Fraud at Income Asset Management Raises Questions Over Controls and Reporting
Income Asset Management has resumed ASX trading after revealing a $1.5 million fraud involving a former employee, while assuring clients their assets remain secure under current custodianship.
- Approximately A$1.5 million fraudulently transferred to former employee
- Client assets remain secure with current custodian, unaffected by fraud
- Investigation involves forensic accountants and multiple regulatory authorities
- Potential restatement of FY25 accounts under auditor review
- Company maintains sufficient resources to operate normally and meet obligations
Background and Discovery
Income Asset Management Group Limited (ASX, IAM) has announced the resumption of its trading on the Australian Securities Exchange following the identification of fraudulent transfers totaling approximately A$1.5 million. These transfers were made from a bank account managed by the company’s previous sub-custodian to the account of a former employee. Importantly, the company confirmed that these funds do not include client assets, which remain securely held by their current custodian, Perpetual Corporate Trust.
Investigation and Response
The fraud was uncovered during an extensive account reconciliation process involving IAM staff and forensic accountants from FTI Consulting. This review scrutinized nearly 22,000 transactions dating back to June 2021, with only a small number of transactions still under manual review. The company has promptly notified its insurers and initiated legal action through the Federal Court of Australia to preserve assets and gather further information.
Regulatory bodies including ASIC, AUSTRAC, and Queensland Police have been informed, reflecting the seriousness with which IAM is treating the matter. The company’s auditors, BDO, have also been advised, as there is a possibility that some revenue related to the fraudulent funds was not properly recognized in the FY25 financial statements. IAM is working closely with auditors to determine if a restatement of accounts is necessary.
Client Asset Security and Operational Stability
IAM emphasized that client assets are held separately and securely by Perpetual Corporate Trust, which manages custody and settlement processes. Daily reconciliations between cash and securities are performed, and client holdings are regularly reported, ensuring transparency and safeguarding. The fraudulent activity is isolated to the previous sub-custodian’s bank account and does not impact the bond administration or custody arrangements currently in place.
Despite the disruption, IAM reassures stakeholders that it retains sufficient financial resources to continue its operations and meet all obligations to clients and shareholders. The company remains actively engaged in debt capital raising and other transactions on behalf of its clients.
Looking Ahead
Income Asset Management’s swift action to uncover and address the fraud reflects a commitment to transparency and client protection. The ongoing investigations and potential financial restatement will be closely watched by investors and regulators alike. IAM has pledged to provide further updates as the situation evolves and investigations conclude.
Bottom Line?
IAM’s handling of the fraud crisis will be a critical test of its governance and resilience in the months ahead.
Questions in the middle?
- Will the FY25 financial statements require restatement, and what impact will this have on reported earnings?
- What internal control weaknesses allowed the fraudulent transfers to go undetected for years?
- How will client and investor confidence be affected as investigations and legal proceedings unfold?
