Consumer Protection—How to Avoid Fraud and Scams

In today’s rapidly evolving financial landscape, the threat of financial fraud and scams remains ever-present. As we continue to navigate these challenges, it is crucial to stay informed and vigilant. Drawing on insights from our previous articles and the principles outlined in the FCA’s Consumer Duty, we aim here to enhance your awareness and provide practical steps to protect you.

The evolving nature of financial fraud

Financial fraud has become increasingly sophisticated, leveraging technology and exploiting vulnerabilities. In a previous article, we highlighted the alarming rise in financial crime during the pandemic, with losses reported by Action Fraud reaching £657.4 million in the 12 months to September 2020. This surge underscored the need for heightened awareness and proactive measures.

More recently, the UK Finance Annual Fraud Report 2024¹ indicates that £1.17 billion was lost to fraud in 2023, reflecting the growing sophistication and prevalence of financial fraud and scams.

Common scams and how to identify them

Scammers employ various tactics to deceive individuals, often targeting those approaching retirement or seeking investment opportunities. Some common scams include:

• Pension scams: As detailed in our previous article, fraudsters promise early access to pension savings or high returns through dubious schemes. They often use persuasive language such as “liberate your pension” or “obtain a pension loan”.

• Investment fraud: Scammers advertise seemingly authentic investment opportunities online, including cryptocurrency ‘offers’ promising high returns. These schemes often turn out to be fraudulent, with victims losing significant amounts of money.

• Social media scams: As we mentioned in our article last year, social media platforms are a hotbed for fraud and scams. In 2023, more than 50% of investment scams occurred through social media platforms with direct messaging options like Facebook, Instagram, and Telegram². One notable case involved a scammer who used Instagram to promote a fake investment scheme, defrauding victims of over £1 million before being apprehended.

• Phishing and spoofing: Scammers send emails or messages that appear to be from legitimate sources, tricking recipients into revealing personal and financial information. According to the Cyber Security Breaches Survey³, 84% of businesses and 83% of charities reported experiencing phishing attacks in the year to April 2024.

• Website cloning: Fraudsters create fake websites that mimic legitimate financial institutions, luring victims into transferring funds to fraudulent accounts. While companies do what they can to have these cloned websites taken down, there is little in the way of preventative measures that website hosting service providers can deploy to stop them from reappearing.

The role of consumer protection

The FCA’s Consumer Duty sets higher standards of consumer protection across financial services, requiring firms to prioritise their customers’ needs. This duty emphasises the importance of clear communication, fair value, and support when needed.

At Netwealth, we applaud the FCA’s push to ensure that regulated firms do all they can to protect and support consumers. We are committed to upholding these principles, keeping our clients well-informed and leveraging technology to secure the information and assets of those for whom we invest.

Practical steps to protect you:

• Stay informed: Regularly update your awareness on the latest scam tactics and warning signs. Knowledge is your first line of defence.

• Verify sources: Always verify the authenticity of any communication or website before sharing personal information or making financial transactions. You can use the FCA Register or ScamSmart as a reliable source of information concerning whether an individual or firm is authorised and regulated in the UK.

• Report suspicious activity: If you suspect fraudulent activity, report it to the relevant authorities immediately. Early reporting can prevent further losses.

• Use technology wisely: Leverage the security features that are available from your service providers, such as two-factor authentication and/or biometrics and regularly update your passwords to enhance your online security.

Conclusion

Financial fraud and scams are evolving threats that require constant vigilance. By staying informed, verifying sources, and leveraging the principles of the FCA’s Consumer Duty, we can better protect ourselves and our financial wellbeing. At Netwealth, we remain dedicated to safeguarding our clients and providing the support they need in these challenging times.

Please note, the value of your investments can go down as well as up.

Sources:

¹ Annual Fraud Report 2024 | Policy and Guidance | UK Finance

² Social Media Scamming Statistics 2024: A Widespread Problem - EarthWeb

³ Cyber Security Breaches Survey 2024 - GOV.UK (www.gov.uk)