FCA warns over social media and online based investment fraud

Expats with hefty pension pots are now even more at risk from online scams, according to a new FCA warning.

Nowadays, it seems scarcely a week goes by without yet another financial scam being reported, along with investors’ losses and self-recriminations. It’s fair to say that expat communities worldwide have always been seen as happy hunting grounds by fraudsters looking to make a quick buck before fleeing back to their home countries when the truth gets out and the losses mount up. The modus operandum is the same in every expat hub and involves ignoring investors’ instructions and substituting high-risk, often illiquid funds with huge IFA commission payments for low-risk, solid investments. Inevitably, the funds fail, losing lifetimes’ worth of savings for the victims who believed the IFA was their friend and therefore trustworthy.

The proliferation of media reports on such scams may have made some expats more cautious but , according to the UK’s Financial Conduct Agency (FCA),they’ve also spawned a new social media-linked scam targeting younger expats. Victims are lured by promises of exceptionally high returns, allowing them a life of luxury and sucking them into yet another fraudulent practice. Typically, the scams involve trading in contracts for difference, binary options investments, cryptocurrencies and foreign exchange, and are found on Twitter, Instagram and Facebook with links to highly sophisticated websites.

The scammers are trading on new investors’ ignorance of the products as well as on greed, and are getting away with over £87,000 every day, according to the FCA report. The internet has now overtaken cold-calling as the easiest way for investment fraudsters to contact new victims, and is drawing in UK investors as well as British expats living overseas. An FCA survey has noted investor profiles are changing, with those under 25 far more likely to trust investments offered over social media sites than their older counterparts.

The survey also showed 23 per cent of respondents were influenced by positive online customer reviews and testimonies, without even considering they might be fake. When asked whether they would bother checking whether a firm was FCA or Companies House registered, 11 per cent said they wouldn’t, even although the FCA’s website gives a warnings list of known offenders and investment risks.