Calls to the UK financial watchdog related to investment scams have nearly tripled over the past five years, as fraudsters use inflationary pressures to better target victims.
The data reflects the wider growth of so-called authorised push payment fraud, in which consumers are tricked into sending money to scammers who pose as trusted figures.
“Scammers are becoming more and more sophisticated, coming up with different tactics, such as impersonation texts or calls, and using the cost of living pressure as a way to tempt investors into false opportunities,” said Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority.
According to its latest statistics, calls to the FCA from investors reporting suspicious investment opportunities increased by 193 per cent over the past half-decade.
“The cost of living crisis is straining the budgets of millions of households, increasing financial vulnerability and providing an ‘opportunity’ for fraudsters to tempt people to part with their hard-earned savings,” said Tom Selby, head of retirement policy at AJ Bell.
A growing area is crypto fraud, in which investors are lured in with fake celebrity endorsements and “pump-and-dump” schemes in which criminals artificially inflate the price of a cryptocurrency before selling it to retail investors shortly before the value crashes.
Previous data from UK police unit Action Fraud showed that the amount lost to criminals in crypto scams rose by a third in the year to September 2022.
Pensions savers over the age of 55 are also ideal targets, said Selby, as they can flexibly access their retirement savings.
“In many cases, someone’s pension will be the most valuable financial asset they have, with the possible exception of their house,” he said.
The FCA said that last year, false investment opportunities totalling £2mn were reported by would-be retail consumers. This compares with a total £170mn lost to investment scams by UK victims in 2021, according to UK Finance data. In the first six months of 2022, £60mn was lost.
The trend is part of a broader rise in authorised fraud, in which criminals impersonate authority figures, bank staff and even romantic partners to earn victims’ trust. UK Finance figures for 2021 showed that authorised fraud losses increased by more than £150mn to £583mn.
Most high street banks are signatories to a voluntary code set up in May 2019 on reimbursement for authorised push payment fraud.
But the approach was criticised last year by the government as “inconsistent”, with varying levels of compensation. TSB, for example, has offered defrauded customers a guaranteed refund since April 2019.
Last year, the UK’s Payment System Regulator set out plans in a consultation, in which it said banks and building societies should be required to fully reimburse victims of authorised push payment scams within two days of the fraud being reported, in cases where losses were more than £100.
However, MPs attacked a proposal this month to ask payments operator Pay.UK to lead the new regime, criticising the idea of handing an industry body without regulatory powers oversight for the sector.
Pressure is also growing on social media companies to clamp down on online fraudsters using their platforms to target customers. Large companies will face a duty of care to protect their users from fraud under the online safety bill currently working its way through the House of Lords.
