How do you spot an investment scam?
Not every scam is the same, but there are a few telltale signs.
There will probably be a higher rate of return than mainstream investments – even 3pc or 4pc is enough to catch the eye of many savers. It may involve something topical such as green energy or cryptocurrency, or it may be extremely vague about how the money is made.
It will be from a brand you have never heard of, or will copy a famous company’s name – but there will be no mention of this investment on the real brand’s website.
You will have to invest via a push payment – the kind of payment you might make to a family member where you send money directly to a bank account. Legitimate investment houses use debit card payments or direct debits, like a shop or utility company.
It is likely to be marketed as a bond, which sounds safe. It is likely to be very difficult to find the names of the people who run the investment and if you do, they will have a very limited digital footprint.
Check the website. How old is it? Has the current owner always owned it? Use the ICANN registry to see.
Are they impersonating a legitimate bank or investment firm with a similar web address? If in doubt, do not invest.
Talk to an adviser or pick a big name to avoid scams. This will not, however, rule out bad investments.
Increasingly, scammers use limited companies registered at Companies House to sell scams. Companies House does not detect fraud or audit the companies it registers, so an investment being run by a limited company should offer you no comfort.
Scams can be long-lasting, especially ones involving land deals.
What should you do if you find one?
If you are not sure if an investment is a scam, discuss it with a friend or colleague. A second, dispassionate pair of eyes will probably have an easier time spotting a fraud.
If you are even vaguely suspicious, you should not invest. Report the scheme to Action Fraud and if you saw it somewhere such as Facebook, then tell the company.
You can also report it to the Financial Conduct Authority, which keeps a list of websites and people they think are offering unregulated investments that may be frauds. The FCA also keeps a list of legitimate firms.
What if you fall foul of one?
If you suspect you have invested in a fraud, tell your bank. Most banks are obliged to warn customers about scams if they are transferring a large amount of money.
Tell Action Fraud, the fraud reporting service run by City of London Police.
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