How to identify an investment scam
Investment scams can come to you via a phone call or email. It may even be an offer from someone you trust. There are three main types of investment scams:
- The investment offer is totally fictitious and does not exist
- The investment offer exists but the money you give the scammer is not going towards that investment
- The scammer says they are representing a well-known investment company but they are lying
In all cases the money you 'invest' goes straight into the scammer's bank account and not towards any real investment.
The Scammer will offer you:
- High, quick returns and sometimes tax-free benefits
- Share, mortgage or real estate investments, 'high return' schemes, option trading or foreign currency trading
- No risk or low risk investment, as you can sell anytime, get a refund for non-performance, have insured or 'guaranteed' transactions or swap one investment for another
- Inside information, the opportunity to invest before a public float or discounts for early bird investors
The investment offer may be a scam if the person:
- Does not have an Australian Financial Services licence or says they do not need one
- Rings you many times and tries to keep you on the phone
- Says you need to make a quick decision or you will miss out on the deal
- Claims they are a professional broker or portfolio manager and sounds professional but is actually following a script
- Uses a name or claims to be associated with a reputable organisation to gain credibility e.g. NASDAQ, Bloomberg
- Offers you glossy prospectuses, brochures, share certificates or receipts or directs you to a slick website
Remember that a glossy brochure is not evidence that an offer is a good investment or even a real deal.
If the investment offer has some of these signs hang up the phone. If you manage to record some of the caller's details please report the offer to ASIC.
How investment scams work
Many investment scammers operate from overseas or offer overseas investments as their activities are illegal in Australia. Overseas scammers target Australians as ASIC does not have international jurisdiction to prosecute them.
Many scammers use the internet to make their investment appear legitimate. They use highly sophisticated websites and issue online press releases that make false claims of outstanding corporate performance. They even provide some victims with logins to view fake investment balances and growing returns.
Passing your call along the line
Investment scammers use a team of less experienced staff to make the initial call. The junior staff follow a tight script to check your interest. If you take the bait they hand you onto a more senior person. This can happen two or three times.
The more senior people are called 'closers'. They are extremely skilful sales agents and their job is to make you feel compelled to close the deal and send your money.
Long or persistent phone calls
Most victims tell of investment scammers calling them endlessly or keeping them on the phone for a long time with promises of wealth or opportunities lost if they do not take up the offer. Investment scammers will not take no for an answer and ask you about your worries to reassure you. As long as they can keep you talking, you have not really said no.
There are government industry standards that detail when and how telemarketers can contact you. A telemarketer or research caller must not call or attempt to call you at the following times:
|Days||Telemarketing calls||Research calls|
|Weekdays||Before 9am or after 8pm||Before 9am or after 8.30pm|
|Saturdays||Before 9am or after 5pm||Before 9am or after 5pm|
|Sundays||Calls prohibited||Before 9am or after 5pm|
|National public holidays||Calls prohibited||Calls prohibited
Tactics to stop you pulling out of the deal
Scammers may try to swap your current investment for another one if you try to change your mind about the deal. They may also try to convince you that your investment will increase in value soon. Even though they know you will never get your money back, they still want to try and get more money from you.
Scammers can also threaten baseless legal action to keep you from pulling out of the deal. This is usually just a threat and they don't carry it through.
Questions to ask
Ask the person offering the investment these questions to check their legitimacy:
- What is your name and what company do you represent?
- Who owns your company?
- Does your company have an Australian Financial Services licence and what is the licence number?
- What is your address?
If they try to avoid answering these questions, it is probably a scam. Hang up the phone, do not respond to the email or stop dealing with the person.
Research the company
Do your own research on the company and take the time to seek independent professional or legal advice. Don't rely only on their information to make your decision and do not be pressured to make a quick decision you could regret later.
Remember that investing with overseas companies can be risky. They are outside Australian jurisdiction so you won't be able to get help if something goes wrong.
There are plenty of legitimate overseas investments that you can make through mainstream companies based in Australia. Don't part with your hard-earned money unless you understand the risks involved.
What to do to protect yourself
- Check if the company is licensed using ASIC Connect's Professional Registers.
- Check the list of companies you should not deal with to see if they are on the list
- Report the scam to ASIC or your local police (the company name, location and contact details, if you have them)
- Stop sending money to the company (if you have sent any)
- Warn your family and friends
- Get independent financial advice before you invest