The Financial Conduct Authority (FCA) is warning investors to be vigilant concerning the threat posed by investment scammers, with the latest data from Action Fraud revealing over £197 million of reported losses in 2018. Victims were scammed out of over £29,000 on average last year as the fraudsters employed increasingly sophisticated tactics to persuade victims to invest.
According to data from the FCA’s Call Centre, the most commonly reported scams involved investments in shares and bonds, forex and cryptocurrencies by firms that are not authorised by the FCA. Together, they accounted for 85% of all suspected investment scams reported in 2018. People are being warned to be particularly vigilant during the first quarter of the year, the peak investment season, as many look to invest before the tax year end.
Interestingly, the profile of investment scams is changing as more and more individuals are being targeted online, moving away from the traditional cold-call. Fraudsters are now contacting people through e-mails, professional looking websites and social media channels such as Facebook and Instagram. Last year, 54% of those who did the right thing by checking the FCA’s Warning List had been contacted by potential fraudsters via online sources, which was up from 45% in 2017. The FCA’s Warning List is a tool that helps users to find out more about the risks associated with an investment and search a list of firms the FCA knows are operating without its authorisation.
Though the contact methods used by fraudsters may vary, their tactics remain the same. The FCA is working with financial expert and experienced investor Alvin Hall to educate on the most common tactics used by investment scammers.
Follow the warning signs
The FCA is urging people to be vigilant when making investment decisions and specifically to look out for these six warning signs:
*Unexpected contact: Traditionally scammers cold-call, but contact can also come from online sources (eg e-mail or social media, by post, word of mouth or even in person at a seminar or exhibition)
*Time pressure: Scammers might offer a bonus or discount for people who invest before a set date or may say the opportunity is only available for a short period
*Social proof: Fraudsters may share fake reviews and claim that other clients have invested or want in on the deal
*Unrealistic returns: Fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than are available elsewhere
*False authority: Scammers might make use of convincing literature and websites, claiming to be regulated and speak with authority on investment products
*Flattery: Fraudsters may attempt to construct a friendship in order to lull people into a false sense of security
Amount lost “staggering”
Alvin Hall, a personal finance expert who’s supporting the campaign, said: “The amount of money lost last year to investment fraud is staggering. If my 30 years of experience in investment markets has taught me anything, it’s this – regardless of how confident someone might be about what they’re investing in, they should also be just as confident that they know with whom they’re investing. The FCA’s Warning List is a fantastic resource for smart investors to use to protect themselves from scams.”
Mark Steward, executive director of enforcement and market oversight at the FCA, observed: “The first quarter of the year is a common time for people to make their financial plans for the year, including investments. They must do their homework. Always check the FCA’s Register and the Warning List of firms to avoid. Remember, if in any doubt then don’t invest.”
Steward added: “Investment scams are becoming more and more sophisticated, with the fraudsters using fake credentials to make themselves look legitimate. The FCA is working harder than ever to help protect the public against this threat. Last year, we published over 360 warnings about potentially fraudulent firms. We want to spread the message such that we can all better protect ourselves from investment scams.”
Pauline Smith, director of Action Fraud, concluded: “These statistics show that investment fraud is a major threat, with the fraudsters doing everything they can to manipulate potential victims into making investments. Victims are often coerced or persuaded into parting with significant amounts of money. Ultimately, this can have a devastating impact on their well-being and finances. We’re working with the FCA to raise awareness of investment fraud and would urge anyone who’s considering an investment to check with the FCA before parting with their money.”