At some point in our lives, most of us will have been reminded of the old adage that if something is too good to be true, then it usually is.

It might not be the most optimistic motto, but it can offer effective protection against the disappointment that follows when promises, having raised our expectations, are revealed as empty.

And sadly, those empty promises can sometimes carry costly implications from both an emotional and a financial point of view. This is certainly true in the case of investment fraud, where unwitting investors are conned into placing their trust in an illegitimate business or unscrupulous individual.

Counting the cost

Estimates on the precise financial cost of investment fraud vary, but data from the Pensions Management Institute indicates that fraudsters steal an eye-watering £13 million each week in the UK.

Separately, data from Action Fraud – the national reporting service for fraud and cybercrime – says investment fraud triggered losses of more than £612 million in 2023. This is based on a total of 30,130 reports and equates to an average loss per victim of £25,110.

Behind these headline figures are the painful experiences of individuals affected by fraud. For example, the City of London Police said one person suffered losses totalling a staggering £11.9 million. The force also highlighted that the age range most affected by investment fraud was 55-64, with over £133 million in losses recorded among people in this bracket.

A spectrum of scams

As a general definition, investment fraud encompasses any scenario where people are contacted out of the blue and convinced to invest in schemes or products that are either worthless or entirely false.

One of the most common types of investment fraud is the ‘Boiler Room’ scam, named after the bolt holes used by criminals to make cold calls to potential investors offering them the chance to buy or sell shares or bonds for impressive-sounding returns. In reality, however, these offers are likely to be “worthless, overpriced or even non-existent”, according to the FCA.

In order to disguise their true identity, fraudulent companies might attempt to present a seemingly legitimate façade, whether drawing on the name of an authorised organisation without permission or citing false FCA accreditation details.

Typically, offers will be accompanied by pressure to act quickly, often with a demand for money to be transferred upfront. After a transaction has been made, however, contact is lost, and the fraudsters effectively disappear into thin air.

Preying on emotions

One of the most common commodities that victims believe they are investing in is cryptocurrency, where there is the promise of a significant return on investment, far above the levels that might typically be expected from legitimate savings or investments. Such propositions can also be accompanied by fake ‘endorsement’ from celebrities or social media influencers in an attempt give the message credibility.

Often, scammers will look to exploit their victims from an emotional point of view, demonstrating empathy in order to build up trust. This is a critical component of another type of fraud that is on the rise: the romance scam.

A total of £36.5 million was lost to this type of fraud in 2023, up 17% year on year. It falls under the general category of authorised push payment (APP) scams, where victims are conned into transferring money under false pretences. In this case, criminals trick individuals into believing they are sending money to a romantic partner.

Romance scams can also provide the basis for individuals to be manipulated into becoming ‘money mules’. This is where criminals effectively use the victim’s bank account for money laundering purposes, coercing them into illegal activity by exploiting their goodwill.

These cruel examples show just how far investment fraudsters are willing to go to dupe their victims in the interest of financial gain. And while there is certainly no harm in having an optimistic outlook on life, they underline that it is also crucial to apply a dash of suspicion and scepticism when you’re presented with unexpected offers that seem just too good to be true.

Tips for protecting yourself from Financial Investment fraud

• Stop: Legitimate organisations will never pressure you into investing on the spot. You should not feel rushed into making an investment.
• Consult: Before making significant financial decisions, seek professional independent advice or speak with trusted friends or family members.
• Verify: Check the Financial Services Register to see if the company is regulated by the Financial Conduct Authority (FCA). If you can’t find a firm on the register, call the FCA on 0800 111 6768.

For more information about how to invest safely, please visit Action Fraud or the FCA.

And if you are concerned you have been a victim of investment fraud you can contact the Financial Conduct Authority’s consumer helpline on 0800 111 6768 or find more information on their website. You can also report suspected investment fraud at www.actionfraud.police.uk or by calling 0300 123 2040 if you live in England, Wales and Northern Ireland. If you live in Scotland, reports can be made to Police Scotland on 101.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.