There are many types of investment scams … you may have heard the expressions ‘boiler room fraud’, ‘ponzi scheme’ or ‘hedge fund fraud’. Essentially, these and many others are simply names for fraudulent investments. The money is said to be ‘invested’ in many different areas including funds, shares or bonds, foreign exchange (forex), property, fine wines and coins or stamps. Increasingly, however, scammers are turning to areas like cryptocurrency or sustainable energy.
Criminals variously pose as fund managers, stockbrokers financial advisors and investment specialists. They make their approach via email or text, or via a phone call or letter. They are generally well versed in financial markets, which enables them to make their pitch highly convincing. They set up credible websites and sales support materials and authentic looking testimonials from other ‘happy investors’, and sometimes even host seminars to enable them to pitch in person.
How to tell if someone is trying to commit investment fraud against you
Classic signs of an investment scam attempt are as follows:
- Unrealistically high returns on your investment, but this is not always the case.
- Time pressure, telling you the opportunity is available for only a short period, or a bonus or discount will be applied if the investment is made before a certain date.
- Testimonials, offering fake reviews and telling you that other clients have made substantial returns or are desperate to take up this deal.
- Speaking with authority on investment schemes and products, and using convincing websites and brochures claiming to be regulated.
- Attempting to build a friendship or flatter you.
- Some fraudsters request that you download software or enable remote access to your computer to ‘make the process easier’. Allowing this would almost certainly result in spyware being loaded on the device, and/or the fraudster accessing your bank or other accounts.
- Consider that if an individual or organisation contacts you randomly about an investment opportunity, it is likely to be either a scam or an investment carrying high risk.
- Whilst most investment scammers approach their target by telephone, contact can also come via email, post, social media post or even via word of mouth or at a seminar or exhibition. Sometimes, you may receive an email or a leaflet in the post, then a phone call referring to it to increase credibility.
- If you receive a cold call offering an investment, do not engage in conversation, but instead end the call.
- If you receive an online or text communication about an investment, ignore it and if it’s an email, delete it. Do not click on any links or attachments.
- Consider registering with the Telephone Preference Service and Mailing Preference Service to reduce the number of unsolicited calls and letters you receive.
- Callers may pretend they aren’t cold calling you by referring to a brochure or an email they have already sent.
- It is not unusual for scam victims to be targeted again by either the original scammer, or another criminal who has purchased their details on the dark web. You should also ignore unsolicited offers of help in recovering money lost to a scam – this is known as a ‘recovery room scam’.
Check for FCA authorisation
In the UK, almost all financial services firms must be authorised by the Financial Conduct Authority (FCA).
- Check the Financial Services Register to ensure that firms are authorised or registered to conduct financial business. Make sure you access the Register from the FCA website, and not from clicking on a link in – or pasting and address from – a communication from the party that has approached you.
- Check if the firm’s ‘firm reference number’ (FRN) and contact details are the same as those listed on the Register.
- If there are no contact details on the Register or if the firm claims that they are out of date, call The FCA Consumer Helpline on 0800 111 6768.
- You could check the FCA Warning List for firms and individuals who are not authorised by the FCA. However, bear in mind that this is not exhaustive and even if the name does not appear, it could still be a scam.
- If you use an authorised firm, access to the Financial Ombudsman Service and FSCS protection will depend on the investment you are making and the service the firm is providing. If you use an unauthorised firm, however, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong. This will make it unlikely that you will recover any losses from the fraud.
- Not all investments (such as wine) are regulated by the FCA. Find out more about unregulated investment products.
- If you are dealing with an overseas firm, you should check with the regulator in that country. Also, check the scam warnings from foreign regulators.
- Check that the organisation is genuine, and not a ‘clone firm’. Always use the contact details on the FCA Register, not the details provided in the communication. You should also check the firm’s details with Companies House or Directory Enquiries or Companies House to make sure they are the same.
- Seek impartial financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by the FCA. Do not follow investment advice from the company or individual that has contacted you, as this may be part of the scam.
- You can find information on investing and how to find a financial adviser from the Money Advice Service, or an industry representation body such as PIMFA.
- The government operated MoneyHelper service has information on investing and about how to find a financial adviser. Alternatively, you could get further information from a group that represents advisers such as PIMFA.
Reporting investment scams
- If you are suspicious that an approach about an investment has been made by a fraudster, contact the FCA Consumer Helpline on 0800 111 6768 or using its reporting form.
- If you think the scammer is impersonating an authentic business, you should also report the attempted or actual fraud to that business.
- If you have given your bank account details to a firm or individual you think may be operating a scam, tell your bank immediately.
- If you have agreed to transfer your pension and now suspect a scam, contact your pension provider straight away. They may be able to stop a transfer that has not yet taken place.