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Inside the mind of an investment scammer

To work an entire lifetime to then have your money fraudulently taken away is nothing short of devastating, but it does unfortunately happen. New research by the FCA highlights exactly how much of a problem this has become but also offers light on exactly how to spot the dirty tricks of a potential fraudster.

The Financial Conduct Authority (FCA) is urging over 55s to check, before they part with their money, to check investment opportunities are genuine. This research, commissioned as part of the FCA’s campaign, (FCA - March 2017) revealed that only two in five (42%) think they know how to spot a fraudulent investment opportunity. The growing over 55 population is being targeted by fraudsters because they are more likely to have money to invest.

Last year alone, victims of investment fraud lost on average £32,000 as fraudsters employed increasingly advanced tactics to persuade victims to part with their money. One of the most common methods used by fraudsters is to pressurise potential investors to make a quick decision. Fraudsters do this by offering a ‘time-limited investment’. This new research found that more than half (53%) of the over 55s surveyed believed acting quickly can be key to getting a good deal, demonstrating how many could be vulnerable to this tactic. If an investment has to be forced, or ‘hurried along’ then you should absolutely stay away from such a ‘fabulous’ offer.

The common tactics used by fraudsters include:

  • Offering lucrative returns above the market rate and downplaying the risk of the investment. If it sounds too good to be true, it probably is!
  • Using flattery to make potential victims feel good, such as praising them for being a knowledgeable investor.
  • Saying that the deal is only available to the target and asking them to keep it a secret. This is driven by our innate desire of ‘Fear of Missing Out’.
  • Saying that other clients have invested or want in on the deal (known as ‘social proof’)
  • Putting them under pressure to invest in a time-limited offer.

The FCA is urging consumers to be sceptical before they invest their money. We don’t think this is ever a bad thing and you should question such an important decision. If someone invests any money with an unauthorised firm then they will have no protection at all from the Financial Ombudsman Service or Financial Services Compensation Scheme if any problems should then arise. The FCA also urges consumers to reject unsolicited contact about investments and to get impartial advice before investing. This might seem obvious for many, but the FCA should be congratulated for getting consumers thinking about protection and noticing the warning signs before it is too late.


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Publish date: 27th September 2018

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