FCA warns against scammers’ convincing online testimonies

January 31st, 2018

The Financial Conduct Authority (FCA) has warned consumers against trusting online customer testimonies, which the regulator said are favoured trust-building techniques by scammers.

Research from the regulator found almost one-quarter (23%) of those surveyed trusted investment companies more if they displayed online customer testimonies.

The FCA said scammers create “highly professional-looking” online investment platforms featuring customer reviews, logos and statements to lure investors.

It said one-in-nine (11%) consumers do not check whether a firm is regulated or registered with Companies House before investing, with £87,000 now being lost to binary option scams every day.

Binary options allow consumers to bet on the price of a stock, commodity, currency or index. As the FCA explained: “As an example, you could bet at 1.25pm that XYZ stock will either increase or decrease in price by 1.30pm. If you guess incorrectly you lose all of your stake, but guess correctly and you can ‘win’ a fixed amount of money.”

Further findings from the FCA revealed one-in-seven (13%) of those aged under 25 were more likely to trust an investment offer if it was received through social media, while this was far less likely with over-55s (2%).

The FCA has previously emphasised the over-55s as a section of society particularly vulnerable to investment scams. Despite this, it said under 50s are significantly more likely to fall victim to a binary options scam than other types of investment-based fraud (34% versus 21%).

‘Fraud Moving Online’

“As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media,” said FCA director of enforcement Mark Steward.

“While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.”

 

Source: Professional Adviser