Australian investors reported losing $13.3 million to investment scammers during the first half of the year, according to the Australian Competition and Consumer Commission.
There were 910 reports of investment scam losses to the ACCC over the six months. For the full year last year there were 1766 reports and losses of $23.6 million.
The ACCC says investment scams account for more losses than any other type of scam, such as fraudulent betting schemes and dodgy dating sites, and it recommends that investors include a few anti-scam measures in their investment checklist.
Common approaches from scammers include cold calls, superannuation roll-up offers and seminars.
In a cold call situation, a scammer claiming to be a stockbroker or portfolio manager calls or emails offering investment opportunities with high returns. Investors are given access to professional looking websites and documents. Often the investment opportunity is overseas and once the money goes offshore it is almost impossible to recover.
Cold callers also offer access to options trading opportunities that involve predicting the movement of commodities, indexes or assets over a short period. After a few successful trades the money disappears.
Superannuation scams usually involve an offer to roll superannuation funds into a self-managed fund that will be more tax-effective and provide more investment opportunities. In some cases the super fund member is asked to fabricate a story to facilitate the early release of benefits. The scammer may direct the benefits to their own account or charge very high fees for the transaction.
Investment seminars are fertile ground for scammers because they use motivational speakers to whip up enthusiasm and high-pressure sales techniques to convince investors to buy overpriced products or borrow heavily to invest without getting independent advice.
The ACCC says scams are often sophisticated, targeted and involve long-term grooming.
It recommends that investors visit ASIC’s MoneySmart website, where they can check if a company has an Australian Financial Services Licence. The website also has a list of companies that are not trustworthy.
According to the ACCC’s data, people aged 45 to 54 were the most affected by investment scams.
Looking at the relationship between age and fraud victimization, the Australian Institute of Criminology has reported that young people are more likely to encounter scams on a wide variety of different technologies, such as the internet and mobile phones, while older people are more likely to encounter them through email or landline.
Social media is an increasingly popular platform for scamming. In one case, the victim received a private Facebook message from a person he believed to be his cousin. The scammer used the cousin’s profile picture and sent a message saying the victim could make $1 million dollars in a few days investing in an online trading platform. The victim lost $500,000.
The Australian Taxation Office has reported that there has been an increase in reports of “threat-based scams”, where the scammer adopts the identity of a figure of authority and uses intimidation tactics to scare the victim and force them to meet their demands.
The majority of threat-based scams are tax scams. The scammer tells the victim that they have underpaid their tax and owe money to the ATO, which must be paid immediately under threat of arrest or other serious repercussions.