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What is an investment scam, and how can you protect yourself?

Security specialist

2024-04-03 00:00

Estimated reading time
4 min

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Imagine getting a call from a confident and enthusiastic financial adviser. They tell you there’s an incredible opportunity to grow your wealth in record time, that will set you up to retire earlier than expected. It sounds amazing, right? Well, we hate to burst that bubble, but if it sounds too good to be true, probably is.

Investment scams are big business. Ruth Talalla, ANZ’s Scams Portfolio Lead, explains that “Australians lose over a billion a year to investment scams. Investment scams are big business for scammers because they enable the scammer to steal large amounts very quickly – often a victim’s life savings or retirement funds.”

Statistics from the Australian Competition and Consumer Commission (ACCC) show that investment scams accounted for almost half of the losses to Australians in 2022 alone, costing us a shocking $1.5 billion. This is why it’s so important to be able to spot investment scam red flags before you fall for one. Here, we’ll explore the different kinds of investment scams, how to spot them, and ultimately empower you with the knowledge you need to keep your investments secure.

What are investment scams?

Investment scams can take many different forms, but most will follow a predictable pattern. According to the National Anti-Scam Centre’s Scamwatch, most investment scams take place via phone, however, scammers will also make use of social media, email and even SMS.

Once in touch, the scammer will often inform you of a fantastic opportunity to grow your wealth. It will likely require a sizable investment from you (in some cases, your entire nest egg), but the returns they promise will be far higher than any other typical investment can offer. And the risks? “Ah don’t you worry about it,” they’ll say, “this is as close to risk-free as it gets”. In reality, the investment opportunity does not exist, and the scammer is angling to make off with your hard-earned savings.

How to spot an investment scam

Unfortunately for us, investment scammers are developing more sophisticated ways to take our money each year. Some will go to great lengths to sell you on the legitimacy of the investment. For example, they might supply brochures and account statements, direct you to professional looking websites and even staff call centres. This is why it’s so important to stay alert for red flags that might suggest something dubious is afoot.

What are common investment scam red flags?

  • Being contacted out of the blue by a “financial expert” offering to take your savings and grow them exponentially.

  • Getting harassed by the person encouraging you to invest, with constant contact or pressure to commit before you hang up the call. Ruth explains that "Scammers are experts at using emotional triggers to manipulate people into sending money – for example creating a sense of urgency, excitement or fear to impair the victim’s rational thinking.”

  • Offering returns that are better than the average interest rate on term deposits or bonds.

  • Promises or guarantees that the investment is extremely ‘low risk’ or ‘no risk’.

  • Attempts to avoid official channels or claims they don’t need to officially register the investment.

  • If the ‘adviser’ is unable to provide their registration with the Australian Securities and Investments Commission (ASIC) or their Australian Financial Services (AFS) licence. “A legitimate financial adviser will be registered with ASIC, have an Australian Financial Services Licence or Australian Business Number,” Ruth explains. “A legitimate advisor will also allow you to take your time to make a decision, rather than adopt high pressure sales tactics to rush you into making one.”

  • They insist on dealing with you only over phone or online and refuse to meet in person. 

  • Celebrity endorsements – these can easily be faked using artificial intelligence. 

  • Newly registered companies or websites.

6 ways to protect yourself against investment scams

  1. “Always check any investment opportunity to make sure it's real, especially if approached through social media,” Ruth says. Confirm the advisor’s credentials – You can look up their registration with the Australian Securities and Investments Commission (ASIC) via their website.

  2. Do not take unsolicited financial advice from sources on social media – this could be a private message or a stranger tagging you in a post.

  3. Keep across all activity in your bank accounts so you can spot any red flags early on.

  4. Don’t click on web links sent by unknown sources. Instead, look up the organisation on its official website to see if the offer is legitimate.

  5. Stop and think - Scammers will often apply time pressure by threatening that you will lose the chance if you don’t act immediately.

  6. Ruth explains that you should ‘do your research before giving your details to an unsolicited caller or replying to emails offering financial advice or urgent investment opportunities.’ Take your time researching the opportunity, do a web search to see if the company or individual has been involved in a scam, speak to others involved, and seek financial advice from a registered professional. 

What to do if you think you’ve been scammed

If you have been caught up in an investment scam, know that this is not your fault, according to Scamwatch, these scams claim the most money from Australians each year. Below are some immediate actions you can take to protect yourself from further financial harm.

  • If you think your super has been impacted, then contact your fund straight away to explain what has happened.

  • If you have shared financial information or believe you have transferred money to a scammer, notify your bank immediately.  If you’re an ANZ customer, please contact us immediately.

  • If you shared credit card details, block or cancel those cards immediately.  If your cards are with ANZ, you can do this through the app. Learn more.

Who can you contact if you’ve been scammed?

  • Report the scam to the Police through the Australian Signals Directorate’s ReportCyber portal. This resource is there for reports of scams where money or personal information has been lost.

  • You can contact the Australian cyber security hotline 24 hours a day, seven days a week on 1300 CYBER1 (or 1300 292 371). 

  • Help others by reporting to Scamwatch to help them prevent future losses, monitor trends and educate the population about emerging threats. 

  • You can also contact IDCare, a not-for-profit organisation providing support to those experiencing identity and cyber security issues.
What is an investment scam, and how can you protect yourself?
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This information seeks to raise awareness and provides general information only. It may be necessary or appropriate  to ensure that measures are taken in addition to, or in substitution for, the measures presented having regard to your particular personal or business circumstances.