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22nd March 2012

How to Spot a Fraudster-Understand and Identify the Warning Signs of Investment Fraud

mini-orbyIt is not difficult to come across investment fraud today – a flip through a major newspaper or a quick Google search will likely produce at least one recent story about a victim of fraud. The pursuit of attractive returns through investment is laudable, but it is not just ‘how to invest’ that should be considered. Who to trust with your investment advice and services is equally critical. Investment scam artists don’t often personify the typical villain and that can make it extremely difficult to decide who to trust with your money.

A video recently released by the BCSC’s InvestRight challenges viewers to try and spot the warning signs of investment fraud. It features a friendly, well-dressed salesperson shooting a TV commercial. On the surface, he seems like a knowledgeable investment advisor who is advertising an attractive investment opportunity. As the video progresses, however, the promises made for this “opportunity” indicate it is a scam.

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Tips for spotting a fraudster:

  • Do not rely on appearance alone. Scam artists often have impressive offices and addresses to portray themselves as legitimate professionals.
  • Fraudsters require your trust and confidence and will work hard to instil a sense of security. In some cases, they may try to make you feel dependent on them for financial guidance or an investment plan.
  • If contact with your advisor becomes more difficult immediately after you decide to invest and have sent the money, this too can be a sign of a fraudster at work.

Additional tips for making sure an investment advisor is legitimate include conducting a free background check with your local securities regulator. Check to see if they are registered and if they have ever been disciplined for breaking securities laws. Even a simple internet search on their name can shed light on their credibility. Every investment one makes should be suitable for their risk profile, so it’s important to check out the investment as well as the person offering it. Finally, never issue cheques to the advisor directly.be fraud aware

Know the warning signs of investment fraud:

  • The no risk investment: There’s no such thing as a guaranteed investment – the higher the returns, the higher the risk.
  • The chance to profit like the pros: Often pitched as opportunities known only to a select few, fraudsters convince investors that they have access to inside information or the chance to benefit from a higher than normal return.
  • Offshore and tax free opportunities: Fraudsters often try to convince investors to move their money outside Canada to avoid taxes. This poses the risk that they will in fact move it to an offshore bank account from which it will never return.
  • Time sensitive opportunities: Placing pressure on an investor to make a quick decision is a tactic often used in investment fraud. The rush to jump on an opportunity that the general public doesn’t have is a warning sign that the opportunity is too good to be true.
  • Friends and family connections: Scam artists target religious, ethnic, or close-knit groups by working their way into organizations and befriending members. This approach relies on the trust investors place in the people they care about.

In addition to the video release, British Columbia Securities Commission’s InvestRight program challenges individuals to test their ability to spot investment fraud, through a unique Fraud Challenge contest. All efforts are targeted at helping Canadians arm themselves with the information and resources to make wise investment decisions.

This entry was posted on Thursday, March 22nd, 2012 at 10:52 am and is filed under Business News, Government, National News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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