Beware of the boiler room scams

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

I am sure that many feel that they are well aware of financial scammers and are alert to emails and telephone calls that tell of packages not being delivered, cures and vaccines for COVID, or bogus pension and investment opportunities, however according to UK Finance, the representative body for the UK Banking and Finance industry, criminals pocketed as much as £1.26bn in such schemes during 2020. One reason that some succumb to these scams is down to their growing sophistication and I came across such an example very recently.

With low interest rates and with some people fortunate to have been able to build up cash savings during lockdowns, investment scams are very much on the increase. A client of mine contacted me for a second opinion on an investment of £40,000 he was planning to make into a Gilt. He was being offered a ‘6% annual interest rate’ and the Gilt value was ‘fully secured by the UK Government’. The client explained the investment was being offered by a FCA regulated company and that he had checked the FCA register and the company’s website. He also explained that he had been told the investment had a fixed 6% interest rate, with the capital guaranteed by the Government at maturity in 6 years and that it was freely tradable in between. It sounded good, too good, and there were a number of inaccuracies in his account. Was that his comprehension or was he being misled?

He had been contacted by the investment company over the telephone following some google searches and email enquiries he had made to a comparison site regarding savings rates, although he was not exactly sure how the company had got his number. Coincidence or had his email account been hacked? I asked him to send me emails that he had been sent and that I would investigate. In the meantime I told him to hold fire.

The emails looked professional, the company FCA number quoted with a link to the FCA register. The Gilt being offered existed, but their description on how Gilts operated was inaccurate and misleading. I went onto their website, it also looked very professional, however when searching the company online there was no record of them that I could find. Very unusual. I clicked their link on to the FCA register and the company that came up had a very similar name but it was not exactly the same. The address quoted for the company was in France and matched the address on the website, which also had a London address. However, the company on the FCA register had no authority to trade investments and had no authorised individuals. The FCA number indicated their registration was made several years ago and further online searches revealed that they were a grocery company based in Paris and that the FCA registration was probably to do with supplying credit. Clearly the company was being cloned by the fraudsters. Finally I checked the ‘investment company’ website domain name; it had only been registered a few weeks before even though they talked about 20 years of investment experience, no evidence of which could been found on search engines.

These types of fraud are known as boiler room scams, and they are one of the most common types of investment scam. Investors get a phone call out of the blue and are offered a fake investment opportunity with promises of impressive returns. Criminals will use pressure tactics, telling you to act fast and transfer your money straight away or you will miss out on the deal. The FCA says it is common for victims to part with tens of thousands of pounds and once sent it is unlikely you will see your cash again.

This boiler room scam was one of the most sophisticated that I had come across. Their website was very believable and the link to a company with a similar name on the FCA website gave an impression of authenticity. Fortunately my client spoke with me before sending any money, or personal details. They also wanted him to email copies of passport, bank account statements and driving licence.

If you are contacted directly and offered a deal that sounds too good to be true, it probably is. Do not be pressured into making a decision. A legitimate company will never pressurise you. Always take your time and get independent professional advice. For more information on how to protect yourself from fraudsters go to Action Fraud

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