Investment scams are expensive to Australians, costing millions of dollars each year. The cost of living crisis is pushing people to find ways to reduce their spending and look for alternatives to cover expenses which can leave them open to investment scams. These types of scams often promise big returns with minimal effort and can be tempting when times are hard.
So, how do you avoid investment scams in Australia?
What is an investment scam?
Investment scams target your trust in online connections and desire to improve your bank balance. Sometimes these scams look like they are being promoted by celebrities, or by your social media friends, and ask you to invest into a wealth-growth opportunity, such as cryptocurrency or gold. Usually these sound too good to be true, and are created with fake endorsements designed to persuade you to hand over money that you probably won’t see again.
Common investment scams include:
- Cryptocurrency scams
- Unsolicited contact about investing
- Romance baiting
- Celebrity endorsement scams
- Superannuation scams
How much do investment scams cost Australians?
In 2024, $945m was lost to investment scams according to data from the ACCC. Scammers are becoming more sophisticated in the tactics they use, however, in encouraging news, Australian reports of investment scams are down 14.6% in 2024 vs. 2023 (6861 vs 7412).
How confident are Australians in identifying investment scams?
A Customer Owned Banking Association (COBA) survey showed more than four-in-five investors were confident they could identify an investment scam, regardless of their experience level.
However, less experienced investors were twice as likely to use online forums and social media as a trusted source to verify an investment opportunity.
Amongst more experienced investors there is a misconception that investing in bonds is low risk, however according to a recent Scamwatch article imposter bond scams are a significant issue.
In this type of scam, individuals are encouraged to register their name, mobile number and email on a fake website. They then steal their money by encouraging these people to buy fake investment bonds. The National Anti-Scam Centre are working closely with the Australian Securities and Investment Commission (ASIC) to remove investment scam websites, which led to thousands of websites being taken down in 2024.
According to Scamwatch statistics, over half the losses from investment scams were reported by people over the age of 55. Common methods of contact were phone calls (40%), social media (37%) and email (22%).
Always check before you invest
- Search the ASIC website to check if a financial advisor holds an Australian Financial Services Licence.
- Check ASIC’s list of companies you should not deal with. If the company that contacted you is on the list – do not deal with them. Even if they are not on this list, it could still be a scam.
- Do your homework on the investment by running a company search online for any reviews, complaints or scams.
The MoneySmart website also contains information about how to avoid investment scams.
Ways to spot investment scams
Look out for red flags
- Promises of low risks with high returns. If it looks too good to be true, it probably is.
- You are contacted out of the blue. You might get a call, email or message on social media from someone offering you unsolicited advice on investments.
- High-pressure tactics. This could look like repeatedly being contacted by someone telling you to act quickly and invest or you will miss out.
- Someone you haven’t met in person offers you investment advice. Never take investment advice from someone you meet on social media or a dating app.
- Use of a celebrity or high-profile person as an endorsement. Often these are fake, and the celebrity’s name and image are used without their permission.
- You are asked to deposit funds into different accounts for each transaction. Scammers may claim this is for security reasons or because they are an international company.
- The advisor who is helping you claims you don’t need an Australian Financial Services Licence.
- You are asked to promote the scheme to friends and family to earn commission
Ways to Protect yourself
- Ensure the person who is trying to sell you a product or give you advice has an Australian Financial Services License.
- Make sure you get professional advice. This could be independent legal advice, or financial advice from a financial advisor registered with ASIC.
- If it is a cryptocurrency investment, always speak with a qualified legal and/or financial adviser first.
- Don’t let anyone pressure you into making an investment. Give yourself time to do your research. Never commit to anything on the spot.
- Never take investment advice from anyone you’ve only met online. Never provide them with personal or financial information.
- Check the legitimacy of the individual or organisation using contact details you find independently.
Always remember to 'Stop, Check, Report'
People’s Choice will never contact you to request your current passwords, card details, verification, access, or SMS passcodes, or to move money from your account. If you’re unsure of an email, SMS or phone call is real, please contact us directly before actioning. Find out more about how we protect our members from scams.
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