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A guide to spotting investment scams

Teresa Kidd

Written by

Teresa Kidd

8 min read

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Unfortunately, investment scams occur in the UK every day, having a huge impact on victims’ lives and finances. They are becoming more common and more difficult to identify, so it pays to be aware of what to look out for.

What are investment scams?

Investment fraud occurs when criminals deceive victims into investing money based on false information.

There are three main types of investment scams:

  1. A totally fictitious investment which doesn’t exist
  2. The investment exists but the scammer takes the money instead of putting it into the opportunity
  3. The scammer pretends they’re representing a legitimate and trusted investment group, but they’re lying

How to spot investment scams

Investment fraud and scams can be difficult to spot because they’re designed to look like genuine investments. The scammers may have professional-looking websites and documents.

However, there are some tell-tale signs that suggest an investment opportunity is likely to be a scam:

  • Companies contacting you unexpectedly about an investment opportunity via cold calls, emails, social media or follow-up calls after sending out a promotional brochure. They call you repeatedly and keep you on the phone for a long time.
  • High-pressure sales tactics are used, such as a time-limited offer. You may be offered a bonus or discount if you invest before a set date. They may say they’re only making the offer available to you or even ask you not to tell anyone else about the opportunity.
  • They downplay the risks to your money, claiming the return on the investment is guaranteed and that you can’t go wrong.
  • They promise you very high returns that sound too good to be true, e.g. offer much better interest rates than those offered elsewhere. No honest investment is built on quick and high profits.
  • They may not answer your questions or allow you to ask questions. They may discourage communication and will be hesitant to provide full written details.
  • Unprofessional conduct such as not giving out their phone number and physical address.

How do I know if an investment company is legitimate

In the UK, a firm must be authorised and regulated by the FCA to offer most financial services products and services. Always check if the company is registered with the FCA.

The FCA also has a warning list so you can check if you’re dealing with a known scammer.

How to avoid investments scams

It can be hard to work out if an investment opportunity is legitimate or not, but there are some things you can do to help you avoid investment scams and fraud:

  • Take your time and seek advice: before deciding to invest, always do your research and don’t let anyone rush you. Only criminals will put pressure on you to make a quick decision. Stop, take time to think and consult trusted friends and family members before parting with your money.
  • Stop the call: if you feel pressured or if the caller won’t take no for an answer, end the conversation. Don’t be embarrassed to put the phone down.
  • Keep control of your devices: never let anyone take control of your phone or computer for any reason. A reputable business would never do this.
  • Check adverts carefully: it’s all too easy to click through an appealing advert and within seconds be asked for your financial information. Step away and do some research using online review sites to check the validity of such an opportunity.
  • Celebrity endorsements: celebrity endorsements can be easily faked, so can’t always be trusted. Don’t be lured in by a face you recognise from the television! Many celebs know that their identity is being falsely used and try to alert people to the fact on their own social media channels.
  • Trust your instincts: if you think the offer sounds too good to be true, it probably is.

How to report investment scams

If you’ve been scammed, you should always report it – never feel embarrassed or ashamed, as hundreds of other people have probably been caught out too. By reporting you might help others from falling foul of the same situation.

The following can offer advice and support:

  • The police: if you’ve been the victim of a fraud, online fraud, cyber crime or you suspect one is being attempted, you can report it to Action Fraud. You can call 0300 123 2040.
  • Your bank: if you’ve noticed any unusual activity on your bank account, call the centralised number 159 (not all banks have signed up to this ) or the phone number on the back of your bank card. If you’ve lost money, your bank may be able to help you recover it in certain situations – but it’s not always possible. Your bank may cancel your current card and send you a new one to stop any other fraudulent transactions from your account.
  • Action Fraud: report any kind of fraud by giving them a call or reporting it online via their website.
  • Victim Support: provides 24/7 free and confidential support to victims and witnesses of crime in England and Wales.
  • Think Jessica: a useful organisation if a scam has made you feel anxious, fearful or guilty. They provide emotional and practical help to victims of crimes and scams.
  • Citizens Advice: contact Citizens Advice for information and advice about how to avoid scams and fraud. Their consumer services also provide information and advice on consumer issues by telephone and online.
  • Samaritans: you can call their helpline on 116 123 if you feel low or anxious and need someone to talk to.
  • Financial Conduct Authority: visit their website to check whether a company is authorised.
  • Advertising Standards Authority: report an online scam advert using their website.

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