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The UK regulator, the Financial Conduct Authority (FCA), is warning investors to be vigilant about possible investment fraud. Data collated by the FCA has revealed that at least – and this could be a conservative estimate – £197 million was scammed from investors and traders in 2018. This equates to about £29,000 per person.

The FCA says fraudsters are using increasingly sophisticated tactics to scam victims, with the most commonly reported investment fraud related to investment in shares, bonds, forex and cryptocurrencies promoted by firms that are not authorised by the FCA. They accounted for 82% of all suspected investment scams reported in 2018.

“The amount lost last year to investment fraud is staggering, over £197 million according to Action Fraud,” says personal finance expert Alvin Hall, who is supporting the campaign. “If my 30 years of experience in investment markets has taught me anything, it this – regardless of how confident you are about what you’re investing in, you should be just as confident you know who you’re investing with.”

The first quarter of the year is a common time for people to make their financial plans for the year, including investments. But the FCA is urging investors to do their homework, and in particular to make sure they are dealing with a properly authorised firm which is in the FCA register. Victims are often coerced or persuaded into parting with significant amounts of money and this can have a devastating impact on both their well being and finances.

What are the warning signs of an investment fraud?

  • Traditionally scammers cold call but contact can also come from online sources, the post, or even by word of mouth at a seminar or exhibition.
  • Scammers like to offer a bonus or discount for investors if they invest before a specific date, or they may say the opportunity is only available for a short period of time.
  • Perpetrators like to show ‘social’ proof like fake reviews or claim they have other clients who have already invested.
  • Frequently scammers will use ‘false authority’ like professional looking literature and websites, or claim they actually ARE regulated when they are not.
  • Finally they will use flattery, building friendship with potential victims to lull them into a false sense of security.

“Investment scams are becoming more and more sophisticated and fraudsters are using fake credentials to make themselves look legitimate,” says Mark Steward, executive director for enforcement and market oversight at the FCA. “Last year we published over 360 warnings about potentially fraudulent firms.”

The profile of investment scams is changing, with more people being targeted online. Fraudsters are moving away from the traditional cold call method to email contacts, professional looking websites and social media channels. More investors are now making use of the FCA register to double check on the firms that approach them, but still only marginally less than half of those approached.

The FCA maintains a warning list that helps traders to check up on the firms that are operating without its authorisation and is freely available for users to check.

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Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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