Whether it’s thanks to gut instinct or deduction, investors are avoiding investment scams, says the Financial Conduct Authority (FCA).
How does an investor spot a scam? It’s by finding mistakes (34pc of those surveyed by the FCA) and requests for access to their personal details to secure the opportunity (34pc) most commonly. Other warning signs that made investors suspicious included contacting out of the blue (33pc) and pressuring to invest before an ‘offer’ ends (26pc).
Of the 1,036 investors who have avoided investment scams that the FCA surveyed, a third (33pc) came across the ‘opportunity’ via email, while a quarter (25pc) received a personal phone call. Once investors realised the opportunity was fraudulent, 42pc warned family and friends, while a further 27pc posted on social media to warn others.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said: “Scammers are becoming more and more sophisticated, coming up with different tactics, such as impersonation texts or calls, and using the cost of living pressure as a way to tempt investors into false opportunities. Once money has been lost in this way, it’s difficult to get back, so if something seems too good to be true, it probably is. It’s great to see so many investors being able to spot the signs of a scam, and helping others to do the same. You don’t need to be a Sherlock Holmes to spot scams.
“Our Scamsmart advice and tips together with the FCA’s Warning List provides all the clues you need to sort the genuine investments from the fraudulent ones.”
The regulator urges investors to check its Warning List before making any investment decisions. This will help identify those who are running scams and are unauthorised to operate, or flag to investors where additional research is needed. If investors were to deal with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong, the FCA warns.
To help remind investors of the warning signs, the FCA has created an Augmented Reality (AR) experience for investors to use. The FCA lists some warning signs:
Unexpected contact: traditionally scammers cold-call but contact can also come from online sources, eg., email or social media, post, word of mouth or even in person at a seminar or exhibition.
Time pressure: they might offer a bonus or discount to invest before a set date or say the opportunity is only available for a short period.
Exclusivity or Secrecy: they might claim that you have been specially chosen for an investment opportunity so to keep it to yourself.
Social proof: they may share fake reviews and claim other clients have invested or want to take up the deal.
Unrealistic returns: fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than elsewhere. However, scammers may also offer smaller, more realistic returns to seem legitimate.
False authority: using convincing literature and websites, claiming to be regulated, speaking with authority on investment products.
Flattery: building a friendship to lull people into a false sense of security.
Remote access: scammers may pretend to help and ask people to download software or an app so they can access to your device. This could enable them to access your bank account or make payments using your card.
