Advisers’ failure to spot fraudsters could result in investors losing thousands of pounds, according to Serious Fraud Office (SFO) head of investment fraud Jane De Lozey.
Pension liberation fraud has been become one of the biggest stories in financial services this year, with the multi-agency task force Project Bloom, which includes the SFO, carrying out a series of raids and arrests in May, followed by a string of High Court cases involving the Pensions Regulator.
Gateways for fraudsters
De Lozey revealed details of Project Bloom in an interview with New Model Adviser® last year in which she also ruffled a few feathers by saying that advisers could lend fraudulent schemes, which are often based on transferring assets into a Sipp, ‘a veneer of respectability’.
In that interview, she said: ‘Not all IFAs are dodgy, far from it, but there are very many who are, and we will do our damnedest to go after them. They provide a veneer of respectability. IFAs need to be savvy about the ways they are manipulated.’
A year on and De Lozey believes her point remains valid, saying: ‘IFAs are very important to the running of these frauds, whether they are innocent parties who have been duped or whether they are more complicit.
‘They are crucial, they are a gateway. We need to get the message to them that there are very convincing fraudsters out there who talk the talk and persuade IFAs of the legitimacy of their investments. We have seen some IFAs putting their own money into the schemes and using it as justification,’ she said.
While De Lozey is keen to highlight that she believes the majority of advisers are honest, the SFO has renewed its efforts to clamp down on those it alleges are not.
Last month adviser Stuart John Stone was charged with fraud and bribery in connection with Sustainable AgroEnergy, a biofuel investment accessed through Sipps by a number of investors.
De Lozey said the charges against Stone highlighted her concerns about the role of advisers.
Stone, along with three other men charged with fraud in connection with Sustainable AgroEnergy, is due to appear before Westminster Magistrates Court on 23 September. These are just charges and nothing has been proven.
Combined fighting force
She said a sense of community between fraudsters made investigating pension liberation complicated but that establishing Project Bloom was beginning to pay off.
‘Because we could see what was happening [with pension liberation], we called together our partner agencies and said: “We’re all dealing with various aspects of pension fraud; we need to combine our efforts across the board”.
‘Because there’s an incestuous level of fraud, the business of it is franchised and the same names keep cropping up in unrelated cases,’ she said.
Loophole in Sipp rules
De Lozey said she would like to see tighter rules governing Sipps to prevent liberation fraud in the future.
‘Before I started dealing with pension fraud, I had no idea that anybody could be a trustee. Sipps weren’t really meant for the likes of us when they first came out and I think there was good reason for that,’ she said. ‘I’m horrified that you don’t need any professional qualifications to be a trustee. That seems to me to be a glaring omission.
‘The best thing we can do is publicise the dangers. Greater public awareness is the best route, so people think twice before they meet someone at the golf club who has a great idea about what to do with their pension.’