It’s always important to be vigilant about the risk of investment fraud, but the scam artists seem to be changing their approach.
New figures from the Financial Conduct Authority (FCA), as part of their ScamSmart campaign, have shown that £87,410 is being lost every day to binary options scams.
Binary options investments allow consumers to make bets on the expected value or price of a stock, commodity, currency or index.
Since 3rd January 2018, binary options have been a regulated investment product, meaning that all firms trading in binary options will need to be authorised by the FCA.
Since then, the FCA has published a list of 94 firms without FCA authorisation that it understands to be offering binary options trading to UK consumers.
The FCA figures also show that those aged under 25 are six times more likely to trust an investment offer received via social media, compared to the over 55s.
With investors becoming increasingly aware of the dangers of cold calling, it seems the fraudsters are taking a more modern approach.
Fraudsters offering investments in binary options, contracts for difference (CFDs), forex and cryptocurrencies (such as Bitcoin), often promote themselves online and via social media channels, such as Facebook, Instagram and Twitter.
They typically promise high returns and use images of luxury items, like expensive watches and cars, to entice people to invest in their scams.
After someone has invested, they distort prices on their website, tie people in with extreme pay-out clauses and even close customer accounts, refusing to pay back their money.
According to the FCA, there is a big rise in people being targeted online and the profile of investment scam victims is also changing.
Older investors used to be at greatest risk of falling victim to an investment scam.
But the latest FCA research shows it’s the under 25s now at greatest risk, as they are six times more likely than the over 55s to trust an investment offer received via social media channels.
This trend is reinforced by figures from Action Fraud, which show that under 50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud.
The FCA research is particularly interesting because it shows that more than one in five respondents said online customer testimonies and reviews increase their level of trust in an investment company.
Scammers are adept at creating highly professional looking online investment platforms, usually featuring fake customer reviews, logos and statements, all designed to lure in their victims.
The FCA also found that a further 11% said they wouldn’t conduct any due diligence at all before investing; simple checks like checking a firm was regulated by the FCA or registered with Companies House.
Mark Steward, Director of Enforcement at the FCA, commented:
As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.
While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.
Before investing online, check you know who you are really dealing with and check if they are authorised by the FCA. Find out how to avoid scams on the ScamSmart website, and if in any doubt – don’t invest.
In order to reduce the chance of becoming a victim to online investment scammers, the FCA is advising consumers to carry out the following steps:
1 – Reject unsolicited investment offers, whether made online, on social media or over the phone.
2 – Before investing, check the FCA Register to see if the firm or individual you are dealing with is authorised, and check the FCA Warning List of firms to avoid.
3 – Get impartial advice before investing.
If you suspect a scam, you can report it to the FCA at www.fca.org.uk/scamsmart or by calling their contact centre on 0800 111 6768.
With the nature of investment scams moving online and making increasing use of social media to snare victims, it’s more important than ever to carry out basic due diligence steps before parting with your money.
If in doubt, always seek a second opinion from an impartial expert, such as the Independent Financial Planners here at Informed Choice.
