10 ways conmen will take your cash, if you let them
As consumer champions gear up for Scams Awareness Month, Emma Dunkley looks at how you can spot a fraudulent investment
Saturday 20 April 2013
There's a new sheriff in town – or two, to be precise. The Financial Services Authority, the regulator of firms selling investment products and services, has turned into two separate entities. And they are set to get tougher on fighting financial crime.
Of the two, it will be the Financial Conduct Authority (FCA), that will clampdown on scams in the industry and focus more on protecting consumers. It can tackle unauthorised businesses, prosecute firms, issue warnings against companies giving cause for concern and, wherever possible, give money back to you if you've been conned.
"The scams we are seeing most frequently are those that purport to sell alternative, unregulated investment products such as carbon credits, rare earth metals and overseas property, land and crops," says Tracey McDermott, a director at the FCA.
"We have also seen a notable increase in unauthorised cold-callers offering advice on transferring pensions or to arrange early access to a pension pot, often with attractive cash incentives."
And these financial scams can leave you not just slightly out of pocket, but thousands of pounds down, warns Gillian Guy, the chief executive at Citizens Advice. "In May, we're running scams awareness month with trading standards to warn people about common scams and what they can do to avoid them," she adds.
So what are some of the most prolific financial scams that could leave you a victim of crime?
Carbon credit trading
You tend to be cold called by a salesperson offering carbon credits, which provide the right to emit a ton of carbon dioxide and can be traded for money. The salesperson could try and sell you carbon credit certificates or lure you to invest in a "green" scheme that offers carbon credits in return.
The caller might try to persuade you with phrases like "this is the next big thing", as industries have to off-set their carbon emissions, and by emphasising how governments are focusing on "green" developments. The FCA warns you could lose money by not being able to sell the credits, nor get a competitive rate when trading them in small volumes.
Some con-artists claim to represent firms authorised to sell investments. And some go as far as to try and change firms' contact details on the FCA register to look genuine.
These scammers then give their own phone number, address and website details to you and usually claim to be from overseas firms that appear on the FCA register, as these companies do not always have their full contact and website details listed. "We have even seen fake versions of our website and register that include the fraudsters' contact details rather than those of the genuine, authorised firm," the FCA says.
Get rich quick
These schemes, like Ponzi and pyramid scams, promise very high returns or dividends, and can deliver these in the early days. But, further down the line you are likely to lose your cash. These schemes work by using money from new investors to pay existing investors, making them look genuine early on.
The schemes implode when there are not enough new investors and money stops coming in. You could find all of your money is gone and the scammers who set them up have taken most of it. Pyramid schemes focus on the money you can earn by bringing on board new investors.
A cold-caller will tell you that by investing in small plots of land, you can make "big profits" once planning permission has been granted. However, you could lose large amounts of cash as this permission is often not granted, or even applied for, leaving you with land worth virtually nothing.
Although not all land banking schemes are fraudulent, the FCA warns it is often not made clear that there are restrictions on the land's development or that it is protected.
You might get a letter or phone call asking you to receive a payment into your bank account. You are then asked to take this amount out in cash and send it abroad using a form of money transfer service. In return, you're told you'll get commission. But you might never get this commission, or if you do get a small amount, you're probably being used as a conduit by criminals to launder money – implicating you in the crime.
Rare earth metals
You might get a call from a salesperson promoting rare earth metals, claiming there is high demand for these metals in manufacturing and they can lead to large returns. Unlike gold and silver, it's hard to find the prices of these metals, which are sold on private markets, so it is difficult to see if you're paying the right price. And you could end up selling at a loss, if you can sell them at all.
As rare earth metal extraction schemes are usually based overseas, UK authorities cannot check the products or confirm they exist.
Boiler room and shares
"You get a call saying there's a fantastic investment opportunity in relation to shares," says Louise Baxter of the Trading Standards Institute. "The callers use high pressured selling techniques, often saying it's an offer too good to miss and that a decision needs to be made immediately – or the opportunity will be lost. The returns they promise are always very high. And if you fall for it once, you're put on a 'sucker list' that gets passed around."
Overseas tree and crops
These offer investment in trees and crops, as well as other ethical programmes, but without the protection of compensation schemes.
The investment is usually stated to be low-risk but promises high, often guaranteed returns of around 15-25 per cent, the FCA said. The investment period tends to be around five years, after which your plot is supposedly harvested, sold on your behalf and the profits given to you.
"Emails started to come from people pretending to be at banks," said Ms Baxter. "But now this has advanced and is starting to come from people pretending to work at PayPal, for example. They take small amounts of money off your credit card or from your account, so say 70p every day, in order to go under the radar. They might simply ask for you to re-enter your username and password to do this, saying they've lost it."
"This is like grooming online," says Ms Baxter. "The scammers target people on dating sites, make them fall in love, then ask for money."
How to avoid scams
The cliché "if it sounds too good to be true it usually is" holds true.
"Be careful with your personal details," says Ms Guy. "If you've been contacted out of the blue, are urged to sign up quickly and not tell anyone else about the offer, have been given only a mobile number or a PO Box address then it could be a sign that it is a scam." And Ms McDermott warns to be sceptical of any promise of fantastic investment returns.
If you think you've been had, call the FCA's helpline on 0800 111 6768.
Emma Dunkley is a reporter for Citywire.co.uk
Compare with the Independent: See how much you could save by switching credit cards. Compare now
Threat of 'catastrophic cascade of collisions' involving 300,000 pieces of rubbish must be averted, warn scientists
Ukraine crisis is Russian roulette for investors
Make money as a mystery shopper
Investment Insider: Poundland may not be cheap when it floats
How to start your own internet business
The whole truth about legal fees: Conveyancing can knock a big hole in home-buyers' finances. To get the best deal you must cross-examine solicitors about their charges, says Sue Fieldman
- 1 Oxford is the least affordable city in the UK, where houses cost 11 times local salaries
- 2 Australian man Rod Sommerville reacts to bite from deadly snake by reaching for cold beer
- 3 North Korea elections: Kim Jong-un wins 100% of the vote
- 4 David Cameron resorts to paying for Facebook fans because not enough people like him
- 5 Steve Irwin’s final words: Cameraman present at death opens up about deadly stingray attack for the first time
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
Exclusive: Impact of immigrants on British workers ‘negligible’
Vince Cable: Teachers 'know absolutely nothing' about the world of work
Ukraine crisis: Russia pledges to 'retaliate against sanctions' as Ukrainian president says Crimea vote will not be recognised
The quiet diplomat: Catherine Ashton - recognised and admired in all the world’s troubled countries, yet ridiculed at home
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£55000 - £70000 per annum + benefits: Pro-Recruitment Group: In-House Corporat...
£80000 - £100000 per annum + benefits: Pro-Recruitment Group: In-House Opportu...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town