Investment scammers stole more than £56 million of savers’ cash in the first six months of 2024 by tricking consumers into believing they were investing in schemes run by genuine financial professionals.
From social media campaigns on platforms such as Facebook blazoned with fake celebrity endorsements to unsolicited texts and emails offering opportunities to grow your cash – crooks will stop at nothing to convince you their investment is the real deal.
Thankfully, the number of instances of investment fraud has fallen by 41% from a peak of 6,224 in the six months to June 2021 during the pandemic to 3,647 over the same period in 2024, according to financial trade body UK Finance.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The decline, says UK Finance, is likely to be a combination of fewer opportunities for fraudsters to contact victims post lockdown and cost-of-living pressures which mean households are less likely to be looking for investment opportunities.
Despite the drop in numbers, savers should remain vigilant.
Camilla Esmund, senior manager of investment platform interactive investor, said: “While social media can be a force for good in terms of financial education and engagement, it can also be a scammer’s paradise. Remember – when it comes to investment information online or on social media, a good general rule of thumb is if it sounds too good to be true, it probably is.”
To avoid falling foul of fraudsters’ tricks, read our guide on the top investment scams and how to avoid them.
What is an investment scam?
A fraudster running an investment scam will attempt to persuade you to pay money into a fake fund or investment scheme.
Their methods of persuasion vary.
Cold callers may contact you with an offer to invest in an opportunity that is only available for a limited period. This creates urgency and encourages you to act quickly before thinking it through.
Social media adverts promising high returns often use fake images and quotes from celebrities to try and legitimise the scheme.
A red flag in all these cases is the promise of a high, market-beating return on your cash that cannot be gotten anywhere else.
If you fall for the ruse and transfer money into the fictitious scheme or fund, you are in fact paying money into the criminal’s account.
As soon as the money has been received, the scammer will quickly transfer your savings to numerous different accounts which could be overseas making it harder to trace, before eventually it is withdrawn.
Top investment scams to be aware of
Criminals use various methods to part you from your savings – here are the top five scams you need to know about.
1. Crypto-currency scams
With fraudsters taking advantage of the hype around digital currencies, crypto-currency scams are on the rise.
These scams often involve fake investment opportunities promising high returns with little risk.
Scammers create professional-looking websites, use social media ads on platforms like Instagram and Facebook to lure victims.
They include images of well-known faces and made-up testimonials to make them seem trustworthy.
National reporting centre Action Fraud received 558 investment fraud reports between April 2020 and March 2021 making reference to fake celebrity endorsements– with 79% mentioning cryptocurrency as the commodity they invested in.
2. Pension scams
Pension scammers target individuals looking to access their pension savings.
They may offer free pension reviews, high-return investment opportunities, or early access to pension funds.
They often use high-pressure tactics to convince victims to transfer their pension savings into fraudulent schemes leaving them penniless in retirement.
Almost £18 million was lost to pension fraud in 2023, according to Action Fraud, with an average loss of £46,959 per person.
The body advises anyone receiving a call out of the blue about their pension, which is illegal, to assume it is a fraudster and hang up.
3. Clone firm scams
Clone firm scams involve fraudsters pretending to be legitimate financial firms.
The fraudsters use the name, address and ‘Firm Reference Number’ (FRN) of real companies authorised by the Financial Conduct Authority (FCA).
They create convincing fake websites and documents that closely resemble those of genuine companies, even using the names of genuine investment managers and financial advisers.
Sometimes victims are drawn to the fake websites by first seeing an advert posted on social media which, if clicked on, takes them through to a seemingly legitimate financial company. Here you’ll be asked for your personal details to send you information about the opportunity.
Eventually, once enough trust has been established, victims are convinced to transfer their savings into the criminal’s bank account.
4. Boiler room scams
Boiler room scams involve high-pressure sales tactics to sell worthless or non-existent investments. They are named so because historically these scam telemarketing campaigns were run by teams out of boiler rooms or basements.
Scammers often cold-call potential victims, offering exclusive investment opportunities with high returns.
They may use persuasive techniques and create a sense of urgency to pressure victims into investing.
Last year, a boiler room scam ring leader who stole £12 million from 310 savers was jailed for five years.
Crypto-currency, commodities and shares were among the fake opportunities the team of sold. None of the money invested ended up in any of the schemes.
5. Property investment scams
Property investment scams promise high returns from investments in real estate projects.
These scams may involve fake property developments, rental schemes, or timeshares.
Scammers often use glossy brochures, professional websites, and convincing sales pitches to lure victims.
Victims are also enticed to part with their cash after attending a free presentation on how to make money from property investment.
At the end of the sales spiel, attendees are told that to sign up to the scheme they must first had over a joining fee. Once the fee is paid, no further contact is made.
How to avoid investment scams
By staying informed and vigilant, you can protect yourself from these common investment scams.
Louise Cockburn, information security awareness and culture manager at wealth manager Quilter, said: “Always take the time to research and verify any investment opportunity before committing your money.
“Verify the credentials of anyone offering financial advice and research the company as well as checking its registration with the FCA. If the firm appears on the FCA’s registered information, call the company directly to verify the details of the investment.”
Speak to a trusted financial adviser before making any investment decision, particularly one that involves a lot of money.
Always be cautious of deals that seem too good to be true. Assurances of a high reward with low risk are often a red flag of scams.
Scepticism towards unsolicited investment offers is essential and never make investment decisions under pressure.
Listen out for claims that the investment offer is exclusive to you and being asked to keep it secret. This is a dead giveaway you’re dealing with a scammer.
Fraudsters often only provide a mobile number or PO box as contact details, which is another warning sign.
Be particularly wary if the company asks for control of your accounts or investments, especially in cryptocurrency, and never give it.
You should also be wary of any unsolicited callers claiming to be from your bank, a legal firm or any other party offering to help you get your money back. Hand up immediately, it is also a scam.
Can I get my money back from an investment scam?
In some instances you may be able to get some or all of your money back after being lured into an investment scam.
According to UK Finance figures, in the first six months of 2024 just over half the money that was stolen from investment scam victims, equating to £30.1 million, was returned by banks, building societies and other payment and merchant institutions.
On 7 October, rules were set by the Payment Systems Regulator, the body that regulates payment systems in the UK that apply to reimbursing victims of fraud whereby the consumer has authorised the transfer of money from their account. This is called Authorised Push Payment fraud.
Certain transactions aren’t covered however, such as payments made to overseas bank accounts or payments made by debit and credit cards.
How to report investment scams
It is vital to act quickly if you think you have been a victim of investment fraud. The sooner you report it to the bank or building society that holds the account you have transferred the money from, the more chance it has of recovering your cash.
Most institutions have a dedicated fraud team on hand to help quickly.
To try get your money back, you must report the fraud to your bank no more than 13 months after the last fraudulent payment was made.
You should also report the scam to Action Fraud using its online form. This will help stop the perpetrators from scamming other people.
The FCA also has a consumer helpline for reporting fraud: 0800 111 6768. Find more information and guidance on the Take Five to Stop Fraud website.
