Investors are getting better at spotting potential scams according to UK financial regulator the Financial Conduct Authority (FCA) by scrutinising dodgy material more closely.
According to the FCA, some £2m was saved in 2022 by investors spotting warning signs and reporting their concerns, a 193% increase over the past five years.
Most commonly reported ‘tells’ were mistakes in material and requests for personal details, with a quarter (25%) of investors said to be taking inspiration from Sherlock Holmes to spot scammers.
Two in five (39%) respondents claim that their investigative or research skills are helping them to spot the clues while a further 32% are relying on pure gut instinct to distinguish between genuine investment opportunities and potential scams.
Mark Steward, executive director of enforcement and market oversight said: “Scammers are becoming more and more sophisticated, coming up with different tactics, such as impersonation texts or calls, and using the cost of living pressure as a way to tempt investors into false opportunities.
"Once money has been lost in this way, it’s difficult to get back, so if something seems too good to be true, it probably is.
“It’s great to see so many investors being able to spot the signs of a scam, and helping others to do the same You don’t need to be a Sherlock Holmes to spot scams.
"If investors were to deal with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong."
To help remind investors of the warning signs, he said the FCA has created an Augmented Reality (AR) experience for investors to use.
Usable on mobiles, including Instagram, the AR sees several everyday objects representing the main warning signs:
Phone - Unexpected contact: scammers can cold-call or text, but contact might also come from online sources, or in person such as at an exhibition or seminar
Piggy bank - Unrealistic returns: scammers often promise tempting returns that sound too good to be true
Clock - Time pressure: scammers might offer you a bonus or discount if you invest before a set date
Book - False authority: scammers might use convincing literature and websites, or claim to be regulated [or authorised] by the FCA when they’re not
Leaflets - Social proof: scammers might share fake reviews and claim other clients have invested
The FCA has also highlighted the most common methods used by scammers to contact potential victims.
Unexpected contact: traditionally scammers cold-call but contact can also come from online sources, for example, email or social media, post, word of mouth or even in person at a seminar or exhibition.
Time pressure: they might offer a bonus or discount to invest before a set date or say the opportunity is only available for a short period.
Exclusivity or Secrecy: they might claim that you have been specially chosen for an investment opportunity so to keep it to yourself.
Social proof: they may share fake reviews and claim other clients have invested or want to take up the deal.
Unrealistic returns: fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than elsewhere. However, scammers may also offer smaller, more realistic returns to seem legitimate.
False authority: using convincing literature and websites, claiming to be regulated, speaking with authority on investment products.
Flattery: building a friendship to lull people into a false sense of security.
Remote access: scammers may pretend to help and ask people to download software or an app so they can access to your device. This could enable them to access your bank account or make payments using your card.