Over the past 2 years, roughly £535m was lost to investment fraud, making it the highest value component of the £2.3bn total lost to scams during the Covid pandemic. Elle Yates, a Paralegal working in the CEL Fraud team, gives her 5 top tips on how to spot an investment scam.
A Which? report using data from Action Fraud – a service run by the City of London Police – highlights the financial toll investment scams inflict nationally. Follow our top 5 tips to spot some of the warning signs of an investment scam.
While shopping scams are more prevalent in quantity, no other area of fraud has a higher total cost than Investment Fraud. This is primarily due to its high-value nature. This is also due in part to the adoption of controversial services like cryptocurrencies (including Bitcoin) and NFTs (non-fungible tokens).
How to avoid investment scams
1) Carry out in-depth research
In the UK, all firms providing financial services are legally required to be registered with the Financial Conduct Authority (FCA), unless exempt. You can check the registered status of companies offering investment opportunities on the FCA website for peace of mind.
2) Check reviews online
When it comes to unknown companies, your first port of call should always be to check reviews online. Don’t rely on reviews listed on the website itself – which may be fake or cherry-picked. Always check reviews on Trust Pilot, Google Reviews, or any other popular review site. When looking at reviews, be sure to look at a good number to get a realistic impression of the company. It’s easy for unethical companies to pay for good (fake) reviews.
3) Don’t trust cold calls
A genuine investment company will never cold call you. Receiving a call from an investment company out of the blue is a major red flag and should not be trusted. If you do decide that you would like to try your hand at investing, work with a company you trust.
4) Minimum amount to invest
A common way dodgy investment companies use to scam people out of money is to say you need to deposit a minimum amount – often around £250 to £300. This is also a major red flag.
Often, fraudulent investment companies pressure their targets into depositing higher initial amounts, as well as insisting that regular extra payments are made. Repeated phone calls from ‘account managers’ asking for further investment is a tell-tale sign of unethical practices.
5) Not allowed to withdraw money
Many scam investment companies make it incredibly difficult to withdraw the earnings they report you have made. They will frequently state that you need authorisation from an account manager, while some companies will also state that there are fees or further investments required to withdraw your earnings.
Alternatively, some scammers will allow the victim to withdraw a small percentage of their earnings as a way of convincing them that the service is genuine. This is called a Confidence Payment. After this. they insist that more money should be invested.
What to do if you are a victim of an investment scam
If you suspect that you have been the victim of an investment scam, the first thing you should do is stop all contact with the scammer. You should then either contact the police via 101 or contact Action Fraud.