The latest tricks being used by financial fraudsters
You’re promised a large profit with a low risk attached? – Caution, it’s a fraud. There is no such thing!
Be particularly carefully if someone promises you “secret tips” or a “miracle product”. High returns always come with a high risk. You could lose all your money! The following applies without exception in financial markets: the greater the returns, the greater the risk!
If you are afraid that you make have been deceived – this is what you can do:
- Do not, under any circumstances, pay any more money to the provider, even if they promise they can get your money back.
- Contact the FMA Consumer Information team! Your information can help to warn others.
Were you contacted by means of an unsolicited phone call and forced to invest? Caution, fraud! Terminate the phone call immediately, and do not under any circumstance conclude any transactions.
In this form of fraud you are called unsolicited and are forced using psychological tricks to invest in apparently lucrative products. A serious provider would never contact you without having obtained your prior approval to do so, as “cold calling” is illegal.
If you receive such calls, hang up immediately and under no circumstances should you conclude any transactions, since in most cases, by doing so, you will lose your money.
“Cutting to the chase”
First you are deliberately requested to invest too high an amount, for which reason you decide to reject the chance to invest. Later you are approached again, and are offered a “better” offer, for with the amount to be invested is also lower. Investors that reject an investment as it is too high, are far more willing to make a smaller investment. This effect is consciously exploited: if you had been made the lower offer from the outset, you probably would not have invested!
Advance payment fraud
You are asked to make an advance payment? Caution, fraud!
Never make an advance financial payment (for example by paying the fees for money transfer transactions)! Especially not, when you are promised large amounts in return. That is not serious. Such providers are mainly focussed on getting their advance fee and don’t actually want to sell you any products. Don’t fall for it!
Caution: an advance payment is not required for a loan! All charges and fees are retained by the bank from the amount of the loan.
You have already invested in securities from a dubious provider, and now want to get your money back. – To do so, the provider first of all asks you to transfer more money. This is post-payment fraud. Here are two examples to illustrate how this happens:
What happened? His contact could no longer be reached. He had lost his invested money. Alexander K. fell for post-payment fraud, and as a rule no longer has any way to get his money back. Could Alexander K. have prevented this from happening? He received an unsolicited telephone call from a company that wanted to sell him shares. Companies are forbidden from making unsolicited approaches! He ought to have hung up straight away.
What happened? Susanne P. not only lost the EUR 5,000 that she had invested, but also in addition the EUR 800 that she paid in subsequently. Could Susanne P. have prevented this from happening? She received an unsolicited telephone call from a broker that wanted to sell her units. Brokers are forbidden from making unsolicited contact to people! She should have hung up straight away.
Investment on Approval
You should first of all invest small amounts? This is investment on approval – caution, fraud!
Be careful – by investing several small amounts dubious providers want to entice you to conduct transactions. As soon as you invest more money, then such entities never get in touch again and your money is gone.
What happened? Michael L. lost his entire investment. Could Michael L. have prevented this from happening? He received an unsolicited telephone call from a broker who wanted to sell him shares. Companies are forbidden from contacting people! He ought to have hung up straight away.
The using of “clone firms” is a popular method of committing fraud. It involves so-called “clone firms” or “clone individuals” falsely claiming to be a company that is authorised to conduct business, as a way of gaining the customer’s confidence. They use the name of a legitimately existing and authorised company with a fraudulent intention (often they claim to be insurance brokers), and pretend to be acting on behalf of that company. The websites of such companies are often elaborately designed and primarily offer asset management, asset optimisation or investment opportunities. However, these companies are not actually authorised to conduct such business.
You are therefore advised to carefully check the precise authorisation that the company holds (what is the company allowed to offer?), check the contact details provided against those for example in the Company Database on this website, or to find out information from the competent authority for the supervision of the “cloned” company. Unsolicited communications, known as “cold calling”, is forbidden and should be reported.
Furthermore, please also read the warning issued by the Financial Conduct Authority (FCA).
Be informed and be critical!
You should be particularly careful on the Internet – fraudsters can empty your bank account!
The perpetrators first of all get hold of the access details to your bank account. This is often done using “Phishing-Mails”, which request you to enter your account information through a faked website. Alternatively, your computer is infected with a virus, which secretly logs access data in the background from online banking sessions. This allows transfers to be made from other accounts.
Your bank will never send you e-mails requesting you to enter your log-in details on another website. You should delete these e-mails without replying to them, or following the instructions contained in them. Never share sensitive information or passwords!
Pyramid schemes (also known as: “snowball schemes”)
In a pyramid scheme you are supposed to invest an initial amount as well as also finding new investors at the same time, who should also pay in an initial amount. You are promised that you will receive a commission for the investors that you attract. However, the contributions paid in are not invested, unlike what the company had agreed. The system collapses as soon as it is no longer possible to find new investors, and you lost the capital that you invested. Don’t get involved, not only can you lose your capital, but you may make yourself liable for prosecution!
The methods involved in Multi-Level-Marketing (MLM) or networking marketing differ from those in pyramid schemes. They also, however, use “sub-affiliates” and often contain complicatedly designed profit systems. However, they do have actual investments in real products. Whether they actual invest as promised, or whether it is a pyramid scheme, in which you may also make yourself criminally liable by participating, is often difficult for the investor to identify. Therefore the utmost caution is also urged to be take in such network marketing structures, particularly since providers of pyramid schemes make particular efforts to create the illusion of investments actually being made.
Lucrative secondary occupation as a “Financial Agent”?
In order to transfer money received from various forms of fraud onwards, fraudsters also look for “financial agents” through online offerings, who should open accounts for them, or place their own private accounts at their disposal. A frequently stated reason is the pretence of difficulties in making payments to foreign companies. The job of such a “financial agent” is to withdraw money that is received and then to transfer it onwards to a foreign country. Noticeably high earnings are a particular warning sign.
If you are lured in as a “financial agent”, the risk exists that you make yourself guilty of being an accessory to money laundering, with is a criminally punishable offence, and one that may also have consequences under administrative penal law.
Therefore, to summarise:
- If something sounds too good to be true, then it probably isn’t true!
- Do not be tempted by sales calls over the telephone, terminate unwanted telephone calls that are trying to approach you to do business immediately!
- Be informed and be critical!
- Contact the FMA, if you are in any doubt or have questions about providers!