Bankruptcy fraud on AFSA agenda with more than $4 million of frauds identified

The personal insolvency regulator, the Australian Financial Security Authority (AFSA), has identified and proven over $4 million of fraud, according to a new report released today.  

The Personal Insolvency Compliance Report, available now on the AFSA website, outlines AFSA’s compliance, regulatory and enforcement activities across the 2018-19 financial year.  

Hamish McCormick, Chief Executive of AFSA and Inspector-General in Bankruptcy, said the annual Personal Insolvency Compliance Report provides insight into the regulation of Australia’s personal insolvency system.

“AFSA is working to be both a firm and a fair regulator,” McCormick said.

“We undertake regulatory and compliance work to ensure that the personal insolvency system is equitable, and that all participants are meeting their obligations.

“Overall, we aim to provide the community with a personal insolvency system that they can have confidence in.”

McCormick highlighted some of the report’s key findings – including complaints against registered trustees and criminal prosecutions.

“In 2018-19, we received nearly 2,000 referrals of alleged misconduct,” McCormick said.

“We analysed each referral and found that 744 warranted further investigation. We referred 115 of these matters to the Commonwealth Director of Public Prosecutions.

“In total, 96 individuals were prosecuted for offences under the Bankruptcy Act. Our prosecutions attracted wide-ranging penalties, from fines to imprisonment.

“Pleasingly the number of prosecutions decreased in 2018-19, down from 137 in the previous year. The overall value of proven fraud also dropped, down from $5.5 million in 2017-18 to $4.6 million.”

Complaints about registered trustees, and the Commonwealth Government’s Official Trustee, both increased in 2018-19.

“In 2018-19 we received 296 complaints about practitioners, up from 257 the year prior. Similarly, complaints about the Official Trustee also rose – we received 48 compared to 10 in 2017-18.

“However, only nine complaints about registered trustees were found to be justified. And only one complaint about the Official Trustee was justified.”

The report noted that the conduct of untrustworthy bankruptcy advisers remains a potential threat to community confidence in the personal insolvency system.

In 2018-19, AFSA made a concerted effort to disrupt the activities of untrustworthy advisers, who provide dodgy advice to people at a time when they are in financial difficulty and vulnerable.

“In 2018-19, we worked closely with registered trustees and industry bodies to identify and disrupt untrustworthy advisers,” McCormick said.

“During the year we finalised three prosecutions involving untrustworthy advisers, and one more is still in progress.

“We will continue to target untrustworthy advisers in an effort to protect the integrity of the personal insolvency system. And where appropriate, we will refer matters to the Commonwealth Director of Public Prosecutions for action.”

The full report is available now on the AFSA website.