As the new financial year is due to start in April, it means many people are in the midst of re-assessing their finances, looking to switch banks and working out where they can save money. But along with that, fraudsters are on the prowl as the changing of banks and opening of new accounts allows them to target their next victims.
Scammers can take advantage of people by tricking them into clicking on spoofed links, asking people into giving over sensitive information such as PINs or if you’ve recently made changes to your bank - they can use this to their advantage.
Ahead of the financial year, the Financial Conduct Authority (FCA) has issued advice on how to spot a scam and what to look out for. The FCA website states “Scams are increasingly sophisticated – but if it sounds too good to be true, it probably is.
“Scammers will usually call you out of the blue, but contact can also come by email, text message, post, word of mouth or at a seminar or exhibition. Always be wary if you’re contacted unexpectedly, pressured to act quickly or give personal financial details, or promised returns that sound too good to be true.”
Common financial scams
The FCA has issued guidance on common financial scams and what to avoid
The FCA website has listed several scams relating to pensions. It says you should be very wary of any scheme offering to help you release cash from your pension before you’re 55, as it’s almost certainly a scam.
There are several scams that can target people through banking and online accounts, including number spoofing, website and email scams. The FCA says these are often very sophisticated scams and they’re not easy to spot.
The FCA has said fraudsters have been known to create spoof websites replicating the FCA, sending fake letters and e-mails to try to obtain information. The FCA says ‘if you get an email, letter or phone call from someone claiming to work for us, it’s important you consider the possibility that it could be a scam.’
If you are contacted by someone claiming to be a foreign government official or another individual needing help to transfer substantial sums of money, you are likely being targeted by a money transfer scam. These scams usually involve paying money to an organisation or individual with the promise that it will be refunded once paid.
Fraudsters usually claim you will then receive a share of a much larger sum of money once the transfer is made. However, the only money that exists is what you pay to the scammers.
If you buy or own a product like a mobile phone, satellite TV box or home appliance, you might consider insuring it in case it gets damaged or lost. This sort of insurance should cover you for the repair or replacement of the product, with parts and labour costs often included.
However, some fraudulent firms take payments from customers but don’t arrange the insurance as agreed. This could leave you with little or no protection. Some other companies contact people to sell, promote or advise on insurance without authorisation. Fraudsters usually target people via a cold call shortly after they have purchased the product and offer them a cheap ‘warranty’ deal - however, this is not an authorised insurance.
It’s important to remember that if you deal with an unauthorised firm you won’t be able to make a complaint to the Financial Ombudsman Service or have access to the Financial Services Compensation Scheme (FSCS) if things go wrong.
The FCA has said they are receiving a growing number of reports from consumers who have been asked to pay a fee – usually between £25 and £450 – for a loan or credit that they then never receive.
The scam works when someone has made several loan applications online and then been contacted out of the blue by text, email or phone and offered a loan. You may be asked to make an upfront payment into a bank account or transfer money via an unusual method.
The scammers may claim that the fee is refundable and will be used as a deposit, administrative fee, insurance or because of bad credit history. You may be put under pressure to pay the fee quickly.
Once the first payment has been made, the scammer might contact you again to ask for more payments before they can give you the loan. Even though you make the payments, you never receive the loan.
People targeted by money transfer scams are often contacted by email, a letter or phone, or you may even see an ad in a newspaper or on a website, offering commission on what seems like simple work with little risk. Often the fraudsters target people on low incomes such as students, or people who have their details listed on recruitment websites or in chat rooms.
It might also be pitched as an opportunity to work from home, where you are an ‘account manager’ or ‘transfer manager’. All you must do is receive a payment into your bank account, take it out as cash and then send it abroad using a money transfer service or other means.
You might be told that the money is for trading shares abroad, or even that you will be helping a charity distribute funds. But you are probably being used by criminals to launder money. Once it is taken out of your bank account as cash, the money is almost impossible for law enforcement agencies to trace.
By helping fraudsters, you could be committing a serious criminal offence. If convicted, you could be sentenced to up to 14 years in prison and receive an unlimited fine.
How to avoid being scammed
The FCA has issued information on things you can do to avoid being targeted.
- Treat all unexpected calls, emails and text messages with caution. Don’t assume they’re genuine, even if the person seems to know some basic information about you.
- Don’t be pressured into acting quickly. A genuine bank or financial services firm won’t mind waiting if you want time to think.
- Never give out your bank account or credit card details unless you are certain about who you are dealing with.
- If you’re buying a financial product such as a loan, insurance, investment or pension, only deal with an FCA-authorised firm – check the FS Register to see if the firm is registered. Always access the Register from our website, rather than through links in emails or on a firm’s website (it might be part of the scam).
- Double-check the URL and contact details of a firm in case it’s a ‘clone firm’ pretending to be a real firm, such as your bank or a genuine investment firm.
- Check the list of unauthorised firms and individuals we’ve received complaints about. If the firm isn’t on our list, don’t assume it’s legitimate – it may not have been reported to us yet.
- Check your bank account and credit card statements regularly.
- Don’t give access to your device by downloading software or an app from a source you don’t trust. Scammers may be able to view, take control of your device and access your bank account.
What to do if you’re targeted by a scam
You can report the firm or scam to us by contacting the FCA Consumer Helpline on 0800 111 6768 or visit the website.
For products not regulated by the FCA or if you’ve lost money in a scam, contact Action Fraud on 0300 123 2040 or via their website.
Be wary of future scams
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals. The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.