FRAUD

It’s an ugly word, and one all too associated at times with financial and estate fraud.  While it is not something that I see professionally on a regular basis, from time to time it does raise its head.

Brace yourselves; this is going to be a bit longer than normal, but it’s important you read it all the way through!

In the last few weeks, Fraud has hit the news headlines a number of times:

•    A Toronto real-estate Lawyer was sentenced to 3.5 years over a $2,000,000 fraud involving deposit made on condominium sales.  (Toronto Star, Feb 23rd)

•    A fraud-detection agent (!!)  in Ajax was charged with using phoney credit cards and other schemes to steal from businesses (London Free Press, Feb 17th)

•    In Waterloo, an individual claiming to sell Makeup over social media is being hunted by police for taking payment but not delivering the goods (CBC, Mar 3rd)

•    Manulife Financial admitted that they had been fined $1.2 Million by FINTRAC, Canada’s anti-money laundering operation over for failing to report 1174 Suspicious transactions, as is required by law.  According to the Toronto Star, many of these transaction related to a Winnipeg-based felon selling counterfeit medication to Americans over the internet. (Toronto Star, Feb 27th)

•    A Kitchener-area convicted financial advisor (who wrote a book, and claimed to be an expert on finance) ended her 4-year sentence late last year after taking $1.3 Million in client money and using it on cosmetic surgery, a Mercedes, and personal expenses (Beacon-Herald, Oct 24, 2013)

The last one in particular leaves a bad taste in my mouth, as I know several of the victims, and had met the fraudster herself.  What makes my blood boil even more though, is that the papers called her “a financial planner”.  Not only did she fail to hold a financial planning designation, to say she violated nearly every regulatory & ethical code applicable to financial planners would be a massive understatement.

In my own practice, over the years, I’ve had some strange and interesting cases arise such as:

•    A drug-addicted child attempting to forge a parent’s signature on a redemption form.

•    Someone claiming to be leaving the country quickly, needing us to “speed up the process” and get him a “Certified Cheque by tomorrow” to a third party under highly unusual circumstances.

•    Someone attempting to get information on their ex-spouse’s accounts.

In all cases, we have policies and procedures in place to prevent anyone from gaining information who is not entitled.  That said, it only takes one moment of letting your guard down before an opportunist can step in and do some serious damage.

Constant vigilance is key.

While fraud remains relatively rare, I cannot overstate the importance of taking steps to ensure that you and your family are not victims of fraud:

1)    Request your credit check annually from TransUnion and Equifax each year.

On their websites, you can annually request your credit report.  They will try to upsell you, however, to instant access for a fee, but by law they must provide a free copy each year via mail.

As soon as you get it, take a look for any unusual items or activity, and report it right away

2)    Never, ever take anything for granted that is said by a financial security or investment representative .

For mutual fund investment representatives, you can verify their registration.  Anyone registered to sell mutual funds in the province of Ontario has to be registered with the Ontario Securities Commission (OSC).  You can go to http://www.osc.gov.on.ca/en/Dealers_registrant-search_index.htm and put in their name and their firm’s dealer name and see what they are registered to offer.  (In my case, you can put my mutual fund dealer “Quadrus Investment Services Ltd.” , and “Fraser, Ryan” to find my record.)

Note that some advisors, like myself, may have an incorporated practice – you will need their dealer’s name, rather than their incorporated name to do the search.

On the insurance side of the equation, you can search someone up with FSCO – the Financial services Commission of Ontario at http://www5.fsco.gov.on.ca/alias2a/agents.aspx .  You can put in the advisor’s last name, as well as their city.  Note that the city may be based on the advisors place of residence, not necessarily the advisor’s office location.  If you don’t see them at first, try searching by last name with no city chosen.

3)     If your financial institution (or the CRA) sends you an email saying you have been compromised. Do not click on any links – ever!

99.9% of the time, these emails are schemes designed to get you to give a scam artist your username and password.  Call your institution (at the number you look up, not the one in the email!), and ask to speak to the fraud department to confirm if the email is legitimate.  Often if you look closely, some of the finer details will give away that the communication is not legitimate.

4)    If you receive a phone call wanting you to confirm your identity, Don’t!

Ask for a case number, then hang up, and call the institution based on the fraud number on their website.

5)    Maintain anti-virus and anti-malware software on your computer at all times.

 Software exists which can pick up your keystrokes as you log onto websites with your username and password.

6)    Make a point of calling the financial institutions your advisor has you with, and getting web-access to your accounts where available.

It’s pretty hard for someone to fake a website AND a call centre.

7)    Try to deal with well-known reputable companies, and avoid “suspiciously good” product offerings.

Read the fine print.  One type of investment is being marketed and advertises “8% Fixed returns”.   People read that as 8% guaranteed return – which it is not.  The fact that a “good” GIC rate is around 2% right now should be used as a guideline – if it offers a return significantly higher, it comes with significantly more risk.  A company advertising these products was recently put on a “name and shame” list by FSCO, as they are not actually licensed to sell the advertised product.

8)    Don’t complain about higher fees that come with better regulated products.

Mutual funds may charge higher fees than other alternatives, however, consumer protections around Mutual Funds are, in my opinion, stronger than just about any other investment offering in Canada.  While your returns aren’t guaranteed, the regulators do a very good job ensuring certain levels of protection if anything goes wrong with your advisor or dealer.

Scared yet?

I don’t mean to scare you – there are way more quality people in the financial industry than there are scam artists and fraudsters.  Fraud is a ridiculously small percentage of the overall number of transactions that go on each day – but to the person caught by it, it can be devastating.  Be vigilant, ask lots of questions and do your homework.

Ryan