Most of us would like to believe we’re too smart to be caught out by scams targeting our savings and investments. However, millions of people — including many who would consider themselves savvy investors — have fallen victim to fraudsters. That’s partly because the tactics and methods they use to part people from their money continue to evolve, making it difficult for the authorities to act quickly enough.
At least £649m was lost to investment fraud in 2024, Action Fraud figures show. And this is likely just the tip of the iceberg, given those targeted are sometimes too embarrassed or ashamed to report their losses. Fraudsters are most likely to target over 55s, who tend to have greater investment assets and, notably, are allowed to access the funds held in their pension.
But two thirds of scams reported in 2024 concerned cryptocurrencies, while cyber fraud is a growing risk and social media platforms play a big role in driving the increase in fraud and scams. So, we cast an eye over the scams for investors to look out for.
What does investment fraud look like?
Most investment fraud occurs when people are contacted out of the blue and convinced to invest money in schemes or funds that either don’t exist or are completely worthless. There’s also been a recent spike in the number of people falling victim to cryptocurrency scams, where they’ve been talked into paying advance fees to receive an attractive investment return that never materialises.
Others include investment bond websites offering products and services without authorisation from the Financial Conduct Authority (FCA), which is urging investors to steer clear. Again, investors are offered the chance to earn eye-catching returns of as much as 9% via bonds offered and backed by big bank brands. In reality these bonds often don’t exist, and fraudsters simply pocket the investment made and stop returning calls and emails. Recovering money can be very difficult.
Some fraudsters create fake investment platforms, email address and websites to con people into believing they are legitimate investment firms, or they might clone the email and website addresses of real firms or organisations.
Among the recent high profile investment scams have been those offered through social media. The FCA is currently acting against so-called finfluencers — often reality TV stars — who use Instagram, Tik Tok and other platforms to promote unauthorised foreign exchange trading schemes. Several scams also use images of famous people without their permission, falsely claiming that they have endorsed their investment or cryptocurrency scheme.
How can I protect myself?
While we might think we would always spot the signs of a dodgy investment offer, everyone is vulnerable at some point or another. When we feel stressed or we’re dealing with difficult life events or circumstances it can be harder to think clearly and remain vigilant, for example. It only takes one poor decision, especially if we don’t have a financial adviser to call on.
Knowing the warning signs to look for will minimise the risk of losing money to investment scams, however. Here are six of the main clues to help you spot a wrong ‘un:
Being contacted out of the blue
An investment offered via a cold call, text, message on social media, email or brochure is highly likely to be a scam.
Being rushed into making a decision
A genuine investment opportunity should never come with any pressure. If you are presented with a limited time offer, bonus or discount if you sign up before a deadline, walk away. Similarly, if you’re told the offer is exclusive to you, don’t take things any further.
They are not registered with the FCA
Always check to see if a firm is registered with the FCA. There is also the FCA Warning List of unauthorised firms — a scam warning list where you can check if you’re dealing with a known fraudster. If you’re in any doubt, ask a financial adviser. It might be worth their advice fee whatever the outcome.
They say it’s risk-free
Anyone who claims an investment is risk-free is undoubtedly lying. Risk is part and parcel of investing.
It sounds too good to be true
Investment returns in the double digits may be very attractive, but they’re also unrealistic. If you’re being offered returns that sound unusually high, the alarm bells should ring.
It has a celebrity endorsement
Whether the celebrity endorsement is genuine or not, it’s probably one to avoid — especially on social media. The 2024 Action Fraud figures show that 36% of all investment fraud was linked to social media. Whatsapp was the most referenced platform (40%), followed by Facebook (18%) and Instagram (14%).
If you have been approached by an unauthorised firm you can contact the FCA’s consumer helpline on 0800 111 6768 to report it. If you have been a victim of fraud, report it to Action Fraud.
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