Being vigilant to scams

Fraudsters often impersonate legitimate, regulated financial institutions, using names and websites that closely resemble well-known firms. These "clone firms" may convince you to invest by pretending to be a regulated firm. They typically target investors through emails, phone calls, or fake websites to build trust and convince them to invest in fraudulent schemes.

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Warning Signs:

• The firm’s name and website address look almost identical to a legitimate company but with slight differences.

• They pressure you into acting quickly or provide untraceable contact information.

• They ask for personal information like your bank details or passwords.

 

What You Can Do:

• Verify the Firm: Always check the legitimacy of the company through the Financial Conduct Authority Register.

• Be Cautious of Pressure Tactics: Be wary of pressure to act quickly. Legitimate companies will give you time to make informed decisions.

• Check for Red Flags: Watch out for minor differences in website addresses, firm names and email addresses

Boiler room scams involve cold calls from fraudsters posing as financial advisors or brokers. They typically use high-pressure sales tactics to convince you to buy shares in worthless or non-existent companies. Once they convince you to invest, the fraudsters disappear with your money, and the shares you purchased turn out to be worthless.

 

Warning Signs:

• Unsolicited calls or emails offering "exclusive" investment opportunities.

• Aggressive or pushy sales tactics, with a sense of urgency to make decisions quickly.

• Lack of detailed information about the company or investment.

 

What You Can Do:

• Hang Up and Research: If you receive unsolicited calls or emails, hang up immediately and research the company yourself before making any decisions.

• Don’t Be Pressured: Take your time when considering investments and avoid giving in to high-pressure tactics.

• Seek Independent Advice: Always seek independent, FCA-regulated advice before committing to any investment.

Cryptocurrency investments have become a popular target for fraudsters, who offer fake initial coin offerings (ICOs), fake cryptocurrency exchanges, or "too good to be true" cryptocurrency trading opportunities. As cryptocurrencies can be highly volatile and less regulated, scammers take advantage of investors looking for high returns.

 

Warning Signs:

• Promises of guaranteed returns in a volatile market like cryptocurrency.

• Unregulated or unofficial trading platforms.

• Lack of transparency on the underlying technology or asset backing the investment.

 

What You Can Do:

• Use Regulated Platforms: Always use official, FCA regulated cryptocurrency exchanges and avoid unregulated platforms.

• Research the Investment: Make sure you understand the investment, its technology and how it works within the market.

• Be Wary of Unregulated ICOs: If an ICO promises guaranteed returns or sounds too good to be true, it probably is.

Carbon credit investment scams have become increasingly prevalent. Fraudsters convince investors to buy carbon credits, often promising huge returns as part of environmentally-focused schemes. However, these investments are typically non-existent or overvalued, and investors end up losing their money with no way of recovering it.

 

Warning Signs:

• The "carbon credit" scheme sounds too good to be true.

• You’re encouraged to make a quick decision or investment.

• You’re unable to verify the legitimacy of the carbon credit scheme.

 

What You Can Do:

• Avoid investments that promise unrealistic returns based on vague environmental schemes.

• Ensure the carbon credit scheme is recognised and operates transparently under regulatory oversight.

Some scams involve high-risk investments that are not regulated by the FCA. These can include anything from unlicensed investment platforms to fraudulent investment funds. Since these schemes operate outside of the regulatory framework, they often offer high returns with no guarantees and a high risk of losing your money.

 

Warning Signs:

• The investment is not regulated by the FCA.

• The opportunity promises high returns with little or no risk.

• The firm is untraceable or difficult to contact.

 

What You Can Do:

• Always check the FCA’s Register to ensure the firm is regulated.

• Be cautious of investments that don’t provide clear information about the risks involved.

• Seek independent advice before committing any funds to an unregulated scheme.

These scams target individuals wanting to access their pension funds early. Fraudsters promise to help you release pension funds before the age of 55, often with no penalties or tax implications, but in reality, they may leave you with massive tax bills or even no access to your pension funds.

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Warning Signs:

• Promises of early access to your pension before age 55.

• Guarantees of no tax penalties or additional charges.

• Requests to transfer funds to unregulated schemes.

 

What You Can Do:

• Don’t act on unsolicited offers to release pension funds early.

• Only work with FCA regulated firms that are authorised to offer pension services.

• Verify any firm claiming to offer pension liberation via the FCA Register.

These investments typically involve purchasing a property or a "hotel room" for a fixed sum, with the promise that it will generate consistent rental income. Some scams may involve property developments that either don’t exist or fail to deliver the promised returns, leaving investors unable to recover their money.

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Warning Signs:

• Guarantees of high rental returns or a fixed income without risk.

• Claims of high returns from "off-plan" developments, which may not materialise.

• Pressure to sign contracts or make large upfront payments quickly.

• Lack of transparency regarding the property’s location, management, or legal documentation.

 

What You Can Do:

• Research thoroughly before investing, particularly in "off-plan" developments.

• Be sceptical of "guaranteed" returns, especially when no firm track record is provided.

• Avoid making large upfront payments without legal oversight and independent verification of the investment.

Mini-bonds and high-yield bonds have become a growing target for scammers. These investments often promise high returns, but they are highly risky and can result in significant losses when the issuing company defaults. Scammers have been known to present mini-bonds as low-risk opportunities, and they may even list these bonds on recognised overseas stock exchanges to add credibility. Despite this, many of these bonds are either poorly managed or entirely fraudulent, leaving investors with no returns and a loss of their initial capital.

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Warning Signs:

• Promises of high returns for a seemingly low-risk investment.

• Mini-bonds listed on unregulated exchanges or overseas stock markets without sufficient transparency.

• Lack of detailed financials, including the ability to verify the company’s viability.

 

What You Can Do:

• Be Wary of High Returns: High returns typically come with high risk. If a bond promises too good to be true returns it’s a red flag.

• Research the investment: Ensure you have access to detailed financial reports and can verify the company’s financial health.

• Avoid Unregulated Exchanges: Be cautious of mini-bonds listed on unregulated or overseas stock exchanges.

Unscrupulous IFAs exploit their regulatory status and expertise to recommend inappropriate or high-risk investments that are not in the best interests of their clients. These advisers may push investments such as mini-bonds, unregulated schemes, or unsuitable pension transfers, often for their own financial gain.

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Warning Signs:

• Pressure to act quickly or invest in high-risk, unregulated schemes.

• Unsolicited offers for advice on complex or high-risk products.

• Failure to adequately explain the risks and consequences of recommended investments.

 

What You Can Do:

• Always seek a second opinion if an IFA’s recommendations seem unsuitable or too risky.

• Be wary of any advice that doesn’t align with your personal financial goals and risk tolerance.

• Report suspicious IFAs to the FCA to protect others from falling victim to similar scams.

Unsuitable defined benefit pension transfers typically involve financial advisers who exploit the requirement for regulated advice when transferring out of a DB pension scheme. Under UK law, you are compelled to seek and receive financial advice before transferring away from such schemes, which makes this mis-selling particularly insidious.

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Despite being FCA regulated, these IFAs may mislead their clients into transferring funds to investments that are fraudulent or extremely risky, which could lead to significant financial losses. In some cases, the pension money is lost entirely, or individuals may face severe tax penalties from HMRC.

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Warning Signs:

• Unsolicited offers to help transfer your defined benefit pension, often promising higher returns or better flexibility.

• Pressure to transfer quickly or to meet "time-sensitive" deadlines,.

• Involves high-risk or unregulated schemes such as mini-bonds, property developments, or foreign investments (see above).

• Lack of transparency or adequate explanation of the risks involved in transferring your pension funds.

 

What You Can Do:

• Always seek a second opinion or independent advice from a different FCA regulated IFA. Even if the adviser is authorised, their recommendations may not align with your best interests.

• Understand the Risks: Fully understand the long-term consequences of transferring out of your DB pension scheme. This is frequently not in your best interest.