How to avoid getting scammed: some simple tips
Over the past couple of days I have been helping out someone on a social network who suspected he was being scammed during an international money transfer. A mutual contact put us in touch, knowing that I have been quite vocal in the past about the dangers of dealing with unregulated firms or individuals when it comes to your money.
As more information was shared, I became convinced that a scam was taking place. The warnings signs were all there; talk of a ‘processing fee’ to get his hands on the money, a mobile rather than landline phone number, a free Internet-based email address.
Around £3.5bn is lost each year in the UK as a result of fraud. Clearly not all of this is the result of scams operated within the financial services sector, but there is a lot of this taking place.
There are some simple tips that will help you avoid getting scammed.
If it seems too good to be true…
The most important rule is to trust your instincts. Money does not grow on trees and it is impossible to get high rewards without taking substantial risks. If something seems too good to be true, it probably is.
By keeping your common-sense head screwed firmly on, you will avoid the majority of scams. Always ask yourself how likely it is that you have somehow just landed the deal of the century. Being (at least mildly) cynical is a great defence from the scam artists.
Check, check and check again
Before you part with your money and make an investment, do your homework. This means checking out the Financial Services Authority (FSA) Register. If the firm or person you have been dealing with does not appear on this register, walk away.
Even if the name of the company they claim to work for does appear on the FSA Register, do a bit more checking. Call the telephone number displayed on the Register to check them out. Do not use any phone numbers they have provided.
In the case I mentioned at the start of this post, the scam artist was using an established brand name that does appear on the FSA Register, but a bit more checking established he had no connection with that business.
Be extra cautious with non-UK ‘advisers’
Boiler-room scams, which sell worthless company shares to unsuspecting investors, are typically based overseas. The ‘advice’ they offer is not regulated and often the shares they sell turn out to be worthless.
As a UK resident, you should only ever deal with a UK authorised and regulated adviser when it comes to your investments. Investment advisers calling you from overseas (Spain, Hong Kong and the US are popular claimed locations) should be met with a prompt termination of the call.
Boiler room scams tend to prey on older, experienced investors. They often get contact details for their victims from share registers. Some are becoming more sophisticated, involving UK based firms or creating fake websites to add some legitimacy to their claims.
Guard your personal details with your life
Your confidential personal data is incredibly valuable to fraudsters. Some victims of fraud feel that they are playing it safe and are shocked to subsequently discover they have been ripped off.
Clearly your bank details are very important to protect. Your other personal details (including your address, date of birth and National Insurance Number) are also valuable to fraudsters. Be very careful about where you disclose this information.
Look for the traits of a scam
Scam artists tend to have a number of traits in common. Once you understand these, it becomes easier to avoid getting ripped off.
They like to remain anonymous. Mobile phone numbers rather than landlines are preferred, because they are more difficult to trace. They might use a free web-based email address (such as @yahoo.com or @aol.com) rather than a proper business email domain.
They are likely to try and put you under some time pressure to conclude a deal. There will be different excuses used to support this time pressure, but in most cases they will be keen to conclude the transaction as quickly as possible.
Know the risks
The Office of Fair Trading reckons that around half of us are targeted by fraud each and every year. It is more common than you might think.
They say that the most popular mass-marketed scam mailings each year are deceptive sweepstakes, misleading prize draws, fake clairvoyants/psychics, bogus foreign lotteries and miracle health cures. Alarm bells should be ringing if you are on the receiving end of any of these.
If in doubt, take extra steps to check things out before parting with your cash or personal information. Be careful out there.
Martin Bamford is site editor of BrilliantWithMoney and a Chartered Financial Planner at Informed Choice. You can follow Martin on Twitter @martinbamford and get BrilliantWithMoney updates @brilliantmoney.
