The promise of financial security or phenomenal returns leads to thousands of Britons falling foul of investment scams every year, and losing millions of pounds. Such scams have become more prevalent and sophisticated, as online communication has improved, and identifying them is proving more challenging.

However, there are a few indications that will warn you of a potential investment scam. Continue reading to learn about spotting, avoiding, and reporting investment scams.

What Are Investment Scams?

An investment scam aims to lure unsuspecting victims into parting with their money. At first glance, an investment scam seems legitimate, backed up by a professional-looking website with plenty of relevant content, testimonials, and marketing collateral.

Ponzi schemes are the most infamous type of investment scam. In this type of fraud, the money from new investors goes to paying those who invested previously. Eventually, the new money coming in is less than the money owed. At this point, the scheme implodes, and everyone loses their money.

Nowadays, investment scams can be incredibly sophisticated, thanks to digital communications and marketing techniques. The complexity with which some of these scams are designed has led to experienced investors falling foul.

Older people have become particularly vulnerable, following the easing of pension restrictions in 2015. Pensioners can now access large lump sums of cash from their pensions, making them prize targets for the scammers.

Regardless of the type of investment scam, they will all offer you the same thing. These scams have the promise of fantastic returns with little or no risk.

What To Be Aware Of

Just because an investment opportunity is presented on a professional-looking website, doesn’t mean that it is legitimate. Before committing to any investment, you should check that the company is registered with the FCA.

Spotting An Investment Scam

Fortunately, several warning signs should alert you to something being not right with an investment opportunity:

  • When you receive unsolicited approaches.
  • You cannot return a call to the company.
  • When an immediate decision is asked for.
  • When you are put under pressure to invest.
  • Only a mobile phone number is given as a contact method.
  • A Post Office (PO) box is provided as an address.
  • High returns are offered.
  • Minimal risk is promised. 

Is the Investment a Scam?

ScamSmart is an FCA website where you can check if an investment opportunity is genuine or a scam.

Protecting Yourself Against Investment Scams 

To reduce the risk of being caught out by investment scammers, follow these guidelines:

  • Ignore unsolicited contacts. Genuine investment firms will never contact you, out-of-the-blue.
  • Always check that the company is registered with the FCA.
  • If you are looking for somewhere to invest, contact a genuine FCA regulated firm. 

Important Notice

Even though the FCA has authorised a company, it doesn’t mean that the FOS or FSCS covers you. It is only mainstream products that FCA rules apply to, so take extra care with niche investment opportunities that could be unregulated. 

What If Scammers Have Targeted You? 

If you believe that investment scammers have targeted you, report it to the FCA. They will be able to add the scam to their ScamSmart website, helping make others aware.

In the event of you losing money to investment scammers, you can report the incident to Action Fraud by calling 0300 123 2040. Alternatively, you can report it online at www.ActionFraud.police.uk.

Having been their victim once, an investment scammer will often try to retarget you by pretending to be a company that can help get your money back. Be on the lookout for such tactics if you have been victim to an investment scam.