How to avoid investment scams

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This blog is general information only. It isn’t advice and isn’t an insight into the views of TSB or any of our Partners.

Over £197 million was lost to investment scams in 2018 in the UK. It’s big business for fraudsters and victims were scammed out of over £29,000 on average. Sophisticated techniques are used by criminals to gain people’s trust and get them to invest in bogus investments. But by following a few top tips and knowing what to look for, you can avoid becoming a victim. 

If it sounds too good to be true, it probably is.

What is an investment scam?

An investment scam is where a criminal will offer you a fake – but very convincing – opportunity to make a profit if you hand over a sum of money. The investment doesn’t really exist, and you’ll never get your money back, let alone make a profit.

The most common investment scams involve shares and bonds, foreign exchange (forex) and cryptocurrencies (e.g. Bitcoin) by firms that are not authorised by the FCA.

How to spot an investment scam.

Traditionally, investment scams came about through cold calls. While this does still happen, the profile of scams is changing, and now more and more people are being targeted online.

But although contact methods have changed, the tactics remain the same. Here are six warning signs that the FCA recommend you look out for:

1.    Unexpected contact
This could be cold calls, emails, text messages, professional looking websites, social media, post, word of mouth or even in person at a seminar or exhibition.

2.    Time pressure
Scammers may apply pressure and rush you by offering a bonus or discount if you invest before a set date.

3.    Social proof 
They may share fake reviews and claim other people have invested or want in on the deal.

4.    Unrealistic returns 
Look out for high returns and interest rates. If it sounds too good to be true, it probably is.

5.    False authority 
They may try to convince you with fancy literature and websites and claiming to be regulated by the FCA.

6.    Flattery 
Good old-fashioned flattery may be used to build a friendship and trust with you.

How to check if an investment company is a scam.

We recommend you reject or ignore any unsolicited investment offers regardless of where they come from. 

If you’re looking to invest but you’re not sure about the company, always check the FCA Register to see if the firm or individual you are dealing with is authorised.

Sometimes, a genuine investment company can be cloned, so we also recommend you check the FCA Warning List of firms to avoid.

Before you invest, getting impartial advice from a financial adviser should also be considered. If you do so, the firm should be regulated by the FCA, and never take advice from a company that contacted you, as this may be part of the scam. The Money Advice Service provides information about how to choose a financial adviser.

What to do if you think you're a victim of an investment scam.

If you think you’re a victim of an investment scam, you need to act quickly. Contact your bank immediately because they may be able to stop the money from leaving your account. Or if it's already left, your bank may be able to contact the scammer's bank to freeze their account.

You should also contact Action Fraud to report the scam and they’ll give you a police crime reference number. 

No one is too smart to be scammed. But we can outsmart the scammers.

No one likes to think they could be the victim of a scam. And the tactics criminals use can be sophisticated, making it hard to work out what’s real or fake. But by knowing what to look out for and following our guidance, you can avoid investment scams and outsmart the scammers.

Further information

·    Fraud Prevention Centre - for tips and advice on how to avoid fraud
·    How to avoid being a victim of a romance scam 
·    How to keep your online banking passwords safe
·    How to spot a “safe account” scam

Everything we publish on Straightforward Money is provided as general information only. It isn’t advice and isn’t an insight into the views of TSB or any of our Partners.

Please think about getting independent financial advice if you want help with your personal situation.
We try really hard to make sure everything’s accurate when we publish it. But the information can sometimes become out of date.  For example, we might link out to sites that we like or think might be helpful, but that link may have been replaced by the other site.
Links to external content are provided for information purposes only; they’re not a TSB recommendation of any brand or service.

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