Investment scams top the list when it comes to scam losses in Australia. In 2024, reported investment losses have been trending down but remain high, with nearly $80 million lost so far this year according to Scamwatch data.
So, what is an investment scam, and how can you spot and avoid them?
According to COBA’s Financial Crimes and Cyber Resilience team, scammers often prey on people’s anxieties and desire for quick financial gains – especially during the cost-of-living crisis – promising high returns with little or no risk.
“Investment scams exploit the desire for financial security to deceive victims into investing money in fake or non-existent opportunities. Investment scams are often high value and can result in victims losing their entire life savings,” COBA Chief of Financial Crimes and Cyber Resilience Leanne Vale said.
“They often impersonate legitimate financial institutions or government agencies, making it difficult for individuals to distinguish between genuine investment opportunities and scams. It’s important to research any investment opportunity to make sure that it matches your expectations and can be verified through the appropriate channels,” she added.
Here, the COBA Financial Crimes and Cyber Resilience team share their top tips on how to spot and avoid an investment scam.
What is an investment scam
There are a myriad of investment scams floating around, but what they have in common is that there is a promise of high returns, usually with little to no involvement from the investor other than to send funds.
Scammers offer investments in unregistered securities, such as stocks, bonds, or promissory notes, without proper authorisation from regulatory authorities. These investments may be entirely fraudulent or involve exaggerated claims about potential returns.
Scammers promote investments in offshore accounts or entities, claiming they offer higher returns, tax advantages, or secrecy. However, these investments often involve significant risks and lack regulatory oversight, making them vulnerable to fraud.
Investment scams are marketed using very convincing websites, endorsements and collateral, making them difficult to identify.
Crypto scams involve the promise of high returns, anonymity, and guaranteed profits. They leverage the ‘unknown’ of cryptocurrency to deceive investors into investing money, only for the funds to disappear or provide little to no return.
How to detect an investment scam
Detecting an investment scam requires vigilance and a healthy dose of scepticism.
Here are some red flags to watch out for:
- Unrealistic promises: Be wary of investments that promise guaranteed high returns with little or no risk. If it sounds too good to be true, it probably is.
- Unsolicited contact: Be cautious of unsolicited investment offers, especially those that come through email, social media, or phone calls. Legitimate investment firms typically don’t solicit business this way.
- High-pressure tactics: Scammers often use high-pressure tactics to rush you into deciding to invest. This gives the victim little or no time to investigate the legitimacy of the offer.
- Lack of transparency: If the person offering the investment is unwilling or unable to provide evidence that the investment or company is real, then it likely isn’t.
- Unregistered or unlicensed operators: Check if the person or company offering the investment is registered or licensed with the relevant Australian financial authorities, such as the Australian Securities and Investments Commission (ASIC). ASIC’s MoneySmart has an investor alert list which can help you find out which entities are not to be trusted.
- Difficulty withdrawing funds: If you have difficulty withdrawing funds from an investment, it could be a sign of a scam. Legitimate investments should allow you to access your money when you need it.
What to do you if spot an investment scam
Even if you’ve managed to avoid losing money to an investment scam, reporting it is still crucial – report the scam to National Anti-Scam Centre (NASC) – Scamwatch.
By sharing your story, you contribute to protecting others and stopping these criminals.
If you have lost money as part of the investment fraud, immediately report the transaction(s) to your bank or financial institution and complete a report through ReportCyber.
Customer-owned banks are dedicated to safeguarding their customers from scams and fraud. In November, 55 mutual banks and credit unions demonstrated this commitment by joining forces to launch the Scam-Safe Accord. This industry-wide initiative represents a united front against scammers and reinforces the banking sector’s determination to strengthen consumer protection. Find out more about the Scam-Safe Accord here.