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
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