ASIC reforming complaint handling, as consumers report global losses

Chris Lee

It seems like “déjà vu” all over again, as consumers around the world continue to complain about investment losses. In recent years past, the complaints focused on the shady business practices exhibited in the binary options space, but loss experiences today reflect a newer brand of loss, typically having to do with cryptocurrencies or related Initial Coin Offerings (ICOs). The issues are also exacerbated by the fact that the crooks are now more clever when they use social media channels to attract victims or when they construct “clone” websites that look surprisingly similar to legitimate ones.

Forex Fraud

As for a current example, we can look to Australia and the firm of Dartalon Ltd, which also goes by the name of GFC Investments. Its website looks enticing enough. The firm claims to have been in business since 2012 and offers its clients the ability to “trade forex, contracts-for-differences (CFDs), and cryptocurrencies via its online platform”. Dartalon Ltd, which owns and operates the website, is located at: Suite 305, Griffith Corporate Centre, 1510, Beachmont Kingstown, St. Vincent and the Grenadines.

The Australian Securities and Investments Commission (ASIC), however, does not approve and has flagged the broker on its “Bad List”: “The business listed below has made unsolicited calls or sent emails about investing, financial advice, credit or loans and does not hold a current Australian Financial Services (AFS) licence or an Australian Credit licence from ASIC.”

Is this website a scam in action, ready to defraud you, after you put down your initial deposit? Maybe “Yes”, or maybe “No”… It would seem that the owners of GFC Investments would have learned long ago that ASIC does not approve of Australian citizens being solicited by an offshore firm that does not have a license to do so. After all, the broker has been around since 2012. ASIC has been adamant for quite a few years that a license is necessary, but this broker apparently chose to ignore the warning.

ASIC would not have responded as it did without the presence of a consumer complaint about the unregistered broker. Brokers across the globe in developed countries, as well as the developing countries, too, are forever warning their citizens about offshore solicitations from unauthorized forex brokers. The Financial Conduct Authority (FCA), the UK’s financial watchdog, and the Autorite des Marches Financiers (AMF), the French regulatory agency, have both recently published reports about consumer complaints.

As we recently reported on this website: “The Financial Conduct Authority, which is responsible for regulating financial services and markets, announced in partnership with Action Fraud that a figure higher than £27 million had been reported as lost due to cryptocurrency and foreign exchange fraud. The number of reports of fraud has also risen threefold, with more than 1,800 cases coming forward.”

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, announced that: “We’re warning the public to be suspicious of adverts which promise high returns from online trading platforms. Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal. Before investing online find out how to protect yourself from scams by visiting the ScamSmart website, and if in any doubt – don’t invest.”

Across the channel in France, the report there was also chilling: “The French stock markets regulator AMF has seen over a 14,000% surge in enquiries related to fraudulent crypto offers in 2018 as opposed to 2016, the agency wrote in a new annual report released May 7. In the report, the AMF specified that the number of enquiries associated with crypto-related scams online has surged to over 2,600 in 2018 from only 18 similar enquiries back in 2016.”

In Australia, the Competition and Consumer Commission released a report that revealed a 190% increase in cryptocurrency scams in 2018, with Australian consumers losing a tidy sum of USD $4.3 million. 674 reports were filed with Australian authorities in which cryptos were used to settle with scammers. Surprisingly, the report also noted that the age demographics of fraud are declining. Roughly 50% of the losses pertained to young men between the ages of 25 to 34. 43% of the losses were also tied to where citizens were asked to purchase specific tokens either for investment or for making initial deposits with a forex broker. Suspicions arose when withdrawal requests were ignored.

Australian authorities are well aware that these complaints may only be the tip of the proverbial iceberg. Many victims are just too embarrassed to report that they have been defrauded or they apparently do not know how to file what is called an Internal Dispute Resolution (IDR). In order to make the process easier and better known to its citizens, ASIC has published a consultation paper in which it outlines proposed changes.

The agency is suggesting that social media be an acceptable reporting method and proposes the following:

  1. “Adopt a proactive approach to identifying complaints made on their social media platform(s);
  2. Have processes in place (including appropriate links between media and complaints departments) to deal with these matters through their IDR process; and
  3. At a minimum, the regulator expects that complaints made on a financial firm’s own social media platform(s) will be dealt with through the firm’s IDR process when the consumer is both identifiable and contactable.”

ASIC is also moving to improve the timeframes for responding to IDRs, as well. For pension plan related complaints, response times will be reduced form 90 to 45 days. For all other complaints, the acceptable response time will now be 30 days instead of 45, but hardship notices will still be handled within 21 days.

Per the agency’s announcement: “ASIC seeks public feedback on the consultation documents by August 9, 2019 and aims to release new IDR standards by end 2019.”

Concluding Remarks

Consumer complaints are on the rise on a global basis, and this time around, they seem to be centered primarily in the cryptocurrency arena. Regulators have already been clamping down hard on Initial Coin Offerings and warning consumers to increase their levels of due diligence before investing. ASIC, to their credit, has gone two steps further by expanding the options for reporting any investment complaint and by improving the response times of the agency when an IDR is filed with them.

In any event, always remember that you are both your first and last line of defense when it comes to preventing forex fraud. Don’t be a victim!

Chris Lee

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