10 tips that can save you from falling victim to an ‘investment’ scam

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The Financial Sector Conduct Authority (FSCA) says it has observed a surge in scams, particularly through WhatsApp groups and Facebook. There has been an increase in complaints about deceptive practices wherein fraudsters employ the details of celebrities and television personalities to persuade individuals to invest.

“Financial customers are falling victim to enticing fake posts and fake testimonials, ostensibly from successful investors. Notably, fraudsters are using the licence numbers and details of legitimate financial services providers (FSPs) to entice the public to part with their money,” the Authority says.

The Fraud Awareness Campaign published in November 2023 by the FSCA highlights incidents that include the unauthorised use of the logo of the Public Investment Corporation and the details and logo of the FSCA by fraudsters to give an air of legitimacy to their criminal activities.

“Another trend on the increase is perpetrators utilising mule accounts with banks and crypto wallets to facilitate the collection and transfer of ill-gotten gains. Victims are encouraged to open crypto accounts to transfer cryptocurrencies, such as Bitcoin, to other crypto wallets. Always be on the alert and do not allow desperation to cloud your judgement,” the Authority says.

The FSCA provides the following tips to keep you and your money safe:

  1. If in doubt, leave it out.

If you do not have sufficient information about an investment opportunity, do your homework and confirm that the entity is authorised by the FSCA to provide financial services and make investments.

Ensure you fully understand the investments and the entities with which you are conducting financial services business. Keep in mind that fraudsters want to keep the information as vague as possible so that the public will not spot the deception.

  1. Do not be pressured into making an investment or a payment urgently.

High-pressure marketing is a strong indication of criminal activity. Let the deal cool down.

  1. Social media isn’t always a reliable source of information.

The lifestyles portrayed on social media claiming to be a result of specific investments may not be what they seem. This is a popular method for criminals to lure the public into a trap.

  1. Claims that celebrities have invested in the product.

Criminals frequently post photos of celebrities claiming they are endorsing the investment. In many instances, this is a misrepresentation – the celebrities’ photos and details are used fraudulently and without consent.

Even if a celebrity endorses a product, keep in mind that celebrities and influencers are not necessarily experts in investment advice. Celebrities and influencers are unlikely to post their poor decisions and mistakes.

Obtain advice from an adviser or an FSP that is authorised by the FSCA.

  1. Do not participate in Ponzi schemes.

Ponzi schemes are easily identifiable by their unrealistic returns and lack of information about the product and the investment entities. A Ponzi scheme by its very nature will collapse, causing financial harm. It is illegal to participate in a Ponzi scheme.

  1. Do not perpetuate a pyramid scheme.

If you are required to raise money through recruiting other people into the “investment”, it is most likely an illegal pyramid scheme. At some point, the pyramid scheme will fall apart and either you or the persons you referred will suffer losses.

As with Ponzi schemes, it is illegal to participate in a pyramid scheme, and you run the risk of being criminally charged.

  1. Stay away from websites with no depth.

Although criminals are getting better at defrauding the public, it is worth the effort to test the depth of a website. Click on the links to see whether they lead somewhere. Often, criminals do not bother to create a second level of fake information to fraudulent websites.

Authorised financial institutions are required to display their licence numbers. If the number is absent, treat the invitation with suspicion. If an FSP number is displayed, confirm with the FSCA that such an entity or person is licensed.

  1. Confirm the destination of your funds.

Fraudsters often claim to be associated with a legitimate investment institution. Confirm with such an institution that the offeror of the product is an authorised representative of the institution.

  1. Speak to your adviser about the suitability of a product.

A financial adviser must conduct a suitability test when advising you on a potential investment. This means you must be informed of the risk of the product and whether you can afford the risk. If this does not happen, do not invest in the product. It is likely to be a fraud or very high-risk investment.

  1. Stay away from ‘investments’ that promise unrealistic returns.

Keep the well-known adage in mind: if it is too good to be true, it is because it is not true.

Use these resources to verify an investment

The FSCA says members of the public should always check the following:

  • That an entity or individual is authorised by the FSCA to provide financial products and services, including for providing recommendations about how to invest.
  • The category of advice the person is registered to provide, as there are instances where companies or people are registered to provide basic advice for a low-risk product but advise on far more complex and risky products.
  • That the FSP number used by the entity or individual offering financial services matches the name of the FSP on the FSCA’s database.

You can check whether an entity or person is authorised to provide financial products and services by: