In early 2023, the FBI published The Internet Crime Report 2022. In this report, they revealed that investment fraud is now the top-earning type of cyber crime, overtaking business email compromise and costing its victims over $3.3bn last year.
In the UK, meanwhile, the FCA revealed in February that calls regarding investment scams have nearly tripled in the last five years. But why is this happening, and what should investors look out for?
Why is online investment fraud increasing?
The cost of living crisis, say experts, is making people more susceptible to online investment fraud. According to Tom Selby of AJ Bell, the strain on household budgets is making individuals more financially vulnerable than before, leaving them susceptible to being tempted by fraudulent investment opportunities.
The Financial Ombudsman Service, meanwhile, says that the majority of scams reported to them involve cryptocurrency, and often via online platforms. Here, individuals invest in cryptocurrency via an online platform and are led to believe that their investment has reaped a huge profit. In order to withdraw their profit they are asked to pay a fee – and both this fee and the initial investment are stolen.
The FOS has also warned of an increase in “hybrid” scams. These, they say, combine elements of more than one type of scam, be it romance scams, the sale of goods or investments that don’t exist, or “safe account” scams, where fraudsters pose as the individual’s financial providers or a regulatory body.
How to spot an online investment scam
Consumer rights body Which? offers useful advice on how to spot a potential investment scam. The things they warn investors to look out for include:
- Being contacted by a company out of the blue
- Emailing or phoning you repeatedly to encourage you to buy
- Pressurising you into making a quick decision
- Being asked to keep the investment quiet and not tell others
- The firm not being regulated by the FCA
- An offer that sounds too good to be true – such as investments that are described as low risk but high return.
The FCA has published a warning list of known scams that investors can check opportunities against – and there are many ways to report suspected investment scams to crack down on this activity. By being cautious and following industry guidance and advice, investors can avoid being caught out, as well as helping to protect others from being taken advantage of by fraudsters.
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