APRA targets illegal early release on super
Monday, 8 February 2010 12:15pm
Planners should take note of how they can help clients combat the illegal early release (IER) of super benefits, following APRA's letter last week to super fund trustees vulnerable to the practice.
In the letter, APRA specifically targets IER involving transfers and rollovers into SMSFs, and outlined several steps to minimise chances of fraud occurring.
First up is a proof of identity check for fund members, including member information, checking for forged documents and contact details.
"The purpose of POI checks is to reduce the risk of ID fraud," noted APRA. Trustees should consider limiting the amount of personal information provided in communication to fund members, for instance.
Secondly, it's important to confirm that the SMSF is regulated. This will help to verify that the transfer/rollover is to a regulated superannuation fund.
For instance, APRA-regulated funds are permitted to transfer or rollover benefits to an SMSF only if it is a regulated fund, according to the letter.
Thirdly, trustees should complete additional checks for ‘Registered - status not determined' SMSFs.
"Additional checks are regarded as prudent because these funds have generally not been operational for long, and have not provided enough information for the Tax Office to determine their compliance status," said APRA.
The fourth step is to verify payment details.
IER promoters often seek to ensure payments are made directly to them so they can take their cut before passing the remainder to the member.
As such planners should help their trustee clients ensure the payment is made to an SMSF.
APRA has been working with the ATO to stem the increasing number of identify fraud and IER of super benefits cases, wrote S. G. Venkatramani, general manger of specialised institutions division at APRA.
Ruth Liew
