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The Red Flags of Investment Scams Are Becoming More Obvious; FCA Puts Forward

Investors’ inherent recognition of a bad situation helped to thwart £2million in investment scam losses during 2022; latest regulator research indicates.  

Investors who trusted their gut instinct when confronted by a dubious bad actor prevented over a third of investment scams during 2022 as the latest Financial Conduct Authority (FCA) research affirms that industry leaders are becoming more adept at recognising when capital is at risk of scams.

The FCA commissioned research by Censuswide among more than 1,000 people across the UK who have held investments, and have also avoided a suspected scam.

If something looks too good to be true, it probably is. And as highlighted by the FCA research, this handy mantra removed 32 per cent of investors from harm’s way last year.

Early warning signs

The innate ability to recognise scams for what they really are is setting in across the financial industry. When the researchers asked the investors how they spotted the red flags, 34 per cent of them said they identified obvious mistakes in the material. Moreover, researchers also found that an equal number of investors avoided fraud by refusing requests for personal data to secure opportunities.

Likewise, a third rightly suspected the motives of cold calling and 26 per cent failed to adhere to pressure to invest before an ‘offer’ expired. On the note of communication methods, a third of investment scams originated from an email and a quarter came from a direct phone call.

Reassuringly, when the guise of scammers eventually began to crack,  42 per cent of investors raised the alarm among their family and friends, while 27 per cent took to social platforms to warn others of dubious activity.

The FCA’s ScamSmart campaign

The release of the FCA’s latest research regarding investment scams coincides with the regulator’s ‘ScamSmart‘ campaign, which seeks to mitigate the consumer-facing risks of investment and pension-based scams.

The campaign encourages the development of skills, including those mentioned here, that can prevent scammers from engaging in fraudulent activities, while also equipping the public with knowledge about how these scams operate.

The regulator has issued a ‘warning list’ to investors through its website, which should be consulted prior to an investment being made.

The campaign provides resources that include information on recognising trading scams and a direct reporting outlet to the FCA for scams and unauthorised firms.

The regulator has since confirmed that if investors engage with an unauthorised firm, they forego coverage offered by the financial ombudsman service or financial services compensation scheme (FSCS) if events take a turn for the worse.

The FCA has followed a similar initiative here to its ‘InvestSmart‘ campaign of late 2021; which also sought to protect investors’ best interests.

“You don’t need to be Sherlock Holmes to spot scams”

Mark Steward, executive director of enforcement and market oversight at the FCA, confirms the evolution of scammer tactics, including impersonation texts or calls, and exploiting the cost-of-living crisis to promote 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,” comments Steward.

“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.

“Our Scamsmart advice and tips, together with the FCA’s warning list, provide all the clues you need to sort the genuine investments from the fraudulent ones,” he concludes.

Combining efforts to combat fraud
FCA investment scams
Rocio Concha, director of policy and advocacy, Which?

Rocio Concha, director of policy and advocacy at the price comparison site Which?, explains that identifying scams is difficult due to the tactics scammers deploy, as they continue to prey on consumers struggling during the cost of living crisis.

“While there are some steps people can take to protect themselves from investment scams,” comments Concha, “the responsibility can’t solely fall on people’s shoulders.”

With regard to the FCA’s recent findings, Which? also recently uncovered a slew of misleading and potentially fraudulent investment adverts still being shown to Facebook and Instagram users, highlighting why the government must take a crucial step in the fight against fraud by ensuring the Online Safety Bill is passed into law without further delays.

“The lack of an effective joined-up approach between the government, regulators, banks, tech firms and telecoms companies is holding back efforts to prevent fraud,” continues Concha. “Improvements to the way businesses share vital data on scams should be a priority in the government’s forthcoming fraud strategy.”


  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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