Investment scams: If it’s too good to be true, it probably is


MoneyPlus Features Team

26th September 2016 at 1:12pm

In the last of our short series on investment scams, we look at some of the ways fraudsters get people to part with their money.

Think you couldn’t ever be caught out by an investment scam? Fraudsters take more than £1bn this way every year.

Shares, land, diamonds, gold and art are just some of the ways people are tempted to part with their money in return for promises of too-good-to-be-true profits.

Fraudsters take more than £1bn this way every year

With more people now investing money in collectables such as coins, art, jewellery and wine according to recent research by Lloyds Private Banking, investment scamming is a lucrative market fraudsters have firmly in their sights.

Fraud tactics: What you need to know

Cold calling, clever marketing and high pressure selling are their well-practised tactics and there are warning signs to be aware of. Even if you think you know what you’re doing, the risk of losing your money is a very real possibility, as recent cases highlight.

Watch out for cold-calling and high pressure selling

Diamond scam which lost its sparkle

Earlier this year, a London diamond broker with Dubai connections was accused of a £1.2m coloured-diamond scam and forced into liquidation by the High Court.

According to the Government’s Insolvency Service, “the fancy coloured diamonds were marketed and sold to the public as an investment opportunity using cold calling techniques.”

Sometimes investors were falsely told the company was FSA/FCA registered to give them peace of mind.

“Investors were sold coloured diamonds for investment at mark ups of over 550% but afterwards were unable to make further contact with the company.”

Wine fraud funded a life of luxury

A fraudulent land broker and diamond dealer who set himself up as a wine trader duped investors out of £300,000.

They said they were mis-sold expensive wines and either did not receive anything, or the promised returns never materialised.

The stark reality is he was using their money to live a life of luxury and it’s not yet known if investors will be able to get any of their money back.

There are numerous sophisticated scams out there

As HM Revenue & Customs told FTAdviser, the fraudster “was looking to make easy money and although he had no experience or qualifications, he set himself up as a high-quality trader in diamonds and then in expensive wines… conning unsuspecting investors out of thousands of pounds.”

Read more about how Fine wine could be a vintage scam.

The reality is these are just the tip of the iceberg and there are numerous sophisticated scams out there. If those who invested their money had checked everything out following the FCA’s guidance on the signs of investment fraud, they might well have protected their money – and avoided, in some cases, substantial losses.

The FCA Be a #ScamSmart investor campaign, which has been running this summer, has the following straightforward advice:

Reject unsolicited calls

Check the FCA Warning List

Get independent advice

Watch the FCA video about how to be a #Scamsmart investor below.

Beware: Online fraud is still a problem

Of course, investment fraud isn’t the only way criminals try to get people to part with their money. Cybercrime is still a growing problem with around 1 million online fraud and cybercrimes reported to Action Fraud in the last year alone.

Be a #Scamsmart investor

It’s phishing season again

Fake HMRC emails have been doing the rounds again, with The Times reporting that “anyone registered with HMRC has been warned to be on their guard [against] being hoodwinked into handing over bank, national insurance and income details by messages suggesting that they are owed a tax refund.”

In September, criminals targeted customers of one of the UK’s biggest banks on social media using legitimate-looking but fake Twitter accounts to try to get customers to share their online banking details. It too was a typical case of phishing.

Luckily, Twitter users spotted the tell-tale giveaway that it was a hoax – the fake Twitter account had no followers, while the real one has tens of thousands. But there will undoubtedly be similar attempts in the future.

Think you’ve been caught out?

If you think you’ve been scammed, defrauded or experienced cybercrime, contact Action Fraud, the National Fraud & Cybercrime Reporting Centre.

If you have any questions about investment fraud or have experiences you want to share to help others, feel free to do so on twitter @StandardLifeUK and Facebook.