Brits are losing millions to advanced financial scams. Here’s how to spot one a mile off

Do you know the warning signs of a financial scam? Even though you may think you’d be able to instantly spot one, financial crime is becoming more advanced by the day.

Indeed, financial scams are sadly costing victims considerable sums of money. Forbes reports that criminals stole a total of £609.8 million in the first half of 2022 alone.

What’s worse, scammers are constantly devising new and clever ways to defraud you of your hard-earned wealth. Some of the most sophisticated scams target your pension and investments, meaning any losses could have a grave impact on your long-term financial security.

The good news is that there are some actions you can take to help you identify the red flags of a scam from a mile off, and help safeguard your wealth from fraudulent activity.

Continue reading to discover why you could be vulnerable to fraud, some common types of scams that exist today, and some ways to protect yourself from financial criminals.

The cost of living crisis could make you more vulnerable to scammers

There’s a good chance you’ve seen headlines detailing the cost of living crisis over the last year. The Office for National Statistics (ONS) reports that inflation stood at 10.1% in March 2023, a significant rise from 0.5% in September 2020.

The unfortunate side effect of this increased pressure is that you could become financially stressed. This could eventually lead to rushed decision-making and difficulty sleeping, and erode your overall mental health.

This isn’t an uncommon occurrence, either, as the Mental Health Foundation found that 1 in 10 UK adults feel “hopeless” about their financial circumstances during the cost of living crisis.

As a result, in a survey from UK Finance, 56% of respondents stated they’re likely to look for opportunities to make extra money due to the high cost of living. Meanwhile, 16% stated that rising living costs mean they’re more likely to respond to an unprompted approach from someone offering an investment or loan.

So, it may come as no surprise that scammers are taking advantage of this heightened financial vulnerability to separate you from your money.

If you’re offered a seemingly legitimate investment opportunity, for instance, you could jump at the chance to improve your situation without thinking twice about the source.

Impersonation and “clone firm” scams could put your wealth at risk

While you may be aware of the typical email phishing or text message scams, fraudsters are becoming more advanced.

Some scammers will pose as officials to convince you to send them money – these are aptly called “impersonation scams”.

According to UK Finance, this form of fraud, which cost around 45,000 victims £177.6 million last year, often starts with regular contact from someone claiming to be an authority figure, such as the police or HMRC. They may say you must pay an urgent bill or provide your banking information, otherwise you could find yourself in trouble.

Similarly, another popular form of fraud these days is the “clone firm” scam. As the name suggests, scammers pose as trusted investment firms, pension providers and banks to defraud individuals.

The tricky thing about “clone firm” scams is that criminals often use identical copies of real websites belonging to genuine investment firms. Even if you search for the name of the investment company on the Financial Conduct Authority (FCA) register (more on this later), you’ll still see the legitimate company listed, which could confuse you.

What’s more, this criminal activity is constantly adapting to reflect the changing economic climate, including the emergence of new cryptocurrency scams.

Thankfully, some professional tips could help you identify fraudulent activity and improve your general long-term financial wellbeing. So, continue reading to learn how to spot scams from a mile off.

How to spot a scam from a mile off and help keep your wealth safe

Cross reference the source of any financial offers

First, it’s important to learn how to check if any “offers” you receive are from a legitimate source.

As you read earlier, an impersonation or clone firm scammer may contact you from a supposed “investment company” with a “once in a lifetime” opportunity, or impersonate a trusted institution such as the NHS or HMRC.

Before you even consider parting with any funds, you should cross reference the source of the financial offer to ensure everything’s above board.

If the offer comes from a private company, you can search for the name of that institution on the Financial Services Register offered by the FCA. This is a database of all FCA-authorised companies, so if you can’t find the name of the business or individual offering the investment on this database, it may be wise to avoid it.

Similarly, the FCA also offers an investment checker called “ScamSmart”, with which you can run investment details through an additional database to check its legitimacy.

If you are contacted by “HMRC” or a similar trusted source, always contact the official institution using their secure website or telephone number to check if it’s really them.

Learn the red flags that could alert you to a financial crime

While scams may be constantly evolving, there are generally some telltale signs of fraud that can alert you to a scam, regardless of its form.

For instance, the fraudster may offer you “guaranteed” returns. Of course, opportunities that offer guaranteed returns for minimal risk are rare, so this could be a sign that the offer is too good to be true. You may also find that scammers will attempt to pressure you to decide quickly.

Typically, legitimate financial institutions will never hassle or pressure you. So, if someone is being too pushy and forcing you to decide on an opportunity quickly, you may want to hang up the phone.

Scammers may also contact you out of the blue, whereas it’s highly unlikely that a legitimate investment company would cold-call you with an offer.

Some of the other common red flags you should keep an eye out for include:

• Vague contact details, including only having a mobile contact number
• An offer that seems too good to be true
• Frequent spelling and grammar mistakes
• Foreign websites
• No net worth declarations are required.

Speak with a Financial Planner

As such, a helpful way to safeguard your wealth could be to speak with a Financial Planner.

We can act as a guardian of your wealth by:

• Teaching you the red flags to look out for
• Helping you develop a financial plan and ensure you resist false investment opportunities
• Talking through your investment choices so you don’t rush an important financial decision.

Even if an investment opportunity seems completely legitimate, information can sometimes slip through the cracks. Without a trusted professional by your side, you could more easily fall victim to damaging scams.

Get in touch

If you wish to ensure your wealth is protected from fraud and malicious activity, then we can help.

Please email us at enquiries@pen-life.co.uk, or call 1904 661140 to find out more.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

All information is correct at the time of writing and is subject to change in the future.