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Investors lost £197m to fraudsters last year: the warning signs it’s a scam

Joanna Faith
Written By:
Joanna Faith

The Financial Conduct Authority (FCA) is urging the public to be vigilant, after victims lost more than £197m to investment scammers last year.

Figures from Action Fraud show 6,700 people were scammed out of around £29,000 each on average in 2018.

Most scams involved investments in shares and bonds, foreign exchange and cryptocurrencies by firms that are not regulated by the FCA.

The financial watchdog warned people to be on guard, particularly during the first four months of the year as they look to invest before the end of the tax year.

It added that more victims are being targeted online, moving away from traditional cold calling. Fraudsters are now contacting people through emails, professional looking websites and social media channels, such as Facebook and Instagram.

People can check the FCA Warning List, which contains firms the watchdog knows are operating without authorisation.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Investment scams are becoming more and more sophisticated and fraudsters are using fake credentials to make themselves look legitimate.

“The FCA is working harder than ever to help protect the public against this threat. Last year we published over 360 warnings about potentially fraudulent firms. And we want to spread the message so we can all better protect ourselves from investment scams.”

Director of Action Fraud, Pauline Smith, said: ‘These statistics show that investment fraud is a major threat, with fraudsters doing everything they can to manipulate potential victims into making investments. Victims are often coerced or persuaded into parting with significant amounts of money and this can have a devastating impact on their wellbeing and finances.”

Warning signs of a scam

The FCA has issued six warning signs to look out for if you’re worried about scams:

  • Unexpected contact ​​​​– Traditionally scammers cold-call but contact can also come from online sources e.g. email or social media, post, word of mouth or even in person at a seminar or exhibition.
  • Time pressure – They might offer you a bonus or discount if you invest before a set date or say the opportunity is only available for a short period.
  • Social proof – They may share fake reviews and claim other clients have invested or want in on the deal.
  • Unrealistic returns – Fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than elsewhere.
  • False authority – Using convincing literature and websites, claiming to be regulated, speaking with authority on investment products.
  • Flattery – Building a friendship with you to lull you into a false sense of security.