ASIC provides guidance to firms on protection against share sale fraud

Maria Nikolova

The Australian regulator has detected a rise in the instance of share sale fraud, primarily in connection with issuer-sponsored holdings.

The Australian Securities and Investments Commission (ASIC) today publishes guidance for Australian financial service (AFS) licensees about how they can handle the risks to their clients and business of share sale fraud. The regulator has identified a rise in the instance of share sale fraud, primarily in connection with issuer-sponsored holdings.

Share sale fraud refers to the fraudulent activity of a person who is not who they claim to be, selling shares that do not belong to them.

The regulator has observed that one-off share sales are particularly vulnerable to share sale fraud, with many share sale frauds involving the sale of large parcels of issuer-sponsored holdings. ASIC advises AFS licensees to consider implementing additional controls when handling one-off share sales. For instance, companies may record and compare the geographic location of the full IP address (including port number) used to submit an application to open a trading account with the address of the prospective client and/or identity document certifier. The AFS licensees may also record the device type and internet browser used to open a trading account and keep this information on the client’s file. Then they can compare this information with the device type and internet browser used for high-risk transactions/interactions (e.g. one-off sales or changing account details) and conduct further due diligence in case of inconsistencies.

Additionally, ASIC encourages AFS licensees to monitor the adequacy of their client onboarding and customer due diligence practices. AFS licensees should regularly review or spot check new accounts – these checks should preferably be conducted by someone not involved in the day-to-day client onboarding process.

The Australian regulator notes the risks associated with fraudulent access to existing customer accounts. However, these risks may be mitigated with effective ongoing customer due diligence (OCDD) measures. OCDD should be embedded into an AFS licensee’s AML/CTF program, and AFS licensees should conduct further due diligence when customers request changes to personal information (such as postal/email addresses and bank accounts).

Further, ASIC considers that there is a heightened risk of share sale fraud where market participants offer white labelling services to other intermediaries, as market participants often do not have direct visibility of their intermediary clients’ customer due diligence practices. While the obligation to verify a customer’s identity rests with the entity providing the designated service, the regulator encourages market participants to regularly (at least every 12 months) review the adequacy of their intermediary clients’ customer due diligence practices.

AFS licensees suspecting that a person (or their agent) is not who they claim to be must provide a suspicious matter report (SMR) to the Australian Transaction Reports and Analysis Centre (AUSTRAC) within three business days after forming the suspicion, and within 24 hours if the suspicion relates to terrorism financing.

  • Read this next

    Podcasts, Women of the Industry

    FF Podcast delves into the rise of prop trading as Brokeree releases Prop Pulse

    In the latest FinanceFeeds Podcast, Tatiana Pilipenko discusses Prop Pulse, Brokeree Solutions’ platform for prop firms and retail brokers aiming to delve into prop trading. Offering a flat fee structure, Prop Pulse emerges as a scalable solution in an era where successful traders increasingly prefer prop firms over traditional retail brokers.

    Inside View

    Scalping or day trading?

    Among the many popular trading styles with both beginners and experienced traders are scalping, which allows you to extract small portions of profit from each price movement, and day trading, which aims to trade over a single day. In this article, you will learn what scalping and day trading are and their differences and peculiarities. Ultimately, you will learn what to look for to understand which trading style is right for you.

    Crypto Insider

    Unveiling Plasma Next: INTMAX’s Solution to Scale Ethereum with Stateless Layer

     INTMAX has launched Plasma Next on the mainnet α, a groundbreaking Layer 2 zkRollup, revealed by co-founder Leona Hioki at ETH Denver. This innovation offers scalability with constant costs per block, merging Plasma’s scalability goals with zkRollups’ security.

    Fintech

    Nuam selects Vermiculus for clearing system in Chile, Colombia, and Peru

    “We are proud to deliver a system that plays an integral role in the core of this historical merger, empowering one of Latin America’s most crucial markets with VeriClear’s state-of-the-art technology, together with our deep market expertise.”

    Retail FX

    Moomoo launches super app in Malaysia

    “As an investment platform connecting 21 million retail investors globally, we envision collaborating with exchanges, regulatory bodies, and partners in the visible future to become the gateway, connecting Malaysia’s investment products to global capital and investors.”

    Executive Moves

    FXPA elects Joe Hoffman as new Chair in its 10th anniversary

    “The opportunity to serve as Chair of the FXPA is truly an honor, and I am committed to upholding the exceptional work of a FXPA. Given the recent market fluctuations due to global tensions, inflationary pressures, shifts in monetary policy, as well as the outcome of the US election and the risk of recession, brings the potential for more FX volatility in 2024. I am dedicated to expanding the FXPA’s membership and I’m excited about collaborating with all members to echo the unified voice of the FX market.”

    Market News

    Eurozone Fights Stagnation Whilst Stock Indices Rally

    European stock markets are defying economic gloom as they continue to soar to all-time highs, showcasing resilience amidst broader economic challenges.

    Web3

    Lisk Partners with Indonesia’s Communications Ministry to Boost Web3 Startup Ecosystem

    Discover the strategic partnership between Lisk and the Indonesian Ministry of Communications and Informatics, aimed at propelling local Web3 startups to new heights through comprehensive support and education.

    Executive Moves

    Admirals appoints founder Alexander Tsikhilov as CEO

    “Striking the right balance between sourcing new talent and developing and harnessing the strength and capabilities of our current workforce, is key to achieving our vision.”

    <