05
Aug
2020

New fraud risk targeting investors

During this time of great uncertainty, serious organised criminals have ratcheted up their operations and are increasingly ruthless in their mission to steal from investors.

We know that under the cover of COVID-19, fraudsters have been targeting retail investors in new, sophisticated and large-scale scams, convincing some savers to purchase bogus investment products and disclose their personal details. On the latest tally, over 300 incidences of this fraud have been reported to date, with a total loss to savers of over £4 million.

A number of firms across the investment management industry have reported that serious organised criminals are impersonating their products, in particular investment bonds, promoting them through fake price comparison websites, and cloning their brands to produce fake documentation. 

Our current understanding of the situation indicates that fraudsters are initially targeting victims through sponsored Google and Facebook links, before harvesting personal details from fake call centres. This is combined with reports that criminals have set up a range of websites and email addresses, sometimes using the names of genuine members of staff in the investment management firms being cloned, all with the aim of tricking investors into sending them their cash.

Reports of this scam activity have spiked recently as savers approached firms concerned about not receiving their expected quarterly interest payment. Only on contacting the genuine investment firms did those affected realise they had been the victims of fraud.

As a result of this spike, we are urging customers and the public to be vigilant. While our industry is working closely with regulators and law enforcement to tackle this fraud, following the National Crime Agency guidelines (Stop. Challenge. Protect.) will help save investors’ hard-earned investments.

We also encourage our member firms to be on the lookout for this fraud, especially given the damage it can do to their reputations and to that of the broader industry. 

We strongly encourage members to take reasonable steps to review the information provided on their websites regarding investment fraud. They should flag to investors the need to check the details of the contracts offered to them and encourage investors to be cautious on receiving cold calls. In such a case, we encourage investors to double-check any such approaches with the genuine investment firm before parting with cash. 

Investors should also be particularly cautious where bank accounts used are not in the names of the purported investment management firm, and be vigilant if they are placed under time pressure to invest - a common feature of fraud. 

At the IA, we are working closely with affected firms to identify ways of effectively countering this type of crime. This includes through our work with the FCA and ActionFraud on better fraud reporting mechanisms, our work with the banking industry to identify better ways to notify banks that their accounts are being misused by criminals, and our work with the NCA on information sharing between firms. This will all feed into our good practice guidance currently under development on how firms should protect themselves, their customers and retail investors.

Finally, it is worth highlighting the IA’s Fraud Alert Scheme we have been running since 2008, and encourage all members to use this vital tool to share useful intelligence about frauds with other member firms. We welcome suggestions on how to improve the scheme for this purpose.

If firms wish to work with the IA on these issues or have any questions about how our industry is responding to the growing fraud risk, please get in touch with me directly via my email: [email protected].

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