Home South African SCAM ALERT: Some of the common investment scams

SCAM ALERT: Some of the common investment scams

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If something feels or looks strange, stop what you are doing and get in touch with your financial service provider directly or your financial advisor.

There are dozens of ways scammers gain access to people’s accounts, often masquerading as being from financial institutions, says Ramesh Ramdeen, the head of fraud at FNB Wealth and Investments and Ashburton Investments. Picture: Geralt/Pixabay

There are dozens of ways scammers gain access to people’s accounts, often masquerading as being from financial institutions, says Ramesh Ramdeen, the head of fraud at FNB Wealth and Investments and Ashburton Investments.

“Investors need to be vigilant. If something feels or looks strange, stop what you are doing and get in touch with your financial service provider directly or your financial advisor. Never feel pressured to do something right away,” Ramdeen said.

Here are some of the most prevalent investment scams in South Africa:

High-yield investments: This type of fraud typically includes an unlicensed individual convincing an investor that an unregistered investment can produce a high yield with little to no risk. If you are approached online to invest in one of these, you should exercise extreme caution – it is probably a fraud. If it sounds too good to be true, it probably is.

Closely related, many fraudsters pretend to be working for an asset manager and even use fake copycat websites with names of real staff members of legitimate companies. Always verify from different sources before parting with your money.

Advance fee: Fraudsters can ask for an upfront payment to grant access to a supposedly great deal. They may even go as far as posing as professionals in the financial services industry, like a broker, so investors can feel more comfortable with them. Investors should be aware that fraudsters could even use official-sounding e-mail addresses. To avoid the scheme, investors should research advisers.

Pyramid schemes: Though a pyramid scheme may sound similar to a multilevel marketing programme where earnings are based on the amount of sales, it is an illegal practice.

“Participants in this scheme can only make money by recruiting new participants and they also have to buy a large inventory of a product or products,” Ramdeen said.

Internet and social media fraud: Fraudsters use social media to appear legitimate through newsletters and blog posts. They also use it to collect sensitive information about you and spam you with unsolicited offerings.

Just because someone has a social media presence, it doesn’t mean they are a legitimate business. Social media is an increasingly fertile ground for scammers.

Phishing: People are lured into clicking on links in emails or messaging apps that introduce malware on their devices, allowing fraudsters to gain insights to their confidential information such as banking and investments information.

They then use this information to communicate with financial institutions to initiate withdrawals from investments and bank accounts.

The best way to protect yourself is to “think before you click”, use antivirus software, check the full message name, double check the email from the sender, verify certain details on the mail and keep operating systems on your phone and computer up to date.

Identity theft: Identity numbers are stolen and used to commit fraud, such as taking out loans, taking over accounts at financial institutions and withdrawing the funds. To best protect against identity theft, keep passports, ID cards, driving licenses, utility bills and bank statements in a safe place or shred old statements you no longer need.

“We urge all investors to stay vigilant at all times. If you are unsure, your financial adviser or the investment institution have fraud hotlines that you can contact to verify information or report fraud,” Ramdeen said.

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