Australians lose more money to investment scams each year than any other scam type. So far in 2024, reported losses have reached more than $125 million (more than $13 million in WA alone) according to Scamwatch investment scam data.
So, what is an investment scam? And more importantly, how can you protect yourself from one?
What is an investment scam?
Cost-of-living pressures have caused many people to look for new ways to grow their money. Scammers are taking full advantage of this and as a result, there are many investment scams floating around. They all have one thing in common though, and that is the promise of high returns – usually with little to no involvement from you, the investor.
Investment scammers often cleverly impersonate legitimate investment and finance companies. The scams are usually marketed using very convincing websites, celebrity endorsements and professional-looking marketing collateral. This makes it difficult for potential investors to identify as a scam.
These types of scams often offer investments in unregistered securities like stocks, bonds, or cryptocurrency. There is no proper authorisation from regulatory bodies, and the investments are often entirely fraudulent.
The scammers will often promote investments in offshore accounts or overseas-based businesses. They will claim that they offer higher returns and tax advantages as a result. However, these investments often involve significant risk, and the lack of regulation makes them vulnerable to fraud.
Crypto (or cryptocurrency) scams promise high returns and guaranteed profits. They often leverage a victim’s lack of knowledge around crypto to deceive them. Once your money has been ‘invested’, the funds to provide little to no return or disappear completely.
How to identify an investment scam
Investment scams are often high value and can result in the loss of your entire life savings. This means it’s very important that you’re able to identify one before you become a victim.
To detect an investment scam you need to be vigilant and use some scepticism. As we know from other fraudulent activity, the details of a scam can change regularly, but there are some common signs that can help you identify them.
Here are some key red flags of investment scams to look out for:
- Unrealistic promises
Low risk with quick and high returns? If it sounds too good to be true, it probably is.
- Unsolicited contact
Real investment firms typically don't find business via email, social media, YouTube or cold calls. - High-pressure tactics
Scammers will rush you into investing and allow you no time to research or investigate the offer. - Lack of transparency
If you’re unable to get independent evidence that the investment or company is real, then it likely isn’t.
- Difficulty withdrawing funds
Legitimate investments allow you to access your money, so if you can’t it could be a scam. - Unusual or complicated process
Scammers will often get you to deposit your funds into several bank accounts.
Always check if the person or company offering you an investment opportunity is licensed and listed with the relevant financial authorities, such as the Australian Securities and Investments Commission (ASIC). The MoneySmart website has an investor alert list which you can check to identify known scam companies. But remember, this list isn’t exhaustive, and if a company isn’t listed it doesn’t mean it’s not a scam.
Always be wary. Check with your bank’s Fraud or Security team before making a deposit into any unknown bank account for an ‘investment’.
What to do if you spot an investment scam
Even if you've managed to avoid losing money to an investment scam, reporting it is still crucial. You can report any type of scam activity you see on the Scamwatch website. By sharing your experiences, you help to protect others.
If you have lost money as part of investment fraud, you should notify us immediately. To report fraud or a scam, please contact us immediately on 13 25 77. You should also report the matter to ReportCyber.
P&N Bank takes the protection of your personal and financial information very seriously. We have comprehensive security measures in place to help protect your accounts and personal information from unauthorised access. Whilst these security measures are in place, it is also very important that you know the common warning signs of fraud and scams. It’s critical you always use good online security practices.
Always stop and think, and help protect yourself and your money.