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January 30, 2018updated 05 Feb 2018 11:00am

FCA warns of increased risk of online investment fraud

By Joe Pickard

The UK’s Financial Conduct Authority (FCA) has urged the public to be vigilant to the threat of online investment fraud.

Fraudsters offering investments in binary options, contracts for difference (CFDs), forex and cryptocurrencies often promote themselves online and via social media channels, such as Facebook, Instagram and Twitter, said the UK regulator.

The fraudsters typically use techniques such as using images of luxury goods and the promise of high returns to lure in potential investors.

After someone has invested, they distort prices on their website, tie people in with extreme pay-out clauses and even close customer accounts, refusing to pay back their money. The FCA revealed that last year investors lost £87,410 ($123,549) per day to binary options scams.

This rise in people being targeted online means that the profile of investment scam victims is changing. While historically over 55s have been most at risk to investment fraud, the FCA’s latest study conducted as part of its ScamSmart campaign, found those aged under 25 were 13% more likely to trust an investment offer they received via social media, compared with over 55s (2%).

A total of 23% of respondents said that online customer testimonies and reviews increase their trust in an investment company. Yet, scammers are known to create highly professional looking online investment platforms that feature fake customer reviews, logos, and statements, to lure in prospective investors.

A further 11% said they would not conduct any of the listed checks at all, such as checking whether the firm was regulated by the FCA or registered with Companies House, before parting with their money.

For the first time, the FCA has seen more users checking its ScamSmart Warning List, which allows users to find out if firms are operating without the FCA’s authorisation, after being approached with an investment offer online rather than over the phone.

Mark Steward, director of enforcement of the FCA, said: “While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances do not really place trades at all, before disappearing with innocent investors’ money.

“Before investing online, check you know who you are really dealing with and check if they are authorised by the FCA. Find out how to avoid scams on the ScamSmart website, and if in any doubt – do not invest.”

Nick Hewer, who is supporting the campaign, added: “The amount being lost every day to online investment fraud, such as binary options scams, is staggering. It is vital for all those on social media to be extra cautious about engaging in any conversations or with adverts that relate to quick-wins or guaranteed returns, especially with individuals or companies you do not know.

“Remember, if it sounds too good to be true, then it probably is. If you are offered an attractive investment out of the blue, be suspicious, check the FCA’s Warning List and seek impartial advice. Better still, if you get an email or message about an investment from someone you do not know, just delete it.”


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