.

“They’re going to have to make decisions like, do they sell their house, are they applying for welfare, are they going to work to a later age — that’s the human toll a lot of these things have.”

Mr Lacey said Australia tended to be “a bit slow off the mark” promoting awareness of scams that crossed jurisdictions and may already have been reported by overseas financial regulatory authorities.

But he said there also needed to be a focus on deterrence.

“What we haven’t seen is perhaps the deterrence and the intervention that we would like to see, to send a message — a very clear message — to criminals offshore that Australia is no longer an easy target,” he said.

“At the moment, we think there’s a bit of a gap.”

Trying to track the scammers

Australian authorities were notified about HybridReserve, but the information seemingly failed to filter back to Jane’s bank — the Commonwealth Bank — or even ASIC.

The Australian Competition and Consumer Commission (ACCC) said it received 25 reports about HybridReserve last year, and first notified ASIC on January 1 — but it only publicly listed HybridReserve as an entity you should not deal with on November 25.

This is despite details about HybridReserve being listed on the International Organisation of Securities Commissions (IOSCO) investor alerts portal on March 4, at least a month before Jane made her first major transfer.

Belgian financial authorities flagged it even earlier, in February.

Mr Day said ASIC was working with the ACCC to better streamline how they exchanged information.

He also said ASIC did not automatically list scams from IOSCO on its blacklist, but it was in the process of reviewing that policy.

“There are so many scams operating at any one time, we would flood our own blacklist,” Mr Day said.

“Our experience at ASIC has been that often the scams that are being perpetrated against a citizen in Belgium, or Spain, or Portugal, or the UK, don’t necessarily mean that they’re being perpetrated on people in Australia.

“That obviously now is changing, the behaviour is changing, and we are reviewing our practices in that space.”

No red flags were raised for Jane

HybridReserve instructed Jane to transfer her money into two Australian accounts set up in the names of shell companies.

Neither of these were registered with the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) remittance register, which is required for firms whose business is transferring money overseas.

One transaction alone was more than $300,000, which Jane said should have raised red flags.

She even called the transfers “HybridReserve” on her Commonwealth Bank statement.

Jane was also told to send her money to a German account, registered to a firm based in Berlin.

German financial authorities flagged that firm two months after Jane made her first transfer, telling the company to desist from conducting money remittance and specifically naming HybridReserve.

The Commonwealth Bank said it were only notified by Jane some months after her last transfer that she had been the victim of a scam and wanted to try to recover the money.

“Unfortunately despite our efforts, we were unable to recall the funds concerned,” a spokesperson said in a statement.

The Australian Banking Association said in a statement banks worked closely with AUSTRAC to protect the Australian community from serious crime and terrorism.

“The financial intelligence and information provided by banks significantly contributes to Australia’s intelligence picture, helping AUSTRAC and our government partners in their work to detect and disrupt criminal activity — here and overseas,” the statement said.

Mr Lacey said while banks played a critical role, they should be the very last line of defence, and multinational companies which profited from selling ads and server space to criminals should also step up.

“For investment fraud to succeed for a criminal, there’s a lot of enabling activities that need to occur,” he said.

“We’re seeing a lot of very large multinational companies involved in … assisting in advertising investment fraud offerings, so they’re receiving money from criminals who are paying to advertise their investment frauds so that Australians can fall for these scams.

“If your organisation is enabling these things to occur … you need to be asking yourself the question whether or not your products and services are involved in that criminal enterprise.”

He said many clients had expressed an interest in a class action against such firms.

Jane’s money remains lost at sea

While she waits for justice, Jane’s money remains unaccounted for as it travels the world in the hands of the cyber pirates.

It has been more than three months since she contacted police, but they had not yet taken a formal statement.

She said she felt let down by the Australian law enforcement system and the banks.

“Three months later, they [have] failed to understand whose jurisdiction this whole case falls under,” she said.

“It’s just handballing and no action. In three months … they haven’t even taken a statement from me, or contacted any international authorities, or held anybody accountable.

“All financial institutions have to be responsible enough to keep their database up to date of all these scams, in order to protect their customers, their clients’ money.

“I think they let us down.”

*Name has been changed to protect the woman’s identity

Credits

• Reporting: Rebecca Trigger
• Video and graphics: Claire Borrello
• Digital production: Liam Phillips and Rebecca Trigger
• Editor: Liam Phillips

Topics:

hacking,

computers-and-technology,

fraud-and-corporate-crime,

perth-6000,

wa,

bunbury-6230,

cyprus,

estonia,

saint-vincent-and-the-grenadines