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safely invest and avoid scammers

^{July 2022}

^{15-minute read}

Investment scams are the highest financial loss scam types impacting Australians, with a combined loss of $701million¹ in 2021. If you’re looking to invest, be alert to scammers actively seeking to target you and divert your money to an account they control.

Impacts of an investment scam

Investment scams are often hard to spot. You may not be aware the investment is of concern until some time down the track, when something occurs – you’re no longer able to access your investment, you can’t reach your advisor or they provide complicated reasons why you can’t access your money, you’re locked out of the normal way you access it, or you can’t withdraw money from your investment. It’s only at this point you realise the investment was possibly a scam and you engage your bank for help.
 

Investing at its core always has its own risks that you need to consider, such as the impact of the market or an investment not performing as anticipated, leaving you out of pocket. There are important decisions you need to consider before you commit to investing any amount, including how much money you could afford to lose. However, when you realise the money you’ve invested has been lost to a scam it can have a larger impact to your finances, as well as your mental health and day-to-day lifestyle. 

How a scammer strikes

Scammers often present offers of high returns with low to minimal loss, using a multitude of options to invest in such as crypto, real estate, shares, bonds or term deposits, and more. These investment "opportunities" are often presented online; using social media, online ads, presented in Google searches, email offers, etc., but can also be received via a phone call.

You may be provided with a “dedicated or premium advisor” (particularly when you invest larger amounts) who will advise you of the best investment option, or a limited offer they have. They might even walk you through a live demonstration on how to use their investment platform, including making your first trade/deposit from your bank account using remote access to your device. Even offering to refer you to a “senior advisor” if you have concerns about their legitimacy.

Regardless of the way a scammer has convinced you into investing with them, the ability for banks or financial institutions to be able to recoup these funds is often extremely difficult, often resulting in an unsuccessful recovery of your money. The extended timeframes from performing your first original investment or deposit, until you are aware this may be a scam, often means scammers have had a lengthy period to access and withdraw your funds.

"I wouldn't fall for a scam"

One of the biggest problems financial institutions face when speaking to someone involved in a suspected investment scam, is their customers’ hesitancy to see their investment as a scam or provide details on the investment. Often customers have been considerably coached to say all research has been done and they trust the investment is legitimate, and that they're aware of the risks they're taking - essentially giving the banker the right answers. If your bank locks your account or your online banking access and tells you that you are involved in an investment scam, hear them out - they are only trying to protect you and your money.

Often our Scams team are advised “We’ve researched the investment, we wouldn’t fall for a scam”, but unfortunately with the growing number of reports each year, it’s evident that scammers are becoming more sophisticated in their approach, tricking even long-term investors.

Before saying “I wouldn’t fall for a scam”, remember scammers are always reinventing and refining their approach and they can target anyone at anytime.

You’ve probably heard of the “High Return/Low Risk” theme scammers use, but with the growing sophistication of scams, there are several methods you should be looking out for.

Common ways an investment scam starts

• Unexpected contact – Initial contact could be made via social media, text, email or a phone call. Be cautious - in some cases you may request a return phone call or further information from a website you’ve found during your search for investment opportunities, that ends up being part of a scam.
• Fake investment trading – Scammers use real trading platforms, like those offered by genuine crypto providers, however instead of you being in control of your account, the receiving account is one scammers are in control of and they access your money without your knowledge.
• Fake investment comparison websites or prospectus documents – Scammers create professional-looking websites or apps, often mimicking legitimate sites (banks, reputable investment companies, etc.) with call-back options. They often include “supporting collateral” such as performance figures, prospectus documents and other professional-looking information. Some even include claims they are endorsed by ASIC or other reputable governing/regulatory bodies.
• Paid advertising – Scammers will pay to have their ads appear in the top search results of online searches or in your social media, particularly for things such as term deposit rate searches, new investment opportunities, etc.
• Fake news articles/celebrity-endorsed offers – Scammers create fake articles, often stating a celebrity endorsed the offer, to lure you in to their investment. These are often distributed on social media, news outlets or other websites.
   

With the number of methods used to target investors, you should always be conscious of scams when looking to invest, regardless of your savviness. 

Tips to help you spot an investment scam

1. You can only access your investment portfolio via your laptop/desktop

If you can’t log into your investment via your mobile or another device, this could mean the original laptop/desktop is programmed to present you with fake information, including a growing balance in your investment.

2. The offer is simply too good to be true

It’s easy to say this, but there are no guarantees on returns from investments with variable rates. Also watch out for Term Deposits advertised with interest rates over the standard market rates, even if it's just a small amount. Always use a bank's website (e.g. westpac.com.au) to locate these rates or apply for products.

3. Change of communicaion methods

The advisor/broker moves from the initial website to alternative methods, such as telephone, online audio (e.g. video calling without their video on), or email.

4. It's an exclusive offer

You’re advised the offer is only available to a limited number of people, and that you can’t tell anyone else about it (including friends or family).

5. You're told what to say

You’re advised to tell your bank, if you’re questioned about any of the transactions, that you’ve done all the research and the investment is legitimate.
Remember - if anyone asks you to lie to your bank about the purpose of a transaction, it is likely you’re involved in a scam.

6. False ABN

The ABN provided to you doesn’t match the ABN holder when completing a search via the Australian Business Register’s ABN look up.

7. You're referred to a supervisor

Your investor/broker/advisor referred you to their supervisor to validate their claims. The best way to validate is hang up/end the call (regardless of what they advise), search the claimed person’s company, then do the following:

• Check ASIC's Professional Register to verify their Australian Financial Services licence and details
• They may be listed as a scam company on the International Organization of Securities Commissions (IOSCO), despite not appearing on ASIC (Australia) or FMA (New Zealand)
• Search for the company/investor name and type the word "scam" afterwards, check to see if others are talking online in forums about being scammed by similar stories
  
• Do a quick sanity check and check in with a friend or family member about the offer.

8. Fake prospectus and documents

The information provided, such as professional-looking prospectus documents, etc. can’t be found on the genuine website of the alleged underwriter or insurer.

Further resources

You can locate further advice about investing via these reputable websites: