As we mark the start of Scams Awareness Week, the Customer Owned Banking Association (COBA) warns new investors are potentially not doing due diligence when it comes to investing decisions, leaving them vulnerable to sophisticated scams and fraudulent investment opportunities.
New polling commissioned by the peak body found new investors – those with fewer than 12 months’ experience – consider themselves equally as confident as experienced investors (5+ years) of spotting a scam, despite being less likely to verify opportunities through reputable sources like ASIC (30% to 59%), and less likely to seek paid financial advice to verify an investment.
The polling data reveals that, when compared with more experienced investors, new investors are more likely to use less reputable and riskier sources to verify an investment such as online forums (30% to 16%) and social media (21% to 10%).
The polling also shows that almost half (45%) of new investors surveyed have invested in cryptocurrencies which are currently unregulated. According to the ACCC, the majority of losses to investment scams involved crypto investments with $113 million reported lost this year. COBA strongly advises new investors to be cautious when investing in cryptocurrency and ensure they do adequate due diligence to verify the investment.
Leanne Vale, Director of Financial Crimes for COBA, said investment scams do not discriminate and investors with all levels of experience should be alert to the risks when considering new opportunities to invest their money.
“Unfortunately, scams are sophisticated and always evolving, with the ACCC reporting more than $700 million lost to investment scams in 2021. New investors need to take their time to verify investments thoroughly, and experienced investors would be smart to consider additional sources now that some scammers are using ASIC and ACCC data to falsify verification – it’s not a shock people are getting caught in what they thought were legitimate opportunities,” Vale explained. A former Australian Federal Police officer, Vale is a leading expert on fraud and financial crimes with over three decades of experience. Her advice:
- Build a network of reputable sources – including the ACCC’s Scamwatch, ASIC, and your financial adviser, if you have one. Use these sources to check if investments are legitimate, including unsolicited investment opportunities or investments you have found via internet search engines.
- Watch for imposters – scammers sometimes try to impersonate reputable sources, so look closely at URLs, don’t click on links unless you’re certain who it is from, and don’t be afraid to make a phone call to confirm a message is from an authentic source.
- Use extra caution with unregulated investments – when a market isn’t regulated (like cryptocurrency), it can be easier for fraudsters to imitate real investment opportunities.
- Do a series of practical checks before making an investment:
- check ASIC’s Offer Notice Board to see if a prospectus relates to a recent offer registered;
- check ASIC’s register of Australian financial services licensees to make sure any party promoting or issuing the financial product is licensed or is authorised by a licensee;
- check ASIC’s Moneysmart list companies you should not deal with.
- Know the risks and stay alert – all investment types have some level of risk for scam activity, even those traditionally deemed low risk. If it sounds too good to be true, it usually is.