Most investment scams have similar characteristics: they promise astronomical returns, provide vague or nonexistent details about the underlying investment structure, and involve pressure tactics.

Many of these scams are well documented and structured, leading the public to believe that they are regulated companies providing a legitimate service. And unfortunately, the level of sophistication of many scams is increasing, writes Alex Ingrim, senior investment analyst at Chase Buchanan Wealth Management.

As an international financial adviser, Chase Buchanan sometimes comes across investment scams aimed at vulnerable expatriate clients. In order to help educate the public and our clients, we have created ‘The Little Booklet of Investment Scams’ in partnership with the Metropolitan Police of London.

Below we have outlined various scams and ways for customers to identify fraud and protect themselves when dealing with a fraudulent company.

Coronavirus scams

Since the global coronavirus pandemic, fraudsters are playing on public fear to develop scams containing misinformation about the coronavirus. Customers may receive phone calls or text messages claiming to be from the government or the World Health Organization.

In these calls, a recorded message or a caller will pretend to contact customers about the coronavirus with a prompt to speak to another operator or press a button on their phone.

Telephone operators may ask questions intended to obtain the customer’s personal information or financial details.

Alternatively, pressing a button can connect a customer to a high-cost phone line, exposing them to a high phone bill. Text messages claiming to be from a GP or the government may contain links or attachments that should not be opened.

Some of these text messages offer coronavirus-related payments or ask for financial details to receive payment. If the message is truly from a GP, the client can always call the practice to verify the message.

This scam is often repeated with different topics. We always encourage customers not to answer unrecognized numbers or to consult a trusted advisor if they are unsure about sending financial details.

Foreign exchange scams

The Foreign Exchange (FX) market is a decentralized and unregulated market for trading currencies. Due to its decentralized nature, it is an attractive area for scammers to promote investing and trading programs.

Fraudsters lure customers with social media posts with fake celebrity endorsements and images of luxury items, often promising high and guaranteed returns on investment. They will create fictitious trading accounts which often show a small profit and generate an initial return.

This encourages customers to invest more in the program. However, the trading account is not real. This is a manipulated demo account where no transactions take place, and after a while the account will be closed and the money withdrawn without further contact.

We advise clients to be wary of any advertising or approach via social media.

Professional-looking websites, social media posts, and advertisements do not reveal whether a business is a real business or signal a good investment opportunity. Fraudsters will often try to falsely associate themselves with celebrities to appear legitimate.

We suggest that clients do extensive research beforehand on any investment opportunity and encourage them to seek independent advice. And if the returns seem too good to be true, they probably are!

Foreign real estate and agricultural scams

In these scams, a fraudster will offer his clients the opportunity to buy an off-plan property, land or share ownership of an agricultural plantation.

The investment opportunity is sold as low risk but with high and guaranteed returns of 15% to 25% per year. The investment period is relatively short, around five years, after which the land will be sold or the crops harvested.

Fraudsters can approach clients with these investment opportunities in various ways – through cold calls, emails, social media or at seminars and exhibitions.

They usually present professional-looking materials, including brochures, websites, and videos, to convince clients of their projects and proposals.

After the investment is made, the scammer will immediately interrupt contact or pressure the client for additional money. But the land, property or plantation does not exist, and the client is left empty-handed.

Clients should be extremely wary of anyone calling them with an opportunity to invest in real estate, land or agriculture. In many countries, anyone offering to sell a property must be licensed and regulated, and although this is not mandatory, they can be associated with ‘best practice’ professional organisations.

Genuine land and real estate companies often work with regulated brokers and financial advisers rather than cold calling potential investors. Clients should be encouraged to speak to an independent financial adviser about any investment opportunity presented to them by an unknown third party.

This article was written for International Advisor by Alex Ingrim, senior investment analyst at Chase Buchanan Wealth Management.