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The U.K. Financial Conduct Authority (FCA) has issued a warning to investors, encouraging them to be vigilant against the threat of investment scams, which most commonly are involved with cryptocurrencies. This warning comes as a result of Action Fraud, the UK’s national fraud reporting service, revealing over £197 million reported losses in 2018. On average, victims lost over £29,000 to investment scams.
Investment scams are evolving as scammers become more sophisticated and adept at targeting their victims. It used to be the case that cold calling was the method of choice for investment scammers; however, people are increasingly cautious of cold callers but more vulnerable to other methods of attack, especially of digital currencies such Bitcoin and Ethereum. The data shows that fraudsters are contacting people through email, malicious websites and popular social media sites such as Facebook and Instagram.
The good news is that as fraudsters become more sophisticated, people are also becoming more knowledgeable when it comes to detecting scams or knowing where to find answers if they are suspicious. The FCA runs the FCA Warning list, a tool that helps people identify risks with certain investments. In 2018 54% of those who check the list had already been contacted by fraudsters, up from 45% the year before.
According to data from the FCA call center, investment scams involving shares and bonds, cryptocurrency and forex are the most reported.
In light of the news, the FCA has joined forces with Alvin Hall, a financial expert and experienced investor to help people identify potential scams. Below are six warning signs that the FCA is encouraging people to look out for.
- Unexpected Contact: Be wary of investment opportunities that are offered by direct contact, for example, an email, a social media contact, or being approached in person.
- Time pressure: Be wary of investment opportunities that encourage you to act quickly. Fraudsters typically create a sense of urgency to get you to take action without having time to evaluate the risks.
- Social proof: Scammers may share fake reviews or claim there is a high amount of interest in the deal
- Unrealistic returns: Scammers may offer returns that seem too good to be true, and that’s because they are.
- False authority: Scammers may claim to be regulated or use convincing literature and websites. You should always try and independently check these claims to see if they re true.
- Flattery: Scammers will often be overly friendly and flattering in order to build up a report and lull you into a false sense of security.
Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:
“The first quarter of the year is a common time for people to make their financial plans for the year, including investments. But before you invest do your homework.”
While crypto could be an exciting new venture that could truly change the financial world as we know it, be sure to be cautious of any too-good-to-be-true alluring offer that involves cryptocurrencies.