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How to protect your finances from scams

The Financial Ombudsman Service (FOS) is warning about an increasing risk of scams, driven by the current economic climate.

Many people are more vulnerable to fraud, financial scams and unaffordable lending at a time of pressure on our spending and budget.  

How to protect your finances from scams

Here we explore the nature of the threat, how to spot it and what steps you can take to keep your hard-earned money safe. 

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Some background  

With rising food prices, spiralling fuel costs and general economic uncertainty, it’s naturally tempting to look for ways that make your money go further or maximise your savings and investments.

This can make you vulnerable to scammers, who are well-versed in offering apparently easy financial gains, too-good-to-be-true schemes and get-rich-quick ideas.  

Authorised investment scams are the fastest-growing type at the moment according to the FOS.

More than half of those reported involved cryptocurrency – digital currency that uses encryption technology to act as both a currency and a virtual accounting system, without the need for any controlling centralised authority or bank.

An authorised scam means that fraudsters trick a person or business into sending to an apparently genuine payee. 

Common financial scams  

Scammers are getting increasingly sophisticated and difficult to spot, but as a rule, it’s worth remembering that if something looks too good to be true, it probably is. 

Be wary of people who contact you unexpectedly, pressurise you to make a decision quickly or provide your financial details. Scams can be unsolicited phone calls, but equally, they might arrive by email, text message, post, or even at a presentation or seminar. 

Banking and online accounts

Banking scams come in a number of forms.

Here are some common ones: 

  • Vishing: Fraudsters can call and claim to be your bank or the police, carrying out a ‘security check’. To convince you of their legitimacy, they might suggest that you ring up and redial your bank, but there’s a problem. The fraudster hasn’t hung up at all and can now intercept your call, asking for account details, or persuading you to make a money transfer, while masquerading as your bank 

  • Number spoofing: Most phones and mobiles show you the caller ID, so you can see where an incoming call is from. Unfortunately, scammers can now change the caller ID number displayed on your phone to make it look as though they’re a legitimate bank or company. You should also watch out for text messages that try to lead you to a particular website – they might be fine, but they could equally be fake  

  • Website scams: You need to be aware that bank websites can be cloned by scammers. The false sites have a similar web address to the genuine article and are often reached simply by clicking through from a spam email. Look closely at any site for slight differences – especially if you’ve reached the site via an email that you’re unsure about. To be safe, bookmark your bank’s real web address or type it in each time 

  • Email scams: This common scam, known as phishing, sends you an email or text asking you for online banking passwords, PINs or other account details. The email will probably come with a story about needing to upgrade your security or offering you a refund. A legitimate bank never asks for sensitive personal security information via email. If you’re suspicious, call your bank using the number on your card or statements, and report the message. Be particularly careful if you spot spelling and grammar mistakes, or missing information 

  • Card scams: There are lots of credit card scams, all aiming to get key information such as the security code to access your account. Skimming is a common one, where card details are taken by copying the magnetic strip at an ATM or in-store. This can be used to access your account or create a fake card with your details. You can protect yourself by never sharing your PIN, looking out for signs that an ATM has been tampered with, checking your statements regularly and reporting any suspicious activity 

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Pensions and investments 

Here are a few of the most common pension and investment scams, although they are evolving all the time. 

  • Binary options scams: This was a form of fixed-odds betting, typically based on whether a particular asset goes up or down in value. Fraudsters often have a slick social media presence and legitimate-looking websites, plus a prestigious London address that is usually false. Using software, they create misleading prices and returns, then suddenly close your trading account and disappear – with your investment Binary options have been banned in the UK since 2019, so any firm offering them is undoubtedly a scammer 

  • Cryptocurrency investment scams: Cryptoasset fraudsters also tend to use social media linking to professional-looking websites. The idea is to persuade you to invest using crypto or traditional currencies. As with the binary options scammers, they often claim to have a high-end UK presence, but usually don’t. Using software, the scammers present false prices and returns, and try to persuade you into buying non-existent crypto assets, before promptly closing your account and refusing to transfer funds 

  • Get-rich-quick schemes: These schemes promise you high returns that aren’t available through traditional investments. Often called pyramid schemes, they reward early investors who are then encouraged to recruit more people for commission. At first, they seem genuinely profitable, but usually disappear when the supply of new investors and money dries up. The fraudsters take most of the money generated and vanish   

  • Early Pension release scams: Be very wary about schemes offering to release money from your pension before you’re 55. These ‘pension loans’ are most likely to be a scam. You could well face a tax bill of 55 per cent or lose your pension pot altogether. The scammers usually call out of the blue, or via email, but might approach you through a seminar or exhibition. You’ll be offered a ’pension review’, which will probably claim that you can release your funds before the age of 55, but to benefit you’ll have to transfer your legitimate funds into a new scheme – often based overseas. The scammers might then ‘loan’ you back some of your pension, while taking a huge fee and investing the rest in high-risk products or simply stealing all of it. 

Your scam avoidance checklist 

Scams come in so many forms today, but there are some golden rules that can help you avoid them. 

  • Be cautious about all unexpected calls emails and texts – even if the caller has some basic information about you 

  • Don’t be hurried or pressurised into action. All genuine banks are happy for you to take your time 

  • Never give out bank account or credit card details until you’re 100 per cent sure you know who you’re dealing with 

  • Always double-check URLs and contact details, in case they’ve been cloned from a genuine company 

  • Check your bank and credit card statements regularly  

  • Never download software or apps from an unknown source 

If you take sensible precautions and stay alert, you can use and invest your money without fear of being scammed – and it still makes good sense to consult a professional financial adviser before making any big decisions. 

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About the author
Kate has written for leading publications and blue chip companies over the last 20 years.