Financial abuse: The five red flags hiding in plain sight

About the episode

A joint bank account. A new company registration. Signing on the dotted line for a family trust. When you build a life or a business with a partner, combining your money feels like the ultimate team move. But what happens if things take a wrong turn?  

In Australia, 16% of women and 8% of men experience intimate partner financial abuse. UNSW Professor Ann Kayis-Kumar explains how easily standard financial structures can be manipulated for financial abuse.  

A Founding Director of the UNSW Tax and Business Advisory Clinic, Professor Kayis-Kumar, shares the simple steps you could take to check your financial safety. And for professional advisors, hear the crucial workplace practices you can put in place to ensure you aren’t facilitating the abuse.

Need help? You can reach out to 1800 Respect (1800 737 732), a 24/7 free, national domestic violence hotline. For help navigating financial safety, contact Financial Abuse Service NSW at Redfern Legal Centre.

Want to ensure your customer data is actually safe? Listen to our episode with Laura Newton, Regulatory Lawyer and Cyber Incident Response Lead at Herbert Smith Freehills.

The Business Of podcast is brought to you by the University of New South Wales Business School, produced with Deadset Studios. It’s hosted by Dr Juliet Bourke, and an edited transcript is available below.

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Edited transcript

Dr Juliet Bourke  00:04
Here's a question: could someone be using your finances against you right now? And, would you even know? Maybe it's a business partner quietly redirecting revenue, a family member running up debt in your name, a co-director filing returns you've never seen, or a system so complicated that, by the time you realise something's wrong, it's already too late.

Professor Ann Kayis-Kumar  00:31
Unfortunately, anyone can be a perpetrator, and anyone can be a victim or survivor, and it has nothing to do with education levels or socioeconomic status. It's a power dynamic, it's about money and power and control.

Dr Juliet Bourke  00:44
Financial abuse affects more than 2.4 million Australians, and costs the economy nearly $11 billion a year. What are the subtle red flags that you might be missing? And as an individual, how can you protect yourself? I'm Dr Juliet Bourke, Adjunct Professor at the School of Management and Governance, and this is The Business Of a podcast by the UNSW Business School. The UNSW Tax and Business Advisory Clinic helps financially vulnerable people. Professor Ann Kayis-Kumar is one of the founding directors, and her research is contributing to how our national tax systems are protecting people from financial abuse. Ann, can we just start by defining what financial abuse is, and who's most commonly affected by it?

Professor Ann Kayis-Kumar  01:30
Financial abuse is a pattern of sabotage, exploitation, and restriction of money in an intimate partner relationship, and that's where we've seen it most pointedly at the tax clinic. Who does it affect? Unfortunately, there is an overrepresentation of women experiencing intimate partner financial abuse. We know, from the Australian Bureau of Statistics, that it's 16% of Australian women and 8% of Australian men. So either way, unacceptably high levels where millions of Australians are affected by intimate partner financial abuse, and those numbers are probably underestimates, because it's so difficult for even the victim survivor to identify that that's what they're experiencing, because of the pervasive, insidious nature of the abuse. There's also a piece about social norms, where it's almost expected that when you get married, you'll have a joint bank account. But even something as innocent as joint finances, joint bank accounts, joint business structures, when you start your own family business, can so readily be flipped and weaponised by a perpetrator if they have that intention.

Dr Juliet Bourke  01:47
Do you mind just clarifying for me the 16% and the 8%? What was the question that the ABS asked?

Professor Ann Kayis-Kumar  01:47
So this was in relation to women experiencing, or women or men experiencing domestic and family violence, and so there it was quantifying the number of women who at a population level reported yes to experiencing that, and of course, these are estimates. We know that since the ABS ran that study, we've had increased awareness at a general population level, but also increased awareness of the different ways that this very insidious form of abuse can pop up. For example, when the ABS was running that study, tax-facilitated financial abuse was not on the radar.

Dr Juliet Bourke  01:47
You mentioned that 8% of men say they experienced financial abuse across their life course, and I'm wondering, what does that look like?

Professor Ann Kayis-Kumar  01:47
I mean, it's quite comparable in terms of the overall pattern, because ultimately it's about control and power dynamics. And so, this is not just a cisgender issue, of course, and so there's a lot of emerging literature on how men experience abuse, and it's really important that there's no stigma attached to that, because it can happen to anyone. Unfortunately, anyone can be a perpetrator, and anyone can be a victim survivor, and it has nothing to do with education levels or socioeconomic status. It's just unfortunately where someone has a sinister intention around power, control, and money.

Dr Juliet Bourke  01:47
Tell me a little bit more about how it arises and how we think about it now. What's changed?

Professor Ann Kayis-Kumar  02:33
What we've experienced at the clinic with our frontline casework has been really illuminating. So, when I first started the clinic in 2019, we were screening for domestic violence. I previously had a placement at the Kingsford Legal Centre when I was a university student at UNSW (and specifically, the domestic violence clinic). I was one of the first students in that clinic. And that was such a formative experience for me, and it really opened my eyes to the fact that domestic violence isn't just the physical, it can be really damaging and have a really long tail at a financial level, and in fact, post separation, that's when financial abuse escalates. We know it takes, from the literature, about seven attempts for a victim survivor to escape a domestic violence situation. And we know that economic instability can lead her back to the perpetrator. So it's really important that victim survivors who are escaping and trying to recover from the abuse are given the financial means to do so. And so I started screening, and my frontline team started screening for economic abuse as well. And over the years, it's always been a consistent range between 60 to 80% of our female clients that we help with the clinic self-reporting yes to domestic violence and financial abuse. So that's then driven our research agenda, and in turn our advocacy, because that is really unacceptably high, and the way it arises is through the use of family business structures in the tax context. If you have a family business where both the husband and wife, for example, are involved, but one of the two has more decision-making power, control, and access to finances and accounts. Then that can very easily be red flags of financial abuse, and can very readily be weaponised post-separation by the perpetrator. That's the bit that really is troubling, and where policymakers' attention has been focused on very recently as part of the Commonwealth systems abuse audit, because we shouldn't have situations where professionals like accountants, lawyers and tax practitioners are unwittingly being mobilised. We shouldn't have situations where ASIC registers are being misused to further perpetrate abuse, or the tax office is unwittingly mobilised by sending in debt collectors to victim survivors for debts that they were never responsible for creating.

Dr Juliet Bourke  07:19
There's a lot in what you've just said, and let's pull on some of those threads. I think one of them is that you're talking about domestic violence, and you're also talking about financial abuse. Do they always go hand in hand? Is that just an expression of domestic violence, or do you see financial abuse sort of standing in its own right?

Professor Ann Kayis-Kumar  07:43
The way I conceptualise it is that the broad umbrella is domestic and family violence. Within that, there's intimate partner violence, and within that, one of the patterns, one of the ways that perpetrators exert control over victim survivors is through various forms of abuse, and financial and economic abuse is one of those forms. But it all forms part of a pattern of coercive control.

Dr Juliet Bourke  08:05
So, how do you know that it's actually crossed the line? Because many relationships are quite traditional in that it would have been the man who controlled the finances, in all good faith. How do you know that it suddenly turned into coercive control?

Professor Ann Kayis-Kumar  08:21
And that's the piece where the cultural and the social norms, and the expectations, can so easily become a slippery slope into creating the structures that facilitate it. So, we at UNSW have been trying to map some red flags to help conceptualise what it can be, because it's very hard for victim survivors to even identify that that's what they're experiencing, because it just shapes so much of their experience, and it becomes so difficult to unpick. But the top five red flags of financial abuse that we've put together on a poster is one, controlling access, so restricting access to money, bank accounts, business income, and tax information, so not having the degree of control. Two, hiding money, so where a perpetrator is keeping finances secret, hiding income or assets, and that's obviously it's so easier said than done, because how are you supposed to know. The third element we've noticed is shifting debts, and that's where debts are put in the victim survivor's name, and then one way that that comes out is in a banking context, but another way that that comes out, specifically in the tax setting, is with the creation of tax debts in the name of the victim survivor.

Dr Juliet Bourke  09:42
How do you do that? How does one person put a debt in another person's name? Surely there needs to be some signed documentation to support that.

Professor Ann Kayis-Kumar  09:51
Unfortunately, it's very easy because we don't have a system designed with safety at the forefront. Rather, there's just an assumption that everyone's going to do the right thing, and that if someone's signature appears on a document, it's usually taken as given. But we know from our clients, for example, one of our clients who we've been helping for years now, to help unpick all of the complicated spider web of structures that the perpetrator set up and put her in situations where she was receiving directed penalty notices from the tax office, which gives you 21 days to pay the full amount of the debt, otherwise you go bankrupt. With her, the perpetrator, her ex-husband, had created a fake email in her name and was giving instructions as her to the accountant, who hadn't verified that it was actually her, and the excuse was, "Oh, I'm too busy with the kids, I can't make the appointment, just go and do this." And so he would sign as her. So there's a piece here about the role of the profession, being aware, and having, I guess, KYC hygiene around these practices.

Professor Ann Kayis-Kumar  11:00
KYC?

Professor Ann Kayis-Kumar  11:01
"Know your client." So, not just taking it as a given that if you give a document to the husband in the relationship, he can take it, have a fully informed discussion with the wife, and then bring back the documents, both signed. Like that isn't the safest way to ensure there is no situation where abuse is happening, and that leads us to the fourth red flag: making decisions. So, when she's not even at the table in a client advice situation, then she's not making decisions. The decisions are being made for her, she's being used in that sense, and that can be coupled with restricting access to money, knowing what's happening, and having decisions being made without the victim survivor. And then that dovetails with the fifth red flag: inaccessible or unclear information. So, having business structures and financial arrangements that have been set up that control and block access to money, rather than a genuine partnership, where you have two people with look-through and decision-making and control and understanding of what's going on.

Dr Juliet Bourke  12:12
Can you talk to me about superannuation? The government has placed great emphasis on ensuring that women have a good nest egg. Is that an area that's already ripe for financial abuse? Is it going to become one in the future? How do you see that?

Professor Ann Kayis-Kumar  12:28
This wasn't on our radar until just recently this year and late last year, when we had a number of clients who came to us, all women, all victim survivors, who some of them didn't even realise that an SMSF had been created in their name.

Dr Juliet Bourke  12:45
A self-managed super fund.

Professor Ann Kayis-Kumar  12:47
That's right, but a really troubling situation where victim survivors have had their superannuation fund balances taken out of an APRA-regulated fund and put into a self-managed super fund, which is then drained by the perpetrator. So not only does she have $0 of superannuation, but she is also trying to unpick the complex web of structures, and this is just one of them. But in the situation where the client I was telling you about the SMSF, she received a red letter from the ATO. So the ATO has different colours of letters, and the red letter is obviously, as you can imagine, the most extreme, the most forceful one. The red letter said that an SMSF, which, by the way, she did not know had been created in her name, had been non-compliant for five years. And, obviously, that's a breach; it's illegal for an SMSF to be in that situation. So, there were about $16,000 in penalties for each breach, and the most troubling part of that letter was that it could also be coupled with up to 12 months in prison. So, for someone who didn't even know that there's an SMSF, let alone the realisation that there's $0 left in the SMSF, she doesn't have access to the trust's deeds or look-through or control or anything to find that she now has no super and the tax office is chasing her, and she might be in prison for a year, when she's trying to recover from the experience of escaping abuse and look after two children. That's just awful, and a situation where there's no real support, superannuation, or pro bono support from a self-managed super fund specialist in Australia. But we do know that the numbers are staggering. SMSFs have grown to hundreds of thousands, and the Tax Office, just earlier this year, gave a presentation to the SMSF Association, noting that, for that particular year alone, there was $252 million in illegal early access. So, an illegal early access situation, and one of the top three reasons was relationship breakdown. No one has quantified the prevalence of financial abuse as a dimension within this problem, and given the consequences, eroding or entirely destroying someone's nest egg, and we know that women in their 50s are a group that's at the highest risk of homelessness. It's just an awful situation when systems are misused and weaponised in this way.

Dr Juliet Bourke  15:43
So Ann, I'm thinking about accountants, lawyers, and financial planners who have clients and are dealing with financial issues, and I'm wondering: might they be unwittingly enabling this to happen between the perpetrator and the victim?

Professor Ann Kayis-Kumar  16:00
Unfortunately, that is a risk. Absolutely, and there is an academic paper on this very topic. So, Professor Kay Cook and her team did a word analysis of all of the victim survivors' submissions to the financial abuse inquiry conducted by the Parliamentary Joint Committee a couple of years ago. And they found patterns in the professions used by perpetrators, with the top two being accountants and lawyers, unfortunately.

Dr Juliet Bourke  16:26
And what should those accountants and lawyers have been looking for? What were the red flags that they should have noticed?

Professor Ann Kayis-Kumar  16:38
This is really challenging, because it goes to what we have so easily normalised as professionals. So, having only the husband in the room, for example, where you're advising a family business, and trusting that he's going to get his wife to sign the documents and bring them back to you. Or only having conversations with him, because you know she's at home, or she's busy, or whatever else. It's so easy for a perpetrator to make it seem so innocent. But where a victim-survivor isn't in the room, she doesn't even have an opportunity to be part of the decision-making process or to have access to information, so opacity can be used instantly.

Dr Juliet Bourke  17:23
And I think you've got a story about a man at a conference who was trying, professionally, to help people, only to find out he wasn't. What was that about?

Professor Ann Kayis-Kumar  17:34
We've had a number of situations where after every workshop or seminar or conference or discussion where we're raising awareness around financial abuse and talking about the red flags, just like you and I have done today, where a professional will come up to us at the end of the session and disclose that either they themselves have been a victim survivor, so this is a professional identifying it in themselves, or reflect on situations where they have realised that they have been unwittingly mobilised. So the first time it happened was the most poignant for me. One of the partners in that room, his eyes started welling, and he said, "For the last three years, I've been in a situation where this has been happening, and I just didn't pick up that there was this dynamic between the husband and wife." So that, for me, really highlights that professionals don't want to be involved. For the vast majority of people, we don't have, thank goodness, a situation where people are deliberately trying to misuse systems. But what we can do is raise awareness around it, so that for the vast majority of people who are professionals going about their day, trying to do the best thing that they can for their clients, they're not unwittingly falling into situations where their work is a further tactic of someone else's abuse.

Dr Juliet Bourke  19:03
What do you think a professional should do to make sure they're protecting their clients?

Professor Ann Kayis-Kumar  19:08
I'm really glad you said 'their clients,' because looking at the clients as a couple and as individuals is really important. So, it can be quite tempting to create structures that optimise for the main client, but it's also important to be aware of risks and mitigate them for both parties in that relationship, when we're talking about family businesses. Make sure that something as simple as a trust distribution or transfer hits the accounts you know the party has access to, rather than just going with the account that's given.

Dr Juliet Bourke  19:52
So it's a joint account, for example?

Professor Ann Kayis-Kumar  19:54
There are situations where we've seen from our practice, our casework, that distributions are declared, but the money is never in the account, or the victim survivor hasn't had access to the account to begin with, and these are all things that can add up because they give rise to tax liabilities, and where you've not even received the money, but then you're liable for the downstream tax effect. Then that creates a problematic situation if you don't have access to.

Dr Juliet Bourke  20:27
For individuals, what basic checks should they perform on their own accounts, trust, my.gov or company registrations? What should they be doing?

Professor Ann Kayis-Kumar  20:38
In the ideal world, it would be one where you wouldn't need to keep looking behind your back to check to see if something's been done, and sometimes it's not even possible to see if there's a trust deed, for example, with your name on it that you've never had access to. But some of the really foundational things, like being in the room with the accountant, or the tax advisor, or the lawyer, are a really important piece of the puzzle, being aware of decisions that are being made that have implications for you. Many of our clients trusted that their husbands, now former husbands, would do the right thing and file the tax returns, or that the professional the husband was dealing with would file them accurately and fairly. But that's not always the case, and so it really, though, shouldn't be up to the victim survivor to be protecting herself from professionals and systems. It should really be about making perpetrators accountable when they misuse those systems. So I think, on the one hand, there's a really strong case for having access and visibility. But the other part of that equation is having severe consequences for perpetrators when they misuse or breach that trust.

Dr Juliet Bourke  21:59
What are a few key things that people should do if they're worried about financial abuse?

Professor Ann Kayis-Kumar  22:03
Yeah, a couple of things to think about. Just checking where you are at an individual level with your taxes: check my.gov, check the Tax Office portal, see if there are any outstanding tax returns, check your director ID. Do you have a director ID? What is it linked to? Have a direct relationship with the lawyer and the accountant in the family business, so you're in the loop on the decisions being made. That can't always happen, but where it can, it's important to be aware of what's going on, not just at a family structuring level, but also at an individual implications level, and where you have concerns, please reach out to specialist support. So, we have a national domestic violence hotline. It is free, it's 1800 RESPECT. And there's also specialist services like the Redfern Legal Centres Financial Abuse Service, New South Wales, which is a statewide service. They are brilliant and can help with things like safety planning and navigating complexity, so that you're not on your own.

Dr Juliet Bourke  23:09
That's Professor Ann Kayis-Kumar from UNSW Business School. She's one of the founding directors of UNSW Tax and Business Advisory Clinic. If you want to hear more about building safer systems to protect your customers, listen to our episode on cybersecurity with Laura Newton from Herbert Smith Freehills.

Laura Newton  23:28
When you look at all sorts of cyber incidents, people are your biggest risk. It's anywhere between 75% and 95% of all cyber incidents that start with human error.

Dr Juliet Bourke  23:44
You'll find the link in the episode description. The Business Of is brought to you by the University of New South Wales Business School, produced with Deadset Studios.

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