The Wire: Spring 2022 – As criminals get more sophisticated, here is how to spot a financial scam

(Estimated read time 5 minutes)

As criminals get more sophisticated, here is how to spot a financial scam

If you have spent your entire working life investing in your future, the idea of your savings being taken away by a pension or investment scam must be devastating.

Although most of us feel we are astute enough to spot a scam and avoid it, the data suggests that more people are at risk than ever. As scams grow ever more sophisticated, it’s becoming easier to be taken in by schemes that look entirely genuine.

And, it’s not just your personal finances that are being targeted. New research from UK Finance shows that scams targeting small and medium-sized businesses are also on the rise.

Read on to find out how you could fall victim to pension or investment scams, how to better protect yourself against them, and how you can ensure your business doesn’t become a fraud statistic.

The “it won’t happen to me” attitude doesn’t match up against the statistics

Research conducted by the Financial Conduct Authority (FCA), published by Sky News, reveals that 68% of pension holders said they were confident they could tell if they were being defrauded, but only 28% spotted the signs of an advanced scam.

This data clearly shows that there are many people at risk of being scammed, even if they consider themselves to be safe from this type of financial crime.

What’s more, according to research published by Which?, 79% of over-55s said they had been approached by a scammer in the 12 months to October 2021. In the same year, more than £2 million was lost to pension scams alone in the UK.

These statistics point to one worrying fact: none of us are completely immune to the dangers of clever and imaginative financial scams.

10 clear signs of a sophisticated investment scam

You might be wondering: how do people fall for these scams? Surely there are tell-tale signs that something is awry?

Pension and investment scams are becoming more sophisticated. Criminals contact pension holders or those with significant investments, usually by email or phone, often offering them better returns on the money they have invested. Unlike small-time scams, investment scams are often highly polished, and can be practically indistinguishable from a qualified pensions expert, for example.

Scammers are more likely to commit these crimes online than over the phone, according to research published by the Office of National Statistics (ONS) in 2020.

Here are 10 clear signs of a sophisticated investment scam, so you can have a greater awareness of how these criminals operate.

  1. You are contacted out of the blue by a “pensions expert” or “financial adviser”
  2. The person or firm who contacts you doesn’t have a website, or calls from a blocked number, making it hard for you to reach them on your own terms
  3. You are promised an unbelievably good deal with very few strings attached
  4. You are encouraged to transfer money into offshore accounts
  5. The only contact information you are given is a mobile number or PO Box
  6. You are pressured to transfer money “today” or “as soon as possible”
  7. The person or firm who contacts you promises to “unlock” or “liberate” your pension funds before 55, or another similarly tempting offer
  8. You are promised a “tax loophole” that can cut your tax bill and keep your money safe
  9. You are “guaranteed” returns on your investments
  10. The investment opportunities you are offered are described as “low-risk” but are sold as yielding “high returns”.

These are not the only red flags you could spot, but are some of the most common signs of a scam that even savvy pension holders and investors can fall for.

If you are concerned about a person or firm who has contacted you with an investment opportunity, speak with your financial planner for guidance before interacting with them further.

3 ways to protect yourself against high-level fraud

1. As a rule of thumb, don’t trust unfamiliar sources

The FCA study concluded that 9.95% of pension savers said they would accept financial advice from a stranger online, yet only 1.1% said they would accept the same advice from a stranger in the pub.

This shows there is still a propensity to trust unfamiliar people online who offer a “free pension review” or “guidance” – which could result in you losing your hard-earned savings.

If a stranger approached you on the street and claimed to be a pensions expert, would you trust them with your life savings?

By applying this context to strange sources that contact you online or over the phone, you are likely to be more judicious about who you trust and may avoid a potentially life-altering scam.

2. Check the legitimacy of anyone who contacts you

It is crucial that you research any “expert” who contacts you, especially if you have never heard of them before. It is highly unlikely that a legitimate firm would contact you without your permission.

There is a way to check whether whoever is contacting you is from an established firm. The Financial Services Register holds the names of all FCA-authorised firms, so you can easily search the name of the source that is offering you a deal.

If they are not registered, it may be wise to halt your contact with this source.

Even if the source is FCA-authorised, it could still be constructive to run their details past an experienced professional, such as your financial planner.

3. Consult a known professional before making an online investment

Your life savings need to be protected – that’s the priority. No matter how convinced you are that an online investment is going to be beneficial for you, it is always handy to consult a professional first.

Contact us today for guidance on how to spot a scam, or for an overview of your pension and other investments.

It’s not just you – your business could also be targeted by scammers

If you run a small or medium-sized enterprise (SME), your business could be the target of financial crime. According to UK Finance, almost £60 million was lost to business fraud in 2021 alone.

As the business owner, you might already be alert to the kinds of scams that could financially decimate your business – but have you considered that your employees could also be a target?

For example, scammers can pose as suppliers, contacting members of your team for financial details in order to “complete an order” or “pay an invoice”. Fraudsters may also impersonate a manager or a senior manager to convince staff to make an urgent payment outside of their business’s internal procedures.

If your team is not hyper-aware of how your business could be defrauded, they could be sitting ducks for this kind of crime.

Unfortunately, it only takes one slip-up to cause serious financial consequences for your company.

In order to shore up your business against financial crime, it may be beneficial to conduct cybersecurity training with your entire team, to make sure every person in your company can spot the signs of a sophisticated scam.

Get in touch

If you would like to discuss making your finances safer, or how you could better plan your financial future, please email or contact us on 020 7400 4700.

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