Pension scheme trustees have been encouraged to ensure that controls are in place to protect against fraud, with RSM UK warning that recent market turmoil could make pension scheme investments a potential target for fraud.

The provider suggested that the recent market volatility and the end of the Bank of England’s market interventions could provide an opportunity for fraudsters, as the high volume of investment transactions could make pension scheme investments a potential target.

To mitigate the risk, RSM UK has encouraged trustees to ensure that controls put in place to protect pension funds from fraud are being properly adhered to.

This includes whether the signing authority mandate is up to date for all investment managers, whether investment transaction instructions are protected so funds can only be moved to agreed sources, and whether there are similar controls to ensure any additional funds provided by the sponsoring employer can only be moved to the pension scheme bank account.

RSM UK pensions audit director, Elisabeth Storey, commented: “Investment consultants, managers and trustees have been making quick decisions about when and where to move their investments and how to access their liquid funds.

“This additional time pressure may mean corners are cut in ensuring robust controls are in place and investment transactions are legitimate.

“We are also seeing an increase in pension scheme trustees approaching their sponsoring employer for loans to support liquidity requirements, which creates another potential opportunity for fraudsters.

"It is well known that one of the scam red flags is emergency warnings to push victims into acting quickly. The risk is that, among all the genuine time-pressured investment and disinvestment instructions taking place, a fraudulent instruction could easily slip through the net."

Storey explained that although all trustee boards will be keeping an eye on the markets and monitoring the impact upon their investments, caution is needed to ensure that instructions given are genuine.

“With pension fund values already plummeting, it would be a double blow if problems were compounded by a fraudulent disinvestment by a scammer capitalising on the current pressurised environment," she added.

"Trustees should have this at the forefront of their minds as they look to comply with the forthcoming single code. Trustees should also remember that if an investment sounds too good to be true, it generally is. Appropriate due diligence is critical to ensure pension funds are protected."

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