Common financial scams to look out for
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Sadly, many people become victims of financial scams each year. In the first half of 2021 alone, £753m was stolen by criminals through fraud – a 30% increase on the previous period. Banks were able to thwart £736m from theft using advanced security systems, but clearly such efforts do not prevent every scam. As financial planners, we recognise that all of us – even experienced investors – can fall prey. Therefore, in this guide we wanted to offer a summary of prominent scams in 2022 and how to avoid them. We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
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#1 The CEO scam
Here, a scammer impersonates a manager, director or other senior person within a business (e.g., via email) to convince an employee to make an urgent payment outside of normal procedure. Staff in finance teams are often an ideal target after the manager’s email has been hacked. Be careful to call your manager if you have any doubts about unusual payments.
#2 Invoice and mandate scams
Another business scam. In this case, a criminal pretends to be a common external supplier and contacts you to ask to update their bank account details on file. As such, when you try to pay the supplier the money goes to the scammer – not the genuine person. You can help to protect yourself by using “3-way matching” (where you match each invoice to a purchase order and a receipt of goods). Most scammers will not bother fabricating three documents.
#3 HMRC tax rebate
You may have seen an email like this in your inbox before. They often look very official and ask for bank details so they can send you a tax rebate (due to you making an “overpayment”). Many emails also include links to fraudulent websites which steal personal details. Bear in mind that HMRC will only ever contact you by post, or via your employer – never by email.
#4 Bank emails
Some scammers pretend to be the government; others imitate your bank. These tactics take multiple forms, but a common approach is an email notifying you about fraudulent activity in your account. The message provides a link which seems to go to your bank’s website, but is really a “capture” page where your banking information is stolen when you use it to try and log into your account. Here, good practice is to never click on links in emails. Rather, call the bank directly or type your bank’s website address directly into your browser.
#5 Apple ID & Amazon Prime
Two widely-used digital services are Apple (iTunes and Apple TV) and Amazon (e.g. Prime). These make them attractive targets for scammers. The former often involves getting an email or text message saying that your account is about to expire. Really, it is a phishing scam.
The latter is more new, and usually involves an automatic phone call (already a red flag) warning that your Prime membership is about to be automatically renewed. Since this is fairly expensive for many people who do not use it (£79), many people panic and “Press 1” on the call when asked if they want to cancel. From there, you are asked your banking details – which are then stolen. Take care by never trying to give financial information over the phone to Amazon, as the company has stated they will never do this.
#6 Investment scams
This term covers a wide range of scams, yet they typically share a common theme. Someone contacts you claiming to have a “rare” or “once-in-a-lifetime” investment opportunity for you, for a limited time only. Each year, over 6,000 people fall victim to scams like this.
The caller typically pressures you to make a quick decision, and often promises high returns (e.g. 50%) which are “guaranteed”. The investments are almost always in unregulated assets such as storage, wine, parking and forestry. Sometimes, the caller will claim that they can enable you to access your pension before age 55 (this is not possible).
As a general rule, if a stranger approaches you with an investment that seems too good to be true, it probably is. Many scammers will, if the victim follows through, take the money offshore (e.g. into property) which is then difficult – if not impossible – to recover. Avoid people who put pressure on you to make an investment quickly. A real financial planner will always give you plenty of time to think about an investment decision.
Take care to check the various official registers if you are ever in doubt about a caller or what they are offering. The company in question should be listed on the FCA website, and they also offer a list of collective investment schemes (CIS) which sell unregulated products.
It is important to keep the above in mind when navigating the financial world and to ensure you refer to your independent financial adviser for further guidance.
01476 855 585