What is an Investment Scam? How to Protect Yourself and what to do if You’ve Already Lost Money
In 2020, people in the UK lost over £135 million to investment fraud and scams, and only a very small amount of the money lost was ever refunded. At Refundee, we think this is wrong.
How do investment scams work
Fraudsters will often create online adverts. These will usually appear in web searches or as social media adverts.
The adverts will typically offer unrealistic but enticing returns. Often these will be from illegitimate firms, but sometimes fraudsters will pose as legitimate organisations (often FCA registered firms) or offer investments in well known products, making the scam more convincing. These fraudsters will generally ask potential customers to register interest in the investment products before receiving a call from someone impersonating a genuine investment firm or broker.
Sometimes, more traditional methods will be used. Scammers will cold call members of the public and pressure them into acting quickly on an investment opportunity that seems too good to miss. The same tricks apply as online, and the callers can be very persuasive.
Common examples of investment scams
Usually the fraudster will be trying to convince you to move money into a fictitious fund or investment, often some form of interest paying bond. Examples may be:
Fake bonds, usually with a high rate of return. Sometimes fraudsters pretend to be legitimate companies, so you need to know how to spot a fake (see further below).
Cryptocurrency investment scams are on the rise. There’s a lot of attention around cryptocurrencies at the moment, and the FOMO (fear of missing out) can be hard to fight. Be on your guard when it comes to cryptocurrency investments, especially if you’re being guaranteed returns.
Carbon credits and other green investments which appeal to a person's concern about the environment. Fraudsters will often pretend to be offering these to prey on people's goodwill.
How to protect yourself
There are some rules of thumb to bear in mind, and you’ll need to be sure to do your research before making your decision. We’ve listed some things you should get in the habit of doing — and situations you should be wary of — below.
To protect yourself, you should:
Check the FCA register to see if the firm you’re dealing with is registered. Just remember that some fraudsters pose as registered firms, so you should still carry out additional checks.
Visit the FCA website which provides a warning list of scam companies, along with legitimate registered companies that fraudsters are known to be impersonating. While you may find information here that helps you, be aware that there could be companies and scams out there that haven’t yet been reported.
Try calling numbers or checking email addresses provided on the company's official website. Fraudsters will often create fake websites, so type out the URLs of legitimate investment companies rather than clicking email or search engine links when visiting their website to invest.
When you should be extra cautious:
Where someone is creating a time sensitive situation. This is an age-old tactic used by fraudsters. If you’re feeling pressured into making a quick decision, it’s a good sign you should be suspicious.
If the offer seems too good to be true. If you’re getting a good rate of return with seemingly low risk, it’s a very good indicator that this isn’t legit. Don’t let fraudsters take advantage of your ambitions.
If you’re asked for more money soon after you’ve already invested. Don’t throw good money after bad. Once a fraudster has managed to extract money from you, they’ll often come back again soon after and ask for more until you wise up to the scam. They’ll try to entice you with convincing arguments (e.g. you need to pay the tax to access returns on your previous investment). Don’t fall for it!
If you’re approached out of nowhere, such as through a cold call. Reputable organisations should only be following up on genuine leads.
Beware investments that appear to be endorsed by celebrities. The identities of trusted people will often be used without their permission.
What to do if you’ve already sent your money
If you or someone you know has been the victim of an investment scam, you need to act quickly to get your money back. If it’s too late for your bank to recover the money from where it was sent, you may still have a good chance of getting the money back.
You can do this yourself by taking your case to the Financial Ombudsman Service. Or Refundee can manage your case for you, as an FCA regulated claims management company. If you’d like us to do this for you, start the process by filling out our claims form.
