Investment fraud

Don't let the money
you want to invest fall
in to the wrong hands

All about investment fraud

Investment fraud is where criminals steal the money you want to invest. They often make promises of great returns when investing in schemes, shares and commodities. The problem is, the schemes are often worthless or don't exist at all.

Why it's dangerous and how to spot it

Why it's dangerous

Action Fraud are the national reporting centre for fraud and internet crime. They estimate people lose £1bn each year to Investment Fraud in the UK.

Unfortunately, many of these scams are successful.  There are many types of scams fraudsters use to persuade you to part with your money. Click on the below headings to find out more about the most common ones.
 

What to look out for

Unexpected phone calls (Cold-calls) by someone you don’t know, trying to sell you investments and promising huge financial gains – hang up immediately!

Out of the blue e-mails - don’t respond!

People you don’t know who know a lot about you - scammers will do their homework and make it their business to know as much about you as possible before they contact you.

People giving you details you think only a genuine investment company would have e.g. previous investment and share information – proceed with caution!

People saying they’re from well-known investment companies - be sure to check independently.
 

Remember: If it sounds too good to be true, it almost certainly is! 

Tips that can help

  1. 1

    Take Five – before you do anything just take five minutes to make sure all makes sense, don’t rush and always take your time. Visit Take Five for more help too (opens in new window).

  2. 2

    Seek reputable independent/legal advice before you commit to an investment.

  3. 3

    Before you hand over money ensure the firm you use is on the FCA register and is allowed to give financial advice. (Opens in new window)

  4. 4

    Check the FCA list of unauthorised businesses which is updated regularly. They list businesses believed to be involved in fraudulent activities. (Opens in new window)

Reporting investment fraud

For reporting any urgent matters: 

In an emergency, dial 999 and ask for the Police

You can also call Action Fraud Telephone Reporting on: 0300 123 2040

You can also report investment fraud online to Action Fraud

And, if you think you've been subject to a fraud or scam, please also report it to us.

The FCA's warning list can help you stay safe too

Thinking about investing?

Use the FCA's warning list to see if a scheme or investment is genuine or not

This tool helps you find out more about a potential investment opportunity. It can help you find out whether the investment is real and help you avoid being scammed. 

Look out for these common scams

Property Investment fraud occurs when scammers convince you to buy shares in a property or property bonds, often telling you that you are part of a group of investors (or a consortium). They will say they are buying houses to renovate, which you will make a profit on. The majority of these companies are not regulated or authorised by the FCA and may not even buy any properties to renovate and sell for profit. 

A binary option is a simple method of investing in the price of an asset going up or down, the payoff is either a fixed monetary amount or nothing at all. Some binary options may trade on regulated exchanges; they are generally unregulated and prone to fraud. 

(Advance fee fraud) occurs when fraudsters contact a previous investment fraud victim and offer to recover their lost investment, usually in exchange for an advance fee. The victim is thus defrauded twice as no genuine attempt to recover the original funds is ever made. These scams are run from what the fraudsters call ‘recovery rooms’ and might even be carried out by the same group.

Carbon credit originates from a range of emission reduction activities associated with removal of existing emissions from the atmosphere. These schemes have recently been reported more frequently as victims are approached by firms promoting carbon credit trading schemes.  The FCA has warned that no money has been made from investment in carbon credits.

Rogue wine traders sell people investments in wine which is either not the vintage quality it is claimed to be or simply does not exist in the first place. Trading in wine before it is bottled and released to the market (known as en primeur wine) is particularly open to exploitation by fraudsters as it is not usually delivered until two to five years after the vintage.

Fraudsters will sell you gold/diamonds at much inflated prices; they may even charge you large sums for shipping and storage.  Some dealers may ask for proof of identity, never send these as they may be used in other scams.

This is where investors are led to believe they are investing in land that will significantly increase in value through:

Plots being in areas with high house prices

Government intention of a general increase in housing

Proximity to land that has been allocated for development

In reality investors are sold land which:

Has no/very little development potential

Is very unlikely to be granted planning permission in the foreseeable future

Doesn’t exist or doesn’t belong to the seller

When purchasing land contact the appropriate council to check who actually owns the land according to the Land Registry. It's also important to check if the land has planning permission or is likely to get it in the future.

 

These promise investors high returns or dividends not usually available through traditional investments. 

While they may meet this promise to early investors, people who invest in the scheme later usually lose their money; these schemes collapse when the unsustainable supply of new investors dries up. 

Affinity fraud occurs where criminals target members of a group – such as community, religious, ethnic, elderly or professional groups – to invest in a scheme. These scams are often Pyramid or Ponzi schemes.

The scammers who use affinity fraud often pretend to be members of the group they are targeting. This makes the scam emotionally as well as financially damaging, as the fraudsters can spend years building trust before carrying out the scam.

This usually begins with a cold call, or an email by someone trying to convince you to invest in shares. The contact will appear to be professional and knowledgeable and the company will seem genuine, however the shares being sold will often be worthless or non-existent.

The shares will not be quoted on the stock exchange and will be virtually impossible to sell. You may find after you have remitted funds that you cannot contact the person who sold you the “shares”. This makes it impossible to recover any losses as such companies are not covered by any regulated compensation scheme.

Individuals should seek independent legal and/or financial advice before investing in anything. 

 

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