How to Spot an Investment Scam Like a Pro – Part 1
PART ONE of TWO
A MoneySmart Guest Blog
Investment scams are an unfortunate fact of life in Canada. They are often sophisticated operations, run by highly-skilled, smooth-talking people who have years of experience in committing fraud. Well-educated and intelligent people are taken in by investment scams all the time.
So how do you protect yourself and those you care about? Advice from a professional.
Jason Roy is Senior Investigator with the Manitoba Financial Services Agency. He deals with investment fraud on a daily basis, and understands the underlying patterns and red flags of fraud better than anyone.
In this blog, Jason takes you through a typical day in his department telling the story of how they investigate a suspicious advertisement. Along the way, he shares some tips that everyone can use to spot a financial fraud.
Rule 1# – Check the registration
I get new complaints every day—usually multiple emails from victims that have lost money in one scheme or another.
Our team regularly checks online buy-and-sell websites and social media platforms for suspicious ads. In this example, we find an ad promoting a Forex and Cryptocurrency trading company. The ad talks about great returns and little risk (more on that below).
I run the company name through the Canadian Securities Administrators National Registrations Search. As I suspect, it turns out the company is not registered. I also run the name of the person that placed the advertisement, and they’re not registered either.
#ProTip! Checking whether a company or individual is registered to do business in Manitoba (or Canada) is the first thing I recommend anyone do before considering an investment opportunity.
Rule 2# – Check for suspicious claims and details
The company’s website lists a Canadian address—an office tower in another Canadian city. I have a large number of techniques and resources I can use to ascertain whether information on the site is accurate or not, which the average person probably doesn’t.
What you CAN check for is this – are they offering HIGH returns with LOW or zero risk? That is a red flag.
#Protip! You can also check for spelling errors and grammatical mistakes. Even a professional, registered organization can make a mistake, but fraud sites are often littered with errors.
– Jason Roy is Senior Investigator with the Manitoba Financial Services Agency. He has more than 25 years of experience in securities investigation and anti-fraud work, and chairs the Canadian Securities Administrators Investment Fraud Task Force.