Fraudsters target British expats in retirement havens

In and around Spain, thousands are falling prey to advisers peddling financial scams and mis-selling investments
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The Independent Online

British citizens living abroad are being targeted by unscrupulous financial advisers for risky investment schemes and fraud.

Many pensioners hoping to live out their days in the sun have already been - or are in danger of being - defrauded out of their life savings, regulators and campaigners warn.

One expat group in Spain, weary of its community being repeatedly fleeced, has now posted warnings of 40 different investment scams on its website.

The same country's financial regulator is investigating 17,000 complaints of mis-selling.

Many of the investment operations targeting expatriates in Spain claim to be based and regulated in offshore jurisdictions such as Gibraltar. Some are not even registered, and only last week the Gibraltar Financial Services Commission issued a strong warning against an outfit run by British financial advisers in Spain.

"[We] have become aware of [an] entity, which claims to operate from premises in Gibraltar. This entity is not, and has never been licensed by the Commission to undertake any form of regulated business in, or from within Gibraltar," it said.

It is the latest in a long line of warnings by the GFSC about suspect companies.

The Commission urges consumers to tread carefully - "exercise the greatest possible caution before proceeding," it says - when getting involved with any financial advisers.

Its guidance to expats keen to invest money is littered with warnings. Headings such as "Do I need to be suspicious?" and "Protect yourself" offer reams of advice to ward off unscrupulous salesmen, while the golden rule is, "If it sounds too good to be true, it probably is".

British expatriates are ideal targets for chancers and conmen, warns David Marchant, publisher of the Miami-based Offshore Alert magazine. "A typical expat is financially successful," he says. "Also, being strangers in a foreign land, expats tend to work and socialise together, forming a group of people that is easy for conmen to recognise and infiltrate."

Many are elderly too, and more vulnerable to sharp practice by fraudsters, who themselves are often based in offshore havens or countries with little or no financial regulation.

Mr Marchant was the first to raise concerns about Imperial Consolidated, a financial group that sold investments promising returns of 15 per cent a year to UK expats across the world. It collapsed in 2002 after losing up to £200m of investors' money and became the subject of a Serious Fraud Office probe.

Paul Austin, a British expat based in Dubai, lost many thousands of pounds in the Imperial fiasco.

Regulation against dubious fund operators is either too weak or non-existent in many countries, he says. "Investors have no easy route to recourse. We need an international fraud squad like Interpol which can enter countries at will and have access to the judiciary of the region or country without hindrance.

"A strong deportation and cross-country information exchange is essential as these [advisers] move from country to country rolling out the same show."

Another concern is that expats like to keep their money offshore to avoid paying UK taxes. However, this can leave their savings much more vulnerable than they would be in well-regulated jurisdictions.

"Where a financial adviser is based in the UK and gives negligent advice in relation to offshore products, there isn't generally a problem," says William Ellerton of solicitors Bevans. This is because, in nearly all cases, the adviser will be insured and regulated by the Financial Services Authority (FSA).

"This means that a disappointed investor will be able to claim compensation."

The same may not be true for expats. "Financial advisers operating abroad are not bound by FSA regulations, which require that they fully understand the investor's risk profile and investment objectives. This lack of regulation can lead to some appalling cases of mis-selling, particularly where advisers are chasing generous commission payments from the funds."

If losses are suffered by investors, their only recourse might be to sue the adviser in the country where the guidance was given, Mr Ellerton adds. "However, where that adviser is unregulated and frequently uninsured, there may be little purpose to this."

The English-language Sur newspaper in Spain reported a recent incident of advisers targeting expats from the Costa del Sol through to Barcelona. Prospective clients were offered a return of up to 16 per cent on their capital.

So far, on the Costa del Sol, 700 families are said to have lost a total of £70m to these fraudsters.

It transpired that the advisers involved were not on the register of the Spanish regulator, the National Investment Market Commission. In the past 12 months, this body has issued 15 warnings about consultants acting without authorisation.

To counter such attacks on their finances, the Costa del Sol Action Group was formed to bring claims to the Spanish courts. In the £70m fraud case above, lawyers acting on behalf of the victims are now pressing criminal charges against the financial intermediaries.

But Gwilym Rhys-Jones, an expat investigating frauds for the action group, warns: "There is no proper system of regulation of financial advisers in Spain."

All experts say that investors should always use independent financial advisers and funds that are reputable and regulated in a country with strong protection for investors.

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