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Strong increase in whistle-blowing tip-offs. More than half relate to investment fraud, particular with crypto assets

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Whistle-blowers, who usually provide anonymous tip-offs and report irregularities in supervised entities, dubious providers or market practices, have evolved into an important source of information for the Austrian Financial Market Authority (FMA). In 2020, some 278 tip-offs were submitted via the whistle-blowing platform on the FMA’s website, a new record since the system was introduced in 2014, with a 57% increase being observed over the last five years alone. In around nine out ten tip-offs there is content that is relevant to the supervisor. Of the 245 tip-offs that fell in the FMA’s scope of competence, around half were in relation to investment fraud (120) and the unauthorised conducting of business (9), ie. providing financial services requiring a licence without the necessary authorisation to do so. Almost a third (77 tip-offs) voiced a suspicion about transgressions at banks, while only 4 cases related to insurance undertakings and pension funds (Pensionskassen). 19 related to securities business and 15 about the suspicion of money laundering.

Considerable confidence in the FMA’s whistle-blowing system

“Our web-based whistle-blowing platform guarantees whistle-blowers complete anonymity on a technical level. Information is cryptographically encrypted, meaning that it is not technically possible for us or for criminal prosecution authorities to identify the informant”, remarked the FMA’s Executive Directors, Helmut Ettl and Eduard Müller: “This boosts confidence and creates a sense of security, and is one of the significant reasons, why this information channel is becoming increasingly well-received.” At the same time an anonymised mailbox allows communication between the authority and the whistle-blower, provided the whistle-blower gives permission to do so. “Our whistle-blowing platform is a very important – and often preventive tool in the fight against investment fraud and dubious market practices. Irregularities are often able to be recognised at an early stage, thereby limiting the extent or even preventing damage from occurring. It makes a valuable contribution towards the protection of consumers, investors and creditors,” remarked Ettl and Müller.

Two-thirds of the tip-offs about investment fraud nowadays relate to offerings in conjunction with crypto assets and so-called virtual currencies, with distribution occurring via dubious or criminally-operated online trading platforms, and frequently are advertised over social media platforms like Facebook, WhatsApp, TikTok or Telegram. In addition to the distribution of fraudulent crypto assets, criminal trading in virtual currencies is continuing to increase. The dubious trading platforms in particular offer contracts for difference (CFDs), foreign exchange trading (FOREX) as well as apparently automated trading with such kinds of apparent investment products. Note: the offering of binary options to retail investors is forbidden in the EU, while the offering of CFDs is strongly restricted in regulatory terms. A third of the tip-offs about investment fraud related to fraudulent offerings with traditional investment products such as shares or gold as well as different forms of advance payment fraud.

Whistle-blowing tip-offs in 2020 have led to seven investor warnings being issued, 42 notifications to the Public Prosecutor’s Office as well as large number of official procedures by the FMA as well as penal orders.

Journalists may address further enquiries to:

Klaus Grubelnik

FMA Media Spokesperson

+43 / (0)1 / 24959-6006 or +43 / (0)676 / 88 249 88249516

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