How to Avoid or Overcome a Financial Scam

I recently came across a story whereby a man was scammed out of $75,000 worth of his and his wife’s savings, which they’d accumulated over a period of 3 years. This wasn’t simply a matter of him clicking on the wrong link, but rather being sold a ‘trading system’ that was making ‘risk-free’ returns, and him transferring their hard-earned savings into the account of the scammer.

This was a particularly heartbreaking story, as he didn’t know how to tell his wife, or how to deal with the shame of the experience. What’s even more alarming is the fact that in Australia throughout 2021 over $2 billion was lost to scams, with over $701 million through investment scams and $227 million to scams involving transferring funds to an account belonging to the scammer.

For this gentleman, the advice was to simply be honest with his wife about what had happened, remain strong and focused to get back on track with their savings goals knowing that they still have time on their side and learn from the experience.

In this update, I want to share some simple steps and safeguards that you can put in place to avoid some of the common scams taking place in the market at present.

1.  There’s no such thing as a free lunch

The first critical point to keep in mind is that there are no guaranteed risk-free returns above the interest rate that you’ll earn on your cash in the bank. Anybody telling you otherwise is either lying or drinking too much of their own Kool-Aid. This doesn’t mean to say that great returns can’t be generated over time with a sensible level of risk, it simply means that a portfolio with a target return of 8% per year over the next 10 years, will likely see some of those 10 years losing money.

If you find yourself in conversation with anyone stating that their ‘program’ or strategy can generate risk-free returns above the cash rate, it’s time to get up and walk away.

2.  Be wary of transferring funds to third parties

If you’re being asked to transfer funds to a third party, such as an account in the name of an investment provider, or to a financial services company, call them directly, and confirm the account details. Confirm that the account does in fact belong to them and that the information you’ve been provided with is accurate.

Be sure to get the contact details for the provider from an independent source also, such as a business registry or otherwise, rather than simply relying on the information provided to you by the individual requesting the funds\' transfer.

3.  Be wary of any changes to the account details

In some instances, a scammer will monitor email exchanges and intercept them at the last instance sending a note to the client to state that the account details have changed, and the funds originally requested should in fact be sent to a different account. How often does a major corporation change its bank account details? Not too often one would be hope.

In this instance, get back on the phone and call the provider using the independently verified contact details to confirm that the account details have in fact changed.

4.  Send a small amount first and request confirmation

If you’re looking to invest a large sum of money relative to your personal balance sheet, you may wish to transfer a smaller sum first, and request verification from the provider that the funds have been received, and that they have been allocated to your account. This can provide you with a safety net to avoid putting all of your funds at risk at once.

5.  Is the provider regulated?

The next key point to check is whether the investment provider, insurance company or other company requesting your funds is regulated in the country in that they operate. In the case of Singapore, many of the investment solutions and insurance products are tightly monitored and regulated by the Monetary Authority of Singapore (MAS), which provides investors and the wider community with peace of mind that their financial assets are safe.

If you’re dealing with providers that are unregulated, or operating in jurisdictions where the regulatory requirements are relaxed (such as the Bahamas – FTX demonstrated this one), you may be taking on more risk than you’re prepared to do. Ask your Financial Planner for confirmation of the regulatory jurisdiction, and if you’re still not sure, you can check out the regulator’s website for a list of those entities that are regulated in the country.

6.  Be cautious online

Of course, in addition to the first 5 items, it’s also important to ensure that you’re not clicking on links that you’re not sure about or downloading attachments you haven’t requested. Ensure that you have the latest cybersecurity software installed on all of your devices, and tread with caution when it comes to emails with unknown senders. As technology advances, so too does the sophistication of online scams.

In the unfortunate event that you do fall victim to a scam, report it, cancel your cards and lock the accounts as quickly as possible. And remember, you’ve got time to regroup and rebuild and to learn from the experience.

To Your Financial Success!

Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3

Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.

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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.

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