Stay alert – more “scam” warnings – but also a helpful anti scam tool.


Article by Phil

At the moment it seems that all we are getting from the Financial Conduct Authority (FCA) are scam warnings. On the one hand it’s certainly a good thing that the regulator is being proactive in bringing warnings to the attention of both advisors and the public, but on the other hand the number of warnings is a real concern. It feels like consumers are under constant attack, especially online.

The latest warnings are about “impersonation” which is where criminals pretend to be another legitimate company online to attract enquiries from consumers where they can then acquire personal information and even bank details. We have been warned about this before back in December, but investigation by advice firm Quilter has now shown that the number of “impersonations” has risen to an all-time high, with  543 reports to the FCA in 2020, up from 300 in 2019 an increase of 33%. But when you look back over the past decade, the number has increased from just 62 in 2010 – an increase of over 700%.

Please be careful.

Scam predictor tool

One thing that could help is a new online scam predictor toll recently launched by Not-for-Profit organisation Help and Advice.

The tool asks a series of questions and based on your answers it produces a percentage risk score and a flag warning Green/Amber/Red. This is not a sales tool. You are not asked to input any personal information just answer a series of straightforward questions about how you’ve been contacted and what your “adviser” has said to you. Questions about whether you have been offered fantastic returns, or special time limited offers, or the ability to access your pension before you reach 55 – all classic warning signs.

We have tried it out and it seems quite useful if you have concerns.

You can click on the link here.

But why do you need to be careful?

The FCA estimates that there are 24 million potentially “vulnerable” individuals in the UK. Of course, these are the people who are most at risk from fraud.

£657 million has been lost to fraud over the 12-month period from September 2019 to September 2020 and 17,000 reports were made to Action Fraud over the same period. It could be worse with Pension Wise estimating that over £1 billion may have been stolen from pensions by fraudsters.

It’s clear that financial advisors have a key role to play in combatting fraud, by being diligent on behalf of their clients. But this also extends to client’s immediate family and friends who can also benefit from the communication of best and safe practices.

What else can be done (outside of advice firms) to reduce the risks?

A number of suggestions have been made. MP’s recommended that everyone should have to engage with the Governments guidance service Pension Wise before being able to access their pension. That way they could be offered guidance and at the very least would benefit from some level of education. Unfortunately, this suggestion was rejected by parliament in the latest Pension Schemes Bill.

A second improvement would be a central database to share information between agencies. At the moment there is no joined up approach with various agencies acting in isolation including the FCA, The Pension Regulator, Action Fraud, Pension Wise, the Financial Ombudsman Service and of course the Police.

Another improvement (which is well underway) is for the FCA (as regulator) to be more proactive in policing the industry, especially in terms of pension transfers. This has already started particularly in relation to final salary pension transfers, where the FCA has been concerned about the number of recommendations to transfer historically. It has already made several interventions including banning contingent charging, requiring regular reporting, checking Professional Indemnity Insurance is in place and intervening in specific schemes like British Steel. These are all measures to police the advice industry itself and they have certainly had an effect, but this is not where most of the fraud takes place. Most fraud is outside the regulated market.

Although it is fair to say that a lot of money has been lost through investments into unregulated investments in the past.

Technological improvements could also help. In particular client’s pension details and access being protected by encryption to prevent direct electronic fraud. There has been a lot of progress on this front, although there is always the case that moving information online in itself creates more opportunity for fraud.

Top tips to avoid scams.

There are some simple warnings that could be advertised more widely including:

  • High returns
  • Time limited opportunities to invest.
  • Offers that were “cold called”.
  • Access to pension funds before 55
  • Tax free offers
  • Offshore investments

All of which are highly likely to be bogus.

Have a look at How to find a good financial adviser

 Google finally takes some action

Not before time and as a result of pressure form both the regulator (Financial Conduct Authority) and MP’s particularly those on the pensions working groups, Google has started to take some action to address scams and fraud on its platform. It has introduced a new Advertiser Identity Verification (AIV) process. The process allows consumers to click on the company behind the advert to find out more about them, who they are, where they are based etc. It seems Google has started to apply this new AIV process across some retirement planning and protection adverts.

It was hoped that there would be legislative support for a crackdown on scams in the Online Harms Bill currently going through parliament, but so far this has not been included.

Further update on scams….

Some strange figures emerged today (23/3/21) from the National Fraud agency Action Fraud who reported that the number of pension scams reported by Pension Trustees (the companies who manage pension schemes) had reduced by 80% from almost 1,800 in 2014 to only 358 last year. So why are the numbers of reported scams down, when the numbers of actual scams are on the rise?

One of the answers maybe that pension schemes are reluctant to report suspicions because they think that their concerns won’t be dealt with, or that it’s too much trouble. If this is the case action needs to be taken like the introduction The Pension Regulators Pledge to Combat Pension Scams which so far has over 200 schemes signed up to the pledge.

It seems more needs to be done at the very top.

Having said that there was some good news today (29/3/21). The High Court has found 24 HR Trading guilty of providing unregulated advice and ordered them to pay £530,000 in compensation. The firm were providing what were known as “trading signals” to customers via WhatsApp which were essentially unregulated tips on market trades and recommendation to use partner brokerage firms to make investments. 24HR Trading and their owner Mr Mohammed Maricar were not authorised by the CA to provide any form of advice.

The FCA have been pursuing this case for two years now and it’s a good example of the dangers of online investment promotions which we have highlighted before.

The Department of Work and Pensions have also just published a detailed report today which recommends that the government legislates to protect consumers from online advertising in the same way that they are protected form print and TV media advertising. It seems ludicrous that the online giants are not subject to same levels of control and laws to protect customers and are instead allowed effectively to benefit from criminal acts .i.e., advertising online pension and investment scams.

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