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How to avoid investment ISA scams

How to avoid investment ISA scams
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Investment ISA scams are April’s ‘scam of the month’, according to recent information released by Metro Bank.

While money scams have been around for a long time, investment fraud has been on the rise during the pandemic. In fact, research shows that the average victim of investment fraud lost £45,000 in 2020.

Now, reports are coming in that investment ISA scams are on the rise, adding a new layer of danger for those dipping their toes into the market.

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Adam Speakman, head of fraud and investigations at Metro Bank explains, “There is always an element of risk in investment – but the risk should come from the movement in market conditions, not from being defrauded by criminals.” 

How investment ISA scams work

Investment ISA scams are common at the start of the new financial year, which is why April seems to be prime time for them, according to Speakman.

ISA scams work by offering good return rates, tempting people looking to jumpstart their new financial year. “Not only is the offer fake, but so too are the reviews from supposedly happy investors,” says Speakman.

It can sometimes be tricky to differentiate an ISA investment scam from a real offer, but Speakman says you should be concerned if the rate of return seems too good to be true. Other warning signs are finding the offer via social media or receiving an email about it out of the blue.

If they tell you “it’s now or never”, you should hear alarm bells. “If you are being pressured to act quickly, move funds or share passwords, you need to STOP and THINK,” Speakman adds.

When in doubt, always ask for the name and details of the company offering the ISA. Then check that they’re authorised by the Financial Conduct Authority to offer the deal. If they’re not registered with the FCA, there’s a clear risk that it’s a scam.

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Other investment scams to be aware of

Metro Bank says April also sees an uptick in other financial scams, including HMRC scams. Some of these include messages trying to scare you into paying supposed fees or penalties.

But Speakman says HMRC will never call to threaten you into making payments. If you hear that on the phone, it’s a sign of a scam. “Always take the caller’s details and terminate the call then check the HMRC website for the latest and common scams,” Speakman suggests.

Other financial scams to be aware of include: 

  • Cryptocurrency scams involving coins that don’t really exist 
  • Binary options 
  • Early pension release 
  • Unregulated assets such as gold or diamonds
  • Forex trading offering guaranteed returns 

If you’re considering an investment, the Money Advice Service recommends checking the FCA register of regulated companies and looking for warnings. Unless you’re familiar with investments, it’s also wise to seek independent financial advice so you know the risks of anything you’re getting into. 

This is especially important if you’re looking into unregulated or ‘niche’ investments. These aren’t always covered by the FSCS or FOS, so the risk is greater. 

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