Beware the ‘instant hits’ of scams on social media

INVESTING money should always be done with a clear head as your future prosperity is at stake. But too many people are nowadays making decisions while under the influence. They are getting dizzy with the prospect of making fast money, and end up being lured into buying high-risk, unregulated products plugged on sites such as Facebook, Reddit, Youtube and Tiktok.

So-called Instagram “influencers” are a growing menace, as many promote investment products to their social media followers, despite having no financial training, qualifications or regulatory approval.

Last year, the Financial Conduct Authority (FCA) issued 1,204 consumer warnings about scams plugged on social media platforms by fake companies – double the number in 2019 – and the threat is growing.

The rise of hyper-volatile cryptocurrencies such as bitcoin and internet “meme stocks” such as AMC Entertainment and Gamestop have also gone to investors’ heads, triggering dreams of avarice that too often end in poverty.

Last week, US tech giant Google pledged a crackdown on financial fraud on its UK platform, which is a step forward, but dangers remain.

You need to approach any investment that seems too good to be true in a sober frame of mind.

DANGEROUS GAMES

For too many, but especially younger people, the line between investing and gambling has become blurred.

The “gameification” of investing has been driven by easy-to-use investment apps, internet message boards and flashy influencers.

Young people who grow up with social media can be easy prey, and Instagram has millions of posts hashtagged #investing and #finance, while Tiktok videos have generated billions of views.

They tempt people with photos of flashy motors, exotic holidays and luxury homes, and share stories of people who have become millionaires by trading risky assets such as foreign exchange and cryptocurrencies.

Some urge followers to sign up to expensive courses, claiming they can make their fortunes too.

Others generate commission every time they persuade a follower to invest via an online trading platform, in the same way beauty influencers get money for plugging top brands.

FIGHTING BACK

The FCA has warned that people make riskier choices by investing for the “challenge, competition and novelty” after being targeted by online adverts or high-pressure sales tactics. Online scams have proliferated because they are easy and cheap to set up, and exploit search engine algorithms to target their victims, in the same way that legitimate advertisers find customers.

Last week, Google belatedly fought back by saying that from September 6, all financial services firms will need to be verified by the FCA before they can advertise on its platform.the

FCA welcomed the move but said more must be done, and called on the

Government to include investment fraud promoted by web advertising in its upcoming Online Safety Bill.

Rocio Concha, director of policy and advocacy at Which?, said: “The Government must urgently give online platforms, including search engines and social media companies, a legal responsibility to prevent, identify and remove fake and fraudulent content on their sites.”

SOPHISTICATED FRAUDSTERS

Holly Mackay, chief executive of Boring Money, warned to keep your wits about you: “Be cautious about any product that guarantees outlandish returns, and check they are genuine by using review sites and investment research tools.”

Even if Google does stamp out dubious financial ads, unqualified influencers on Tiktok and Instagram will continue to spout nonsense, she said: “That is where much of the damage is being done, but it is harder to regulate and control.”

Financial scams used to be easy to spot, due to bad spelling or outlandish claims of a big win in an overseas lottery you never entered. But Interactive Investor’s personal finance campaigner Myron Jobson warned: “Fraudsters are now adopting increasingly sophisticated methods, to mimic legitimate companies.”

‘Be cautious

about any product that guarantees outlandish

returns on investments’

STAY SAFE

Debbie Barton, financial crime prevention expert at Quilter, said social media and search engines have a dark side, but the following tips can help you stay safe online.

Check the FCA register at register. fca.org.uk to make sure you are dealing with a real financial services firm. Check FCA’S scam warning list.

If contacted by phone, email or text out of the blue, then it is highly likely to be a scam.

Be wary of sites that ask you to input personal details, as you have no control over where they go, and to whom they are sold.

Look for any unexpected words in domain names or email addresses. “If it’s a scam, the email address may be filled with random numbers or misspelled words.”

Beware a significant rate of return above the market rate. “Promises of guaranteed interest should set alarm bells ringing,” Barton said.

As with any scam, the best defence is your own common sense.