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How to spot a scam? FCA reports common investment fraud schemes

How to spot a scam? FCA reports common investment fraud schemes

The UK financial regulator has revealed common investment fraud schemes used by fraudsters to deceive 55s across the UK. Do you know how to spot a scam?

2 March, AtoZForex The Financial Conduct Authority (FCA) is cautioning investors over 55 years old to double check investment opportunities before actually giving any money to companies.

FCA warns investors over 55

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The UK watchdog is warning over 55s to assure the thuthfullness behind the investment opportunities. Such suggestion comes as new research, which has been commissioned as a part of FCA’s campaign called ScamSmart. The campaign exposed that only two in five (42%) believe they know how to detect a fraudulent investment opportunity. Fraudsters are targeting the investors’ community over 55 due to the fact that they most likely have funds to invest.

Only last year, victims of fraudulent investment activities lost on average £32,000, according to FCA. The regulator also highlights that fraudsters utilize sophisticated psychological tactics to convince victims to invest their funds.

FCA reports common investment fraud schemes

One of the most common methods utilized by fraudsters is to push potential investors to make a quick decision. They propose potential investors to decide on a time-limited investment offer. The new research by FCA found that more than half (53%) of the over 55s that were surveyed thought acting fast can bring them a good deal. The regulator notes that this finding indicates that big part of 55s is vulnerable to this tactic.

Furthermore, a third (34%) stated they prefer not to discuss investment decisions with others. Moreover, 48% of surveyed stated they would be seeking unbiased advice before making an investment.

Taking these and other FCA research findings into consideration, the regulator has summarized a list of the most common tactics utilized by fraudsters. According to the official press release of the UK watchdog, they include:

  • Offering lucrative returns above the market rate and downplaying the risks of the investment
  • Using flattery to make potential victims feel good, such as praising them for being a knowledgeable investor
  • Saying that the deal is only available to the target and asking them to keep it a secret
  • Saying that other clients have invested or want in on the deal (known as ‘social proof’)
  • Putting them under pressure to invest in a time-limited offer

How to protect yourself?

Following on this, the UK regulator is warning consumers to exercise extreme caution before investing their money. The FCA stresses that in case someone invests their money with an unregulated firm they will not be protected by the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong. The Director of Enforcement at FCA, Mark Steward, has commented on the recent research:

“Be alert to the warning signs like being contacted out of the blue, promises of low risk and/or guaranteed above-market returns, special deals just for you, time pressure and, very often, flattery.

Be vigilant. Don’t let them push you into making a decision and parting with your money. Question their claims. Check the Financial Services Register and seek impartial advice. If in any doubt – don’t invest.”

Thus, in order to avoid being a victim of investment fraud, FCA recommends that consumers:

  • Deny unsolicited contact about investments;
  • Before investing, check the authority of the firm/individual you are dealing with via the Financial Services Register;
  • Check the FCA Warning List of firms to avoid;
  • Receive an unbiased investment advice before investing.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ, nor should they be attributed to AtoZMarkets.

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