Investment Fraud

Periods of change, such as the recent pandemic, can give rise to new scams as fraudsters seek to capitalise on uncertainty and confusion.
 
However, this doesn’t mean that older scams go away, and when it comes to financial services, the scam activity can be extremely well-planned and executed and, therefore, difficult to spot.
 
Scammers are sophisticated, opportunistic, well-resourced and creative in their attempts. They are ultimately seeking financial gain, but they can achieve this in several ways: they can obtain personal details, such as names, addresses, account numbers, email addresses and passwords, and collate these to sell on to other criminals; they can use these personal details to access bank or investment accounts to steal money; or, they can try to steal money directly from the individual by persuading them to transfer the money directly to fund activities that appear legitimate, such as investment opportunities.
 
Fraudsters can target people who may be more vulnerable or susceptible to being scammed, although in the current climate this definition may encompass many more of us. However, more experienced investors are not immune to scams – indeed, some fraudsters target experienced investors as the potential ‘reward' can be much greater. 
 

What is investment fraud?

It has been estimated that fraudsters steal over £1bn each year in investment fraud. It commonly occurs when people buy investments that promise high returns but are either worthless or non-existent, also known as share fraud. Fraudsters may also offer investments in gold, land, carbon credits, diamonds, shares in hotels or car parks, or luxury goods such as fine wine.
 
Investment fraud is often sophisticated and difficult to spot. Fraudsters can be articulate and appear financially knowledgeable and friendly. They can have considerable technological and financial resources that allow them to create convincing and credible websites, testimonials and promotional materials that can be hard to distinguish from those produced by legitimate companies.

 
Other types of financial scams

• Clone firms - firms must be authorised by the Financial Conduct Authority (FCA) to sell, promote, or advise on the sale of most financial products or services. Some fraudsters falsely claim to be working for or representing genuine authorised firms to appear legitimate. The name they give may be the same as a genuine company, but website addresses and phone numbers will lead to a different website or telephone. Always check website addresses and telephone numbers by visiting the legitimate website. Do not click on links sent to you in emails as these can be made to look legitimate, a practice known as ‘spoofing’.
• Scammers may contact you claiming to be from a Claims Management Company (CMC), insurance company or your credit card provider. They may say they can help you recuperate losses by submitting a claim for the cost of a holiday or event that has been cancelled, for example, due to the pandemic. Often, they ask you to send money or bank details before the claim can be progressed.  
• Cold calls, emails, texts or WhatsApp messages stating that your bank is in trouble due to Coronavirus and pushing you to transfer your money to a new bank with alternative banking details. This scam can also claim to be from or on behalf of individuals such as colleagues or friends, with the message claiming  that someone you know is abroad and has lost their credit card, passport etc and needs financial assistance. 

What to look out for 

• Unexpected contact – are you being contacted by an individual or firm you do not currently have a relationship with? This is perhaps the best way of identifying a potentially fraudulent call or email. Reputable, FCA-registered firms are unlikely to make cold calls or send unsolicited emails or post.
• The promise of high returns – is the caller promising tempting returns that sound too good to be true or offering much better interest rates than those offered elsewhere? Remember, if it sounds too good to be true, it probably is.
• The promise of reasonable returns – this is a tactic used by fraudsters to persuade you that they are legitimate, i.e. they are not promising ‘the moon on a stick’ so they must be trustworthy.
• Pressure – is the caller putting pressure on you to act quickly? This is a common tactic that is designed to unnerve you and make you act before you have had time to think about the opportunity and check credentials.
• Repeated contact – are you being called often and is the caller staying on the phone for a long time? This is a tactic designed to keep the pressure on. Fraudsters also use repeat calls to build a relationship with you – they may ask about your family and ask after them in subsequent calls, for example.
• Jargon – is the caller using technical or legal language? This is designed to convince you that they are legitimate but also to intimidate you into not questioning their authority.
• Flattery/friendliness – fraudsters will often use flattery and over-friendliness to persuade you that they are legitimate, professional and good to do business with.
• Exclusivity – is the caller saying that they are only making the offer available to you, or even asking you to not tell anyone else about the opportunity?

How to protect yourself 

• Reject cold calls - People offering high risk investments or scams will often cold call. Legitimate firms are very unlikely to contact you in this way. If you’re called about an investment opportunity the safest thing to do is to hang up. If you have an investment manager or stockbroker that you usually deal with you can call them to check if the opportunity is legitimate.
• Treat all unexpected calls, emails and text messages with caution. Don’t assume they are genuine, even if the person seems to know some basic information about you. Some shareholder information is publicly available via Share Registers so fraudsters may know your name and address, the amount of shares you hold, their value and what companies you invest in. This does not mean they are acting legitimately or legally by contacting you.
• Don’t be pressured into acting quickly. A genuine bank or financial services firm won’t mind waiting if you want time to think. 
• Check the FCA Warning List and Register. The Warning List is a list of firms and individuals that the FCA knows are operating without its authorisation. The tool also provides information about the risks associated with a particular investment opportunity. However, if the firm or individual isn’t on the list, don’t assume they are legitimate – they may not have been reported yet.
• If you’re buying a financial product such as a loan, insurance, investment or pension, only deal with an FCA-authorised firm – check the Register to see if the firm is registered. Always access the Register from the FCA website, rather than through links in emails you have been sent or on the websites you have been directed to as the link may be part of the scam and take you to a convincing but fraudulent copy of the FCA website. You can also contact the FCA via the contact form on their website at www.fca.org.uk/contact or call the Consumer Helpline on 0800 111 6768.
• Not all investments are regulated by the FCA, for example, wine. You can find out more about unregulated investment products at www.fca.org.uk/scamsmart/unregulated-investment-scams.
• If you’re dealing with an overseas firm, you should check with the regulator in that country and also check the scam warnings from foreign regulators.
• Seek advice – if you are a client of an investment provider such as Redmayne Bentley speak to your usual contact or office.
• Check your bank account and credit card statements regularly and never give out your bank account or credit card details unless you are certain who you are dealing with.
• Be wary of clicking links or opening emails from senders you don't already know.
• Do not give out personal details (bank details, address, existing insurance/pensions/investment details) unless you are certain who you are dealing with.  
• ActionFraud and the National Cyber Security Centre have resources and advice regarding current scams and risks. 

If you have been scammed

Report it

• You can report the firm or scam to the FCA by contacting the Consumer Helpline on 0800 111 6768 or using the reporting form available from www.fca.org.uk.
• For products the FCA doesn’t regulate, or if you’ve lost money in a scam, contact Action Fraud on 0300 123 2040 or via their website at www.actionfraud.police.uk/.
• If you’ve given your bank account details to a firm you think may be operating a scam, tell your bank immediately.
• If you've 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 hasn't taken place yet. 

Be wary of future scams

• If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals. 
• The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee. 
• If you have any concerns at all about a potential financial scam, contact the FCA immediately.

Finally, if you are unsure about the legitimacy of any communication you receive from Redmayne Bentley, please contact your usual executive or office.