[LINK] Email Fraud, Very Naive Financial Services Corporation

[Yun Huang Yong]

At 09:00 AM 2/01/2008, Roger Clarke wrote:
>Stewart Carter's eCommerce Report 14, 18 of 21 Dec 07
>http://www.ecommercereport.com.au/
>reports on an interesting case in the Vic Supreme Court.
>
>In McGiddy v. Collins House, NMMT and Axa, a bloke is having to sue 
>to get $700,000 of his super fund back.  (No sign of it on AustLII yet).
>
>Collins House received an email in 2005, requesting that the money 
>be sent to an account in Indonesia.  They sent it.
>
>The email was not from the account that McGiddy had given them.  It 
>was from a Yahoo account.  And they took no steps to authenticate it 
>by seeking confirmation from McGiddy through some other channel, 
>such as, for example, the email-address he'd provided to them.

This was published in the AFR on 12 November 2007.

---
Client sues planners as super lost to web fraud | By Matthew Drummond

A financial planning firm is being sued after it unwittingly 
transferred $700,000 from a client's superannuation account to 
fraudsters operating in the Republic of the Congo.

Trevor McGiddy is also suing his superannuation trustee, AXA-owned 
NMMT, in a case that will test the obligations of superannuation 
trustees and financial planners to prevent their clients from falling 
victim to identity theft.

Mr McGiddy, a South African businessman, deposited $1.5 million into 
NMMT's iAccess personal superannuation fund in 2005 after working in 
Australia. Three months later, financial planners Collins House 
Financial Services, who had set up the account, received an email 
from a Yahoo! account set up in Mr McGiddy's name. The email 
requested that $700,000 be transferred to Bank Negara Indonesia.

In a writ filed in the Victoriam Supreme Court, Mr McGiddy alleges 
Collins House Financial Services had a policy of not accepting 
instructions by email and also knew his personal email was registered 
to a different account. In fact, the email was sent by fraudsters 
operating in Congo.

Nonetheless, an employee allegedly replied with a standard withdrawal 
form, which was filled out and returned four days later.

The Collins House employee then forwarded the form to the trustee and 
the money was transferred.

Mr McGiddy wants it back and has alleged breaches of care, skill and 
diligence. His lawyer, Mark Walter of Slater & Gordon, said the fraud 
was remarkably simple. As Mr McGiddy was a former company executive, 
many of his personal details, including his signature, were available 
on the internet.

"In the internet age, information is broadly available which can be 
used by fraudsters," Mr Walter said. "Are the internal processes 
adopted by financial institutions allowing for the transfer of funds 
adequate? This was an email from the Congo asking for money to be to 
sent to Indonesia. Doesn't that cause you to ask questions?"

AXA declined to comment as the matter was before the courts.

Collins House managing director Dominic Alafaci said the firm was 
concerned that money had apparently been withdrawn without a client's 
permission. "We can't make any further comment at this stage other 
tahn hoping the police catch those responsible for the fraud," he said.

At a directions hearing on Friday, NMMT and Collins House were 
ordered to file their defence by November 30. The parties are 
expected to return to court after mediation in February next year.

Four years ago, the Securitities Industry Research Centre of 
Asia-Pacific said identity fraud cost large Australian businesses 
$1.1 billion a year.
---

yun


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