Out-Law / Your Daily Need-To-Know
Investors reported £197 million worth of fraud losses to Action Fraud last year, worth over £29,000 per victim, according to the Financial Conduct Authority (FCA).
The most common scams involved investments in shares and bonds, forex and cryptocurrencies by unauthorised firms, which together accounted for 85% of reports to the FCA's contact centre.
Scammers are increasingly targeting their victims online instead of via the traditional cold call, with victims reporting approaches via email, professional-looking websites and social media channels to the FCA. The regulator has also warned advisers to be particularly cautious in the coming weeks, ahead of the tax year end.
Mark Steward, the FCA's executive director of enforcement and market oversight, said: "The first quarter of the year is a common time for people to make their financial plans for the year, including investments. But before you invest, do your homework. Investment scams are becoming more and more sophisticated and fraudsters are using fake credentials to make themselves look legitimate."
The FCA published over 360 warnings about potentially fraudulent firms on its website last year, Steward said. It is urging investors to be vigilant about unexpected contact, offers made under time pressure and promises of unrealistic returns, and to verify firms' trading status and contact information via the FCA Warning List and FCA register.
Civil fraud and asset recovery expert Alan Sheeley said it was good to see the FCA warning investors about the dangers of fraud. However, he noted that there was no mention in the report of "what the FCA has done to recover the £197m that has been lost".
"It is of vital importance that on detection of a fraud the victim acts quickly," he said. "Time is always of the essence when trying to recover money. Sadly, many clients inform me that they have reported that fraud to Action Fraud but heard nothing since. In many incidents, many weeks or even months have passed by the time the victim contacts me. Sadly, this means that the money has probably long gone."
"The FCA and Action Fraud should be advising victims of the civil route to recover monies. The civil route allows the victim to control and run the investigation. This route does not require law enforcement, which can be slow if it reacts at all owing to the lack of funding and the ever-growing number of frauds," he said.
"We regularly advise clients to obtain freezing orders to stop dissipation of assets from the fraudster and then seek judgments to return the money to the victims. However, to be successful with such an action, the victim needs to react quickly and instruct civil fraud lawyers with the specialism in this area as soon as they detect the fraud," he said.
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