Investment scams are almost exclusively pitched online to unwary inexperienced victims, frequently in the form of advertising, although the victim may not recognise the "too good to be true" investment opportunity as a paid-for advertisement. The Online Safety Bill, confirmed in the Queen's speech earlier this year, purported to address the online harms leading to investment fraud. Regrettably, the Bill does not include any actions to protect consumers from the dangers of scams being promoted by paid-for advertising dressed up as legitimate opportunities.
A wide range of organisations and high-profile figures, including the Financial Conduct Authority (FCA) the governor of the Bank of England TheCityUK an industry-led body representing UK-based financial and related professional services and Innovate Finance the voice of global FinTech have all lobbied the government in an attempt to persuade the government to look again at the Bill and rectify the omission with regard to investment fraud in the form of paid-for advertising online. The chair of the Treasury Committee, Mel Stride also expressed disappointment that the government had not included fraudulent advertising in the Online Safety Bill.
The lawyers in Giambrone & Partners' banking and financial litigation team recognise that the FCA has stepped up its efforts to pursue fraudsters by tackling online platforms that accept paid-for advertisements from financial fraudsters now that the UK is free of the EU laws that hampered such action.
Investors, particularly novice investors, should be wary of any investment opportunity that has an almost immediate cut-off time limit, an investment where you are urged to act on immediately is likely to be a scam. There are a number of markers in the approach to an online investment that may indicate that it is a scam:
·Urgency – if you are being rushed to take up an opportunity it is likely to be a scam
·Do you know the organisation or broker you are dealing with?
·Check the regulatory status of the organisation with the FCA. If it is active in the UK and not regulated FCA you are not protected by the Financial Services Compensation Scheme (FSCS)
·Can you freely access your money?
·Are the negatives explained as well as the benefits?
·Is there clarity regarding the risks to your money?
·Is it suggested that your investment is protected, secured or in some way guaranteed against risk and does it explain how this is achieved?
·Is there the suggestion that the FCA endorses the product or investment opportunity? If so it is likely to be a scam as the FCA does not promote opportunities, it simply authorises an organisation's regulatory status.
If you have any reservations about the investment opportunity it is best not to go forward, even if you are reassured by an account manager or broker.
The chief executive of UK Finance, an organisation that represents approximately 300 banks, David Postings points out "as more of us have shifted online because of the pandemic, we've seen a spike in money mule activity, investment and purchase scams over the last year because criminals can target people directly in their homes across online platforms."
Giambrone's banking and financial litigation team commented that the criminals behind investment fraud are highly adaptive and change their tactics frequently when they see an opportunity. By omitting paid-for investment scam advertising from the Online Safety Bill it opens the door to large scale scams where consumers will lose untold amounts of money.
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