Action Fraud, the UK’s national reporting centre for cybercrime, has seen a growing number of reports relating to investment fraud, with the average loss now reaching £45,000.
Education and awareness of scams and potential fraud has greatly reduced the number of victims in many cases of cyber crime, but the ease of being able to create convincing an online presence, based by social media has allowed the fraudsters to become more authentic-looking and thus able to hook a new set of victims.
Technology has made it so much easier for us all to be able to invest in equities. Most reputable firms now have apps that allow you to buy, sell and track your investments from the palm of your hand. These have become increasingly popular with older generations who tend to have more available funds and time to research who to invest in.
However, Action Fraud has seen a rise of 29% in cases of ‘clone firm fraud’ where genuine looking investment firms are created, including professionally designed websites, and investors are targeted to deposit funds that are never seen again. A frightening stat from 2020 is that more than £78 million was reported lost through investment fraud. The Financial Conduct Authority said it received over 3,700 reports of these clone scams during the lockdown in 2020.
Some of the tactics used by fraudsters to entice victims are the same as those used by genuine firms. Social Media presence, SEO and AdWord campaigns, outbound email and telephone marketing. It does not take much effort or cost unfortunately to create an authentic looking investment firm online.
There are some steps that can be taken by potential investors though to check if the firm they are considering using is genuine. Here’s our five step guide to fraud prevention.
- Look at the domain name the company is using and do a WHOIS check to see when it was registered and where. If it was relatively recent it could be a sign of a company that isn’t what or who it seems.
- On their website look for the contact details. Is the address a genuine building – use Google Streetview to look at the building to see if it is genuine. Do they use mobiles and retail email addresses (gmail, yahoo, aol etc)? They should be signs that it may not be all that it seems.
- Is the content on their website all theirs? Often scam websites will lift content directly from someone else. Take a sample paragraph and paste it into a search engine and see what the results are. If there is duplicate text elsewhere, investigate if it has been directly taken from a reputable firm’s website.
- If the initial approach was by phone, be very wary. Cold calling on investment opportunities especially if related to pensions has been banned in the UK for over a year.
- Any reputable investment firm will have a Firm Reference Number (FRN) which can be checked on the FCA’s register. Use the FCA’s website to check the firm’s detail and whether the contacts you have match.
It is almost impossible to get any investments made back from the fraudulent firms. They close down their operations immediately at any sign of being discovered and move on to a new scam quickly. Remember ABC – Always Be Cautious – when it comes to any type of investment. As with most things in life, if it looks too good to be true, it probably is!