Be a ScamSmart Investor
Scams are increasingly sophisticated and fraudsters are generally articulate, financially knowledgeable and have professional websites with testimonials and materials that look like the real thing.
Warning signs of a fraud can include
If it sounds too good to be true, it probably is.
Unexpected offers should be rejected.
If you’re contacted out of the blue about an investment opportunity, it could be a high-risk investment or a scam.
Fraudsters often cold-call but they can also use email, post, word of mouth or run seminar or have a stand at an exhibition.
If you get cold-called, the safest thing to do is to hang up. If you get unexpected offers by email or text, it’s best to simply ignore them. Callers may pretend they aren’t cold calling by referring to a brochure or an email they sent you which is why it’s important to know how to spot some other warning signs:
- Apply pressure to invest quickly – they might offer you a bonus or discount if you invest before a set date or suggest it’s a limited time offer
- Downplay the risks - they can suggest you can sell the investment back to them for what you paid or use jargon to suggest the investment is very safe
- Promise tempting returns - that sound too good to be true, such as better interest rates than elsewhere or high potential future returns
- Suggest it’s an exclusive offer – they might claim that the investment is limited, not available to all and even ask you to not tell anyone else about it
- Ask you to transfer money – This is the aim of the fraud. Genuine financial services firms are unlikely to ask you to transfer money without a meeting and lots of paperwork. Most genuine firms will require a cheque rather than a bank transfer.
5 practical Steps to avoid the Scammers
1. Check the firm is authorised by the Financial Conduct Authority (FCA)
Almost all financial services firms must be authorised by the FCA – if they’re not, it’s probably a scam. You can Check the Financial Services Register to see if a firm is authorised or registered by the Financial Conduct Authority.
Always access the Register from the FCA website, rather than through links in emails or on the website of a firm offering you an investment. Even ours!
Ask for the firm’s ‘firm reference number’ (FRN) (ours is 122483) and check that the FRN and contact details are the same as on the FCA Register. If there are no contact details on the Register or if the firm claims they’re out of date, it’s probably a scam - call the FCA Consumer Helpline on 0800 111 6768.
If you use an unauthorised firm, you won’t have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong – and you’re unlikely to get any money back.
Not all investment products are regulated by the FCA - these include wine, horses, gemstones and this link provides more information on unregulated investment products.
If you’re dealing with an overseas firm, you should be extra alert and check with the regulator in that country and also check the scam warnings from foreign regulators.
2. Check the FCA Warning List
Use the FCA Warning List to check the risks of a potential investment – you can also search to see if the firm is known to be operating without FCA authorisation.
Even if a firm isn’t on the list, it may still be a scam – firms change names and details all the time.
3. Check it’s not a ‘clone firm’
A common scam is to pretend to be a genuine firm (called a ‘clone firm’) which it is vital that you always check and use the contact details on the FCA Register and not the details the ‘clone firm’ gives you.
You can also check the firm’s details with directory enquiries or Companies House to make sure they’re the same.
4. Get impartial advice or a second opinion
Always get independent advice before investing – if you are in any doubt, get second opinion from an adviser at a different firm.
5. If you’re suspicious, report it
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.
6. Avoid the ‘Suckers List’ & Be wary of future scams
If you’ve already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals via the ‘suckers list’. Any follow-up scam may be completely different or could be related to a previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.