RBS Business Banking | Investment fraud

Therefore it is important to stay vigilant and aware of Investment Fraud.

Investment fraud is any scheme or deception relating to investments that affect a person or company. As traditional investments become less popular due to lower returns, high yield investments have become more attractive to fraudsters.  

Overview

What you should watch out for-

• Being cold-called on telephone by someone who is trying to sell you investments that will supposedly lead to huge financial gains. In reality they may not exist or might be worthless and you should hang up the phone immediately.
• Often scammers will give you details that you might think only a genuine investment company will have e.g. previous investment and share information. Be aware the scammers will do their homework and make it their business to know as much about you as possible.
• The scammers may often call numerous times to develop a relationship. This may lead to a build up of trust as they persuade you to part with your money. They may try to persuade you to invest further money once you agree to invest in the first place.
• Scammers may say they are from well-known investment companies, be sure to check independently.
Remember: If it sounds too good to be true, it probably is!

Tips

• Always seek reputable independent/legal advice before you commit to any investment.
• Before you hand over any money ensure that the firm you use is on the FSA register and is therefore allowed to give financial advice. www.fsa.gov.uk/fsaregister
• The FSA also maintain a list of unauthorised businesses which is updated regularly. The list details businesses that are believed to be involved in fraudulent activities. www.fsa.gov.uk/consumerinformation
• Do your own background research. Does the caller have a proven track record that can be verified by an independent party? You can also check whether the company is registered at Companies House and whether the details held there match those you have been given. www.companieshouse.gov.uk/about/fraud.shtml

Reporting

Have you been targeted? If so, these are the steps that you should take:

For reporting urgent matters:

1. When an immediate police response is required such as when the suspect is very near or the victim is at immediate risk- dial 999
2. Where a police response is required such as for victim care or the suspect can be easily identified- dial 101 or go into your local police station

For reporting investment fraud and scams:

Action Fraud, a national fraud reporting initiative, should be contacted to report an investment scam of if you are suspicious. Action Fraud will be able to give you further advice and your report will be appropriately dealt with. You can report either online or over the telephone.

Reporting online: www.actionfraud.police.uk
Telephone Reporting: 0300 123 2040

You should contact your local branch or relationship manager immediately to inform them if they have been involved in a potentially fraudulent transaction.

Schemes

There are many different schemes that attempt to part the unwary from their money. These include:

Ponzi and Pyramid Schemes
Share Sale Fraud (Boiler Room Fraud)
Carbon Credit Fraud
Land Banking Schemes

Ponzi and Pyramid Schemes
Ponzi and pyramid schemes promise investors high returns or dividends not usually available through traditional investments. While they may meet this promise to early investors, people who invest in the scheme later usually lose their money; these schemes collapse when the unsustainable supply of new investors dries up. Investors usually find most or all of their money is gone, and the fraudsters who set up the scheme claimed much of it for themselves.

The essential difference between a Pyramid scheme and a Ponzi scheme is that a Ponzi schemer will only ask you to invest in something. A victim would not be asked to take any more action than handing over money. The fraudster will claim to take care of the rest and give the returns later. The Ponzi Schemer is the mastermind behind the whole system and is always shuffling money from one place to another.

Affinity fraud occurs where criminals target members of a group – such as community, religious, ethnic, elderly or professional groups – to invest in a scheme. These scams are often pyramid or Ponzi schemes.
The scammers who use affinity fraud often are – or pretend to be – members of the group they are targeting. This makes the scams emotionally damaging, as well as financially, as the fraudsters can spend years building trust before carrying out the swindle.

More information can be found at http://www.fsa.gov.uk/consumerinformation/scamsandswindles/investment_scams/ponzi_pyramid

Share Sale Scams
Share fraud (also known as Boiler Room Fraud) is a scam that attempts to persuade unwitting individuals to invest in worthless schemes.

This usually begins with a cold call, or an email, at home or at work by someone trying to convince you to invest in shares that they are selling. The contact will appear to be professional, knowledgeable and sympathetic. The name of the company often sounds very similar to a well known financial company in an attempt to convince you it is genuine, however the shares being sold will often be worthless or non existent.

The shares will not be quoted on the stock exchange and will be virtually impossible to sell. You may find after you have remitted funds that you cannot contact the person who sold you the “shares”.

Victims may therefore find it impossible to recover any losses as such companies are not covered by any regulated compensation scheme.

Victims of boiler room fraud and other investment scams are often targeted by criminals offering to help those that have already lost money. These scams are run from what the fraudsters call ‘recovery rooms’ and might even be carried out by the same group. Find out how to avoid becoming a victim of recovery room fraud.

Individuals need to be vigilant and if they are unsure or concerned about any form of investment, they should seek independent legal and/or financial advice before proceeding.

More information can be found at http://www.fsa.gov.uk/consumerinformation/scamsandswindles/investment_scams/boiler_room

Share Fraud and Boiler Room Reporting Form http://www.fsa.gov.uk/pages/doing/regulated/law/alerts/form.shtml

Carbon Credit Schemes
Carbon credit schemes have recently been reported more frequently as victims are approached by firms promoting carbon credit trading schemes. These schemes are particularly prevalent currently and heightened vigilance is required.

Firms may try to sell carbon credit certificates or get investors to invest directly in a ‘green’ scheme or project that generates carbon credits as a return on their investment.

Carbon credits can be sold and traded legitimately and there are many reputable firms operating in this sector. However there is an increasing number of firms using dubious, high-pressure sales tactics and targeting vulnerable consumers.

More information can be found about different types of carbon credits and how the market developed from an investigation the FSA conducted in 2011- http://www.fsa.gov.uk/consumerinformation/scamsandswindles/investment_scams/carbon_credit/trading-schemes

Land Banking Scams
Land banking scams are where investors are led to believe they are investing in land that will significantly increase in value through:

• plots being in areas with high house prices
• government intention of a general increase in housing
• proximity to land that has been allocated for development.

In reality investors are sold land which:

• has no/very little development potential
• is very unlikely to be granted planning permission in the foreseeable future
• does not exist
• does not belong to the seller.

Like many investment frauds – such as boiler room fraud - the sale often takes place through high-pressured telephone calls, although it can also be through mailings, brochure distribution or websites.
When purchasing land it is advisable to:

• Contact the appropriate council, depending on the geographical location of the land, to check who actually owns the land according to the Land Registry.
• Check if the land has planning permission or is likely to get it in the future
• Seek independent legal advice
More information can be found at FSA’s description Land Banking Scams http://www.fsa.gov.uk/consumerinformation/scamsandswindles/investment_scams/land_banking

Sources for further information

• ActionFraud’s Website for Reporting Fraud and Internet crime http://www.actionfraud.police.uk/
• National Fraud Intelligence Bureau www.cityoflondon.police.uk
• Money Advice Service on Scams https://www.moneyadviceservice.org.uk/en/categories/scams-and-identity-theft .

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