When a Coutts client heard of an attractive investment opportunity from an old friend, he jumped at the chance to get involved. But it turned out the well-known company they thought they were investing in was actually a fraudulent clone of it, and they both lost their money.
This was one of several investment fraud stories shared at a recent event for Coutts clients covering the latest scams and what to look out for.
The audience heard an example based on a client’s experience. The client said the friend who’d recommended the investment was “a very astute businessman” and someone he’d known for over 20 years, so he thought it well worth getting involved.
“He set up a direct call with a representative and we had a long discussion about the types of assets I would want to invest in and the funds I had available,” he said. “It was a reputable firm. Over the next six months or so I got regular updates on how my money was growing. It all looked very positive.”
But then a call from his friend changed everything.
“I could tell straight away that something was wrong,” he said. “He told me that for the last few months he had tried to withdraw some of his money, and that the firm kept stalling and giving him reasons why he shouldn’t take his money back.
“So he started to dig deeper, and found out that the firm we were dealing with was actually a clone of the genuine one. We had been part of a very well-orchestrated scam. I wasn’t able to get any of my money back.”
He said the experience hit him emotionally as well as financially.
“I felt personally violated – and stupid,” he said. “How could I have become a victim so easily? I still feel sick to my stomach when I think about it.”
A trick of psychology
Such cases are not uncommon – perfectly intelligent people getting caught out by well-organised investment scams.
The numbers are staggering. UK Finance says that, in 2021, investment scams saw losses of over £171 million. This accounted for the largest proportion of losses of all ‘authorised push payment’ scam types – where a criminal tricks you into sending money to an account they control.
Event panellist Jamie Bartlett, an investigative journalist, writer and broadcaster, said he knew of people in the UK with PhDs in finance who had invested tens of thousands in such schemes.
One of the things Jamie is best known for is investigating a huge investment scam led by Ruja Ignatova for his BBC podcast The Missing Cryptoqueen. Ignatova, the only woman on the FBI’s 10 most wanted list, convinced people to invest billions in a cryptocurrency called OneCoin – then she disappeared.
So how did she do it?
“Technology is almost the cover story here because this is essentially a trick of psychology,” Jamie told the audience. “She was constantly creating a great sense of urgency – don’t miss out on this one, don’t worry about the technology because that’s complicated. She was playing to people’s FOMO which can be more powerful than greed.”
Jamie added that Ignatova also stressed her credentials to present herself as the “establishment” in the world of crypto – she was Oxford educated and had worked at a leading management consultancy.
Red flags to look out for
Sarah Muir, creator and host of Coutts’ weekly investment podcast Need to Know, said there were a number of red flags that could help you spot fraudulent behaviour. They include:
- has the opportunity come out of the blue?
- are you being put under pressure to invest quickly?
- does the offer itself, particularly the returns promised, feel too good to be true?
Referring to the client who trusted his old friend’s judgement, Sarah said: “Don’t take what a friend or family member says at face value if they mention an opportunity, because you don’t know what due diligence they’ve done. Do your own research to be sure.
“For example, you can go to [UK regulator] the FCA’s website to see their list of company websites that have been cloned. Or if someone calls you saying they’re from a company, check the company on the FCA’s website and only use the number provided in the company’s listing.”
She added: “The important thing is that you don’t let emotions take over but stay rational. Take a step back and don’t be pressured into anything.”
Scam victims could get re-targeted immediately
Coutts’ Head of Entrepreneurs Franklin Asante, who helps people understand finance through his social media persona the Urban Financier, was also on the panel. He warned that some fraudsters attempt to steal from people twice by targeting recent scam victims and posing as someone who could help them get their money back.
“People can get calls from someone saying ‘we’re sorry you’ve been a victim of a scam, we’re here to help you’. They’re the wolf in sheep’s clothing, striking when you’re at your most emotional and vulnerable,” he said.
“They’ll use more pressure tactics, saying they need to act quickly. But ultimately they’ll do nothing and the fees they charge you could cost you more than you lost originally.”
Some banking top tips
James Clarry, Chief Operating Officer at Coutts, hosted the event. He also had some important reminders on how to avoid fraud.
He said: “If you’re ever contacted out of the blue, remember the person on the other end of the phone may not be who they say they are. Call back on a number you trust, probably on a different phone.
“Never use caller ID on your phone to see if it’s a legitimate number – we don’t use that. Please update your ID questions from time to time, particularly if you have old ones. Never disclose your one time passcodes. We will never ask you for that.
“And move to face or touch biometrics. That is at the moment the safest form of security, much safer than old style passwords.”