Financial fraud is on the rise

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Together offers some top tips to make sure you aren’t taken in by financial fraudsters.

Increasingly, people pay for goods and services online. Most of us think of ourselves as sophisticated digital natives, but there are some very savvy fraudsters who go to great lengths to get hold of your money. Online platforms can present very convincing fronts, often almost identical to legitimate organizations. We offer some tips on how to stay safe online. 

The Belgian Financial Services and Markets Authority (FSMA) is, among other things, responsible for combating illicit activities in the field of financial investments. Since July last year, it has published a quarterly dashboard that provides statistics as well as an overview of the main trends in investment fraud.

Fraud is targeted at everyone: men and women, young and old. The majority of consumers who contacted the FSMA regarding fraud in 2022 were Dutch-speaking men residing in Belgium. Many age groups are represented, but the largest number of complaints come from men aged between 50 and 59 years of age; as they are likely to have more income, this is not surprising.

“The overall findings for 2022 show that almost 50% of all complaints concern online trading platforms”

The overall findings for 2022 show that almost 50% of all complaints that the authority receives concern online trading platforms. ‘Online platform scams’ are often promoted via social media channels. Fraudsters typically promise high returns, use fake celebrity endorsements, as well as images of luxury items to entice people to invest in their schemes. Click on the ad and you are taken to a professional-looking website where consumers are persuaded to invest, either through a managed account where the firm makes trades on their behalf, or by trading themselves using the firm’s platform. These sites sometimes almost perfectly clone legitimate sites, using the same address and contact details. 

Most consumers report initially receiving some returns from the firm to give the impression that their trading has been a success. They will then be encouraged to invest more money or introduce a friend or family member to join. However, eventually the returns stop, the customer’s account is suspended and there’s no further contact with the firm. It is difficult to recover these losses and not all investments are regulated; in particular, there are few if any protections for those who invest in crypto assets.

Fake credit fraud remains stable at around 20% of complaints received. There is heightened vigilance by the FSMA in the current cost-of-living crisis, when the unscrupulous and downright criminal will prey on people who are faced with financial difficulties. 

One growth area is so-called ‘recovery-room fraud’. Recovery-room scams usually follow on from boiler room scams, when cold-callers contact investors offering them worthless, overpriced or even non-existent shares, bonds or other types of investment scam where a consumer has lost money. The perpetrators of the original scam may contact the victim again pretending to be from a different firm or sell on their details to other recovery rooms. The scam tends to involve cold calling with high-pressure tactics and upfront charges described as a tax, solicitor or administrative fees, which can result in losses that can be greater than the initial loss.

“Recovery-room scams are on the rise”

Like the online platforms, recovery rooms often have professional-looking websites to persuade visitors they are legitimate and claim to have a presence when they don’t. These websites often make false claims to have successfully recovered money for other consumers involved in scams. Recovery rooms generally use a web-based email address, such as Yahoo, Gmail or Hotmail. 

What to do?

The regulators make a number of recommendations. 

Online platform fraud

Be wary of adverts online and on social media promising high returns from investing online, especially if you are contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.  

Always do your own further research on the product you are considering and the firm you are considering investing with. Is it an authorized firm registered with the FMSA? Is it an unusual investment product: cryptoasset, wine, real estate. 

Check you are not dealing with a ‘clone firm’, which can look identical to real firms. Look closely at the URL address – the unique identifier for that company. Do a search on Google (other search engines are available) for the named financial service provider and see if you spot any differences. 

Never give access to your device by downloading software or an app from a source you don’t trust. Scammers may be able to view, take control of your device and access your bank account.

On recovery-room fraud

Be wary of websites, phone calls, and online or social media adverts promising to recover any money you may have lost from investments or fraud.

If you get a phone call offering to recover your losses, ask how the caller has acquired information about your lost money. Any report of fraud can only be shared between other law enforcement agencies. It cannot be shared with a private business operating a recovery room.

If you have been asked to pay a fee or provide your bank account, card or other financial details, end all contact immediately and do not pay any money or provide any banking details.

The FSMA is there to help you. Don’t hesitate to use their website: www.fsma.be/en/beware-fraud