26 April 2024

What to do when an investment seems too good to be true

You’ve been working your entire adult life and saving hard for your future. With rising costs of living and looking to grow your nest egg for retirement you start to do research on investment options.

One day, a call out of the blue. A specialist from a bank is in touch, offering you a limited-time interest rate on a fantastic investment. They can’t sell this at the branch, so don’t bother going in. You’ll only get this deal if you transfer the money over this week.

The documents look legitimate when emails are exchanged, and you are ready to secure your family’s financial future.

Soon after you transfer your money over, the investment banker suddenly becomes uncontactable. Panic sets in. You get in touch with your bank, who tell you that you were scammed.

Scammers use powerful social engineering skills to manipulate the psychology of their victims. They use lies to construct a realistic situation to either scare, excite or pressure, hoping you’ll hand over your personal information and hard-earned money.

Investment scams are particularly insidious as criminals just need to produce fake documents and email signatures, which can be very convincing. Losses from investment scams can be particularly large.

To avoid becoming a victim of an investment scam here are some tips to consider:

Ask questions

Do your due diligence as you would any other high value purchase.

Fraudsters are counting on you not investigating before you invest. How many steps do you take before you make a big purchase, such as a TV or car?

You read reviews, speak to a few different retailers, ask friends for their input. Apply that same vigour to any investment opportunity. Speak to your accountant or other trusted advisor and do your research.

Find out who is on the other end of the phone

Consider why you have been contacted out of the blue with an investment opportunity.

Banks will rarely, if ever, do that. Always get in touch with the bank through its official channels, whether that be via the phone using the contact details on their official website or app, or visiting a branch to speak to staff.

If it is genuinely your bank, they will not mind that you do so. Staff are trained to detect scams and do so every single day. They are here to help.

Check the documentation

Don’t be fooled by official looking documents or social media.

Scammers do use the names of genuine bank staff, so a quick Google search might show that person does indeed work at a bank. Fraudsters also create fake LinkedIn accounts to trick unsuspecting victims.

Avoid quick decisions

A huge red flag is if the person is applying pressure to accept quickly. They don’t have to be rude - scammers are often extremely polite and well spoken.

Educate yourself

Be aware that scams exist, read the latest warnings from your bank and speak to your loved ones about the red flags, especially if you have family who are vulnerable.

Keeping people safe from scams requires everyone to play their part including customers, banks, the wider industry, governments, telcos and social media companies.

This article first appeared in Money Magazine on 26 April.