In the past, investment fraud was largely carried out in call centres or offices known as “boiler rooms”. Here, cold callers would try to scam individuals by offering into buying fake or worthless investments. The government has recently announced that it will be cracking down on cold callers selling financial products, including investments, insurance, and cryptocurrency. But investment scams come in many forms, so it’s important you know what to look out for.

Read on to learn about the different ways scammers try to manipulate people, signs of an investment scam, and how to check that an investment opportunity is legit.

Fake financial services and copycat companies

Investment scams often involve criminals posing as investment service providers, such as financial advisors, investment platforms, or fund managers. They can invent a financial services company or impersonate one that actually exists.

Traditionally, they would cold call people or send glossy brochures promoting “time-limited investment opportunities”. But they can also create websites, email offers, online adverts, and social media posts for their fake company to make it seem genuine. These made-up firms can even appear on search engines like Google.

Fraudsters can create professional-looking marketing material and may claim to be regulated. Before parting with your money, you should:

• Check for yourself that the firm actually exists by looking for it on Companies House.
• Check the FCA register to see if a company or advisor is regulated and what they are authorised to do.
• Call the company on the number listed on its FCA register to make sure you’re dealing with the correct company and to verify the payment details.
• Use the FCA's ScamSmart Investment Checker for a steer on whether what you’ve been offered could be a scam.

Remember: financial services companies are not allowed to cold call you. You should be suspicious of an organisation that calls or messages you out of the blue; genuine financial firms rarely do this.

Social media and romance fraud

Recently, scammers have taken advantage of social media and begin by striking up a friendship or romance with their intended victims on social media channels or dating apps. Once the scammer has built up trust, they may claim that they’ve made money in an investment (typically cryptocurrency) and offer to invest some money on the victim’s behalf. Some scammers may even use fake websites which make it appear as if the investment is doing well or send some money back to the victim as “returns”. The aim is to convince people to invest large sums of money, either by sending it to the scammer or a fake investment platform.

This form of scam is often known as “pig butchering” as it involves grooming or “fattening up” the victim by building a friendship or romantic connection first.

“Pig butchering is particularly devastating for victims who may end up losing their life savings. Fraudsters often target financially savvy people who they think will be interested in investing, so don’t make the mistake of thinking that you’re too smart to be taken in.” Alana Fairfax, fraud writer, Triodos Bank UK.

Be careful when investing based on personal recommendations. Ask yourself the following:

• Who is recommending the investment and why? Are they qualified and regulated to give advice?
• How long and how well do you know them? Have you verified that they are who they say they are?
• How did they initially contact you? Was it unexpectedly?

Don’t invest solely based on what someone recommends unless it’s part of regulated financial advice. If you’re not sure whether an investment is right for you, get financial advice from a regulated adviser or firm.

More on romance fraud

Signs of an investment scam

• Unexpected contact: Treat all unsolicited calls, emails, texts, and social media messages promoting an apparent “investment opportunity” with caution.
• Unrealistic returns:  You should be suspicious if the returns or interest promised are much better than other similar products. All stock market investments involve risk and there’s never a guarantee that you’ll get a return.
• Time pressure: Scammers will try to pressure people by saying that the offer is only available for a short time or by offering a discount if you act quickly. You should never rush; take time to decide if an investment is right for you.
• Fake reviews: It’s not hard for a scammer to create fake reviews to make their firm seem legitimate. A fraudster might pretend that other customers also want in on the deal, but a good financial adviser won’t tell you to invest based on what’s popular. You should invest based on what’s right for your circumstances.