RegulationFeb 6 2019

FCA warns £197m lost to fraud

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FCA warns £197m lost to fraud

The FCA has warned investors about the growing threat posed by investment scammers, after £197m of investment scam losses were reported last year.

The warning came after data from its Action Fraud unit found investment scam victims were losing £29,000 each on average, with fraudsters increasingly using social media to target people.

The most common scams reported involved shares and bonds, forex and cryptocurrencies and tax year-end scams, with the FCA warning tax year end represented ‘peak season’ for investment scammers.

Mark Steward, executive director of enforcement and market oversight at FCA, said: "The first quarter of the year is a common time for people to make their financial plans for the year, including investments.

"But before you invest, do your homework.

"Always check the FCA’s register to make sure you’re dealing with an authorised firm and use the contact details on our register, not the details the firm gives you, to avoid ‘clones’.

"Also check the FCA warning list of firms to avoid. Remember, if in any doubt – don’t invest."

The FCA stated fraudsters were now contacting people through emails, professional looking websites and social media channels, such as Facebook and Instagram.

Last year 54 per cent of those who checked the FCA Warning List had been contacted by potential fraudsters via online sources, up from 45 per cent in 2017.

The FCA Warning List is a tool that helps users find out more about the risks associated with an investment, and search a list of firms the FCA knows are operating without its authorisation.

Director of Action Fraud, Pauline Smith, said: “These statistics show that investment fraud is a major threat, with fraudsters doing everything they can to manipulate potential victims into making investments. Victims are often coerced or persuaded into parting with significant amounts of money and this can have a devastating impact on their wellbeing and finances.” 

Commenting on the issue, Tom Selby, senior analyst at AJ Bell, said: "These latest investment scam figures are truly shocking.

"The crooks behind these schemes have a habit of targeting elderly and vulnerable people, stealing vast sums of money and often leaving their victims facing destitution.

"The best way to protect people from scams is to arm them with the tools to protect themselves. The FCA’s ScamSmart campaign has been hugely successful in building awareness to-date.

"It is crucial all parts of the industry build on this success by providing savers with the information and help they need to make sensible investment decisions."

But Quilter warned the real losses for investors came from being too scared to invest for fear of being scammed.

Jane Goodland, corporate affairs director at Quilter, said: "People tend to read about scams and think, ‘that would never happen to me’.

"But with investment losses totalling £197m, that clearly is not the case.

"In fact, to put the figure in context, the average loss to a scam of £29,000 is nearly five times the annual amount saved in a typical Isa, and the total lost is the equivalent of 70p for every £100 subscribed to a stocks and shares Isas.

"In truth the real cost is not only the £197m lost by victims of fraud, but the untold amount of investment growth that potential investors forego because they fear being scammed or don’t feel able to discern legitimate investment opportunities from the fakes. Investment scams damage public trust in financial services as a result."

aamina.zafar@ft.com