Investment scams

financialcrime
financial-crime

#1

WHAT ARE THEY?
INVESTMENT SCAMS are fraudulently offered financial opportunities (they don’t exist). They happen when an offender successfully persuades a potential victim, whether that be an individual or business, to part with their money on the promise of a lucrative financial return.

HOW DO YOU RECOGNISE THEM?
INVESTMENT COLD CALLING/BOILER ROOM SCAMS begin with an out-of-the-blue call from an offender operating from a ‘boiler room’ (aptly named on account of high-pressure selling). They will claim to be a ‘Stockbroker’ or ‘Portfolio Manager’ calling to offer financial or investment advice. Their financial proposal will be low-risk and will provide quick and high returns, or they will encourage investment in overseas companies. It will sound legitimate and the offenders will often have resources to substantiate their claims. They will be persistent and may keep calling. Investment opportunities include, but may not be limited to:

• Shares;
• FX trading;
• Binary options;
• Bitcoin; or
• Sports investment schemes.

The offenders will convince their victims to make a small initial payment and once they have the money (together with their victim’s credit card details) they will introduce many different reasons why a larger payment is required. Even if a larger payment isn’t authorised by the victim, it will often be taken anyway directly from their credit card. To give the scam a greater sense of legitimacy, occasionally victims will also receive calls from ‘senior’ employees, for example, the ‘Vice President’ or ‘Chief Executive Officer’ giving the impression that the victim is a valued client. The caller will just be another offender from the boiler room. They are clever and persuasive and may suggest they can prove their authenticity by referring their victims to impressive looking websites or fake agencies with official-sounding names.

WHAT ARE THE INDICATORS?
Potential victims are:
• Contacted about an investment opportunity by someone they don’t know.
• Promised very high returns with little risk (this is almost always ‘too good to be true’).
• Given very little information in writing (legitimate investments must come with explanatory documentation).
• Told the offer is known only to a ‘select few’ (this is often a ploy to make the victim feel special).
• Asked to keep the investment a ‘secret’ (this is to stop the authorities from hearing about it).
• Not told who is behind the offer or given a physical address (legitimate businesses provide full names and address details).
• Promised access to ‘secret’ overseas banking markets supposedly offering very high returns (these markets don’t exist).

WHO IS MOST AT RISK?
No-one is safe from scams, but elderly or retired people are potentially more exposed to this particular fraud type as they often have surplus cash to invest or are keen to top-up their superannuation income with dividends from investments. They are also trusting and more likely to have a landline.

FINANCIAL MARKETS AUTHORITY (FMA)
The FMA are a government organisation who help regulate capital markets and financial services in New Zealand. They are responsible for enforcing securities, financial reporting and company law applicable to financial services and securities markets. The FMA regulate securities exchanges, financial advisers and brokers, auditors, trustees and issuers, including issuers of KiwiSaver and superannuation schemes.

They are a member of New Zealand’s Council of Financial Regulators, together with the Reserve Bank of New Zealand, New Zealand Treasury and MBIE (Ministry of Business, Innovation and Employment). They are also a member of the International Organisation of Securities Commissions (IOSCO). In short, the FMA knows their stuff and exist to promote fair, efficient and transparent financial markets. They have an excellent website that includes a section devoted to scams and unregistered businesses.

FINANCIAL SERVICE PROVIDERS REGISTER (FSPR)
Finally, the FSPR is operated by MBIE and identifies if a company is a registered financial services provider, which services they are registered or licensed to provide, their business address, whether they belong to a Dispute Resolution Scheme (DRS) and what the status of their registration is.

Offenders of INVESTMENT COLD CALLING/BOILER ROOM SCAMS are never registered to provide financial services in New Zealand, and when they are asked to provide this information to a potential investor, they tend to tip-toe around the subject or end the call abruptly.

If you’re concerned that you may have been caught up in a scam similar to this or otherwise, you should contact BNZ immediately on 0800 ASK BNZ (275 269) or + 64 4 470 9021 as soon as possible.