Investment scams

Investing can be a great way to get your money to work for you. Well-researched investments that suit your own person circumstances can grow over time and help you reach your financial goals more quickly. All investments carry some degree of risk though and some investment opportunities are riskier than others.

What are investment scams?

Investment scams often begin with an unsolicited call from someone claiming to be a financial adviser or investment broker promising very high returns with little risk. The promises may sound too good to be true, and it’s likely that they are.

According to Scamwatch’s year to date figures for 2023, investment scams is the highest reported loss type coming in at over $259 Million to date alone.

What do Investment Scam calls involve?

Callers may spend considerable time building up their credentials, including providing professional looking material about their company and financial profit statements to convince victims of their legitimacy. However, it is unlikely scammers are able to provide is an Australian Financial Services Licence (AFSL) number, which is required to deliver personal financial advice within Australia.

If you do receive a cold call or respond to advertisements offering an investment opportunity, it’s a good idea to ask questions such as:

• What is the name of your company?
• Who owns your company?
• What is your address?
• How long the has the company been operating?
• Do you have an Australian Financial Services Licence?
• What is your AFSL number?

If they can’t answer these types of questions or claim that they don’t need an AFSL to offer you advice, then you should end the conversation.

Two valuable resources to help check the validity of anyone you are speaking to are:

1. The Australian Securities and Investment Commission’s database of AFSL licencees.
2. The ASIC’s s Moneysmart website:  ‘Investor Alert List’ and the check before your invest page

Types of investment scams to watch out for

Some of the most common investment scams include:

Cryptocurrency scams

Cryptocurrency is new to most Australian investors, which can make it difficult to differentiate legitimate opportunities from potential scam. As well as the investment risks that any new form of investment poses, there are also a range of dishonest practices to look out for:

• Cryptocurrency trading: Victims are offered guaranteed returns and often promoted on social media using ads featuring celebrities. Fraud victims report being assigned an account manager who assists them establish and deposit money into a digital wallet and recommend trades. Victims can see their investment grow on an account portal however are unable to withdraw any funds.
• If you are considering investing in cryptocurrency then it can a good idea to only use well known Australian registered cryptocurrency exchanges and invest in well-established coins until you are familiar with the market.

Government Bonds

There have been a number of imposter Government bond investment offers targeting people looking to invest their money in Treasury bonds.

Victims often report receiving an email or an unsolicited call from a reputable financial institution’s investment department and are forwarded information on Treasury Bonds at a very attractive guaranteed return.

They are often told it is a limited offer and need to act now or miss out. Victims are assigned an Account Manager who has frequent contact to advise the latest opportunities.

Here are some red flags to look out for that relate to imposter bonds:

• Financial Institutions are not authorised to issue Treasury Bonds on behalf of the Government. Legitimate bonds are genuinely bought through licensed ASX brokers or securities dealers.
• Spelling or manipulated logos in emails or documentation supplied.
• Deposit account details are always changing despite using the same broker.
• Emails, websites, or ads that include testimonials promoting the promise of big returns on the investment opportunity.
• You’re asked to refer your friends and family to promote the scheme so you can earn commission.

How to keep yourself safe from investment scams

1. Always use an Australian licensed provider. Individuals and companies providing financial advice in Australia must have an Australian Financial Services Licence (AFSL), which is issued by the Australian Securities and Investments Commission.  
2. End the conversation if someone is putting pressure on you to make a decision. A common red flag is “act now or miss out” as it does not allow you time to think & research your investment.
3.  Be cautious of unsolicited offers. It’s okay to hang up on someone who you’re suspicious of.
4. Check the organisation’s contact details. To help check that the person you’re dealing with works at the organisation, ensure that you use the contact details advertised on their website and perform an online search of the street address to verify the business operates from that location.
5. Always do your thorough and independent research. Before taking action, it’s important that you check that the investment opportunity is genuine and coming from a verified investment company.