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
Will your credit card rewards be scrapped following new EU rules on charges?
Buyers beware of new-build home headaches
Bargain Hunter: First Utility's Cosy deal lets you heat your home from anywhere
What would happen if you put a statistician in a casino with £1m?
10 tips for taking out a personal loan
- 1 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 2 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 3 UK weather: Britain braced for snow as arctic air mass moves in
- 4 Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
- 5 'Isis' schoolgirls: Missing British teenager tweets picture of her Syrian takeaway
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...
£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...
£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...
£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...
Day In a Page
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace