RRSP fraud or RRSP borrowing schemes
You’re told that you can withdraw money from your RRSP7 right now without paying taxes. It may also be a locked-in retirement account (LIRA), a pension plan or other registered funds.To do so, you will need to transfer the funds to an investment that will earn you a high return, for example, 40% per year. You’re told that this investment is also RRSP eligible, which is why you won’t pay any taxes. The fraudster is so confident about this investment that he’ll offer to advance you part of the future return in cash. For instance, if you invest $50,000, he may give you $25,000 in cash. The fraudster explains that you’re not risking anything: “Anyway, if you had taken the money out of your RRSP, you would have had to pay half in taxes.”
What are you risking by making this investment?
- Your money is not invested in the vehicle in question at the incredible rate. Instead, you may be investing in a company that’s worthless or that belongs to the fraudster. You will therefore lose your $50,000.
- Besides, contrary to what the fraudster told you, the investment is not RRSP eligible.
- You will receive a notice from Canada Revenue Agency claiming taxes for the funds withdrawn from your RRSP. You may very well have to pay the taxes even if you were a victim of fraud.
- In order to pay the taxes owed, you’ll have to use the $25,000 so generously offered by the fraudster.
- So in the end, the only winner is the fraudster, who makes off with
- your $25,000 ($50,000 – $25,000).
Amounts withdrawn from your RRSP, LIRA or pension fund are taxable.
Be wary when people make amazing promises. When something is too good to be true, it usually is.
This fraud has several variations. For example, some fraudsters will tell you that in order to withdraw money from your RRSP without paying taxes, you must first transfer your RRSP to an “on-line broker” (discount broker/dealer). To give their scheme a veneer of credibility, fraudsters will let you select a broker. They will then ask you for your passwords so they can access your accounts, telling you that they will manage them on your behalf. Fraudsters will then use this information to empty your accounts at the first chance. Remember that you must NEVER disclose your passwords or personal information such as your social insurance number, your mother’s maiden name, etc., except to companies in which you have complete trust and confidence. Some fraudsters are extremely adept at winning their victims’ trust.
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