Exposure to financial scams is something we as a firm have become more and more aware of over the past five years.

    We’ve had clients bring scams to our attention before now, but it was a recent case that particularly highlighted how sophisticated the scammers have become.

    This case was originally reported in Professional Adviser, and involved a client who had £150,000 segregated as part of his portfolio and was earmarked to buy a retirement property abroad.

    Due to his fixed rate products coming to an end, the client was looking around for cash products.

    He entered his details into a comparison site for guaranteed investment products, and came across something called the Prudential Fixed Interest Isa RMA bond, offering guaranteed returns of 3.5 per cent a year for five years.

    The next day, the client received a call from someone who in retrospect had clearly had financial training. From what I’ve been told, they came across as credible, and were based in the UK rather than an offshore call centre.

    Following the call, literature was sent through to the client.

    At first glance, you couldn’t tell the difference between this literature and actual material from the Pru – it later turned out the paperwork was taken from legitimate Pru communications, which had then been modified.

    It had the branding, it was the right tone of voice, every kind of detail was down to a T, including the application processes. Everything was right about it.

    The client passed it to me to sense check, and having not come across the product before, I consulted with my colleague James. The red flag was references to underlying assets, which as a guaranteed product seemed strange.

    After speaking to our account manager at the Pru, they confirmed this was a scam and that there was an ongoing investigation underway.

    I had a long chat with colleagues about whether to go public with what happened.

    On the one hand, providers understandably don’t want their brand to be associated with scams. But on the other hand, how many more people would be affected by this if I was to keep quiet?

    In the end, the second argument won out.

    Professional Adviser 1
    The original Professional Adviser article that got the message out 

    Since the Professional Adviser article I’ve had members of the public call me up to say thanks for highlighting this was a scam, and I've also heard from multiple advice firms.

    As it turns out, this scam has been going on since February/March this year. And it’s still ongoing even now.

    Understanding the problem

    Looking at the bigger picture of scams more generally, one of the problems is the scammers’ ability to pop up and disappear with minutes.

    I’ve got a degree in Information Systems from Newcastle University School of Computing Science, but I’m by no means a computer genius.

    What I do know though is how easy it is to create a fake website, including by buying similar domain names to legitimate companies. That website can look to all intents and purposes like you’re dealing with a genuine firm.

    What’s more, the website can be set to dynamically update every time the legitimate business updates their website.

    All the scammers have to do is add a layer of code to the login screen which then emails them usernames and passwords as people enter their details.

    Consumers are none the wiser, and as long as certain internet browsers are used and things are set up in a particular way, the perpetrator is untraceable.

    Alongside this, there's the issue of the times we're living through right now.

    People are at their most vulnerable when they’re financially stressed, and we're also spending more time online, and perhaps paying more attention to our finances as well. So it’s a time when scams are absolutely rife.

    We’ve seen scams pop up specifically as a result of coronavirus, with clone firms or individuals applying for loans in the names of real businesses, and these are finding their way through the system. So it’s a massive worry.

    ‘Washing the pig’ 

    In 2017, there was a great speaker at the Nucleus annual conference called John Sileo, who talked about adopting a “hogwash” mindset.

    It’s an Americanism, but the point he made was that a pig is dirty until it’s washed clean – in other words, you have to assume something is false until it’s proven to be real.

    This is something we’re now instilling with our clients, so for example, if someone calls them and says they’re from HMRC, or they get an email they weren’t expecting, they should automatically assume it’s fraud until they can prove it isn’t.

    There’s another scam we saw recently, again with a prospectus and everything, which was supposedly offering green energy investment. The scheme referred to wind farms being built in specific locations.

    By analysing the brochure, doing reverse image lookups and searching the given co-ordinates online, we found one of these ‘wind farms’ was going to be in the middle of a housing estate, and another was listed as a site of special scientific interest and earmarked for conservation.

    So we were able to establish that this so-called 'investment' is just never going to happen.

    All this goes to show that’s it’s time to change. As a profession, and as a wider industry, the problem is big enough that we need to do something about it.

    A three-pronged approach

    I believe tackling financial scams requires a multi-faceted approach, with three main elements we need to get right:

    • Education – getting the word out about scams and how to avoid them;
    • Mitigation – having the right systems in place and sharing best practice; and
    • Legislation – trying to drive policy change.

    On the education side, of course we’ll always do everything we can to help our clients on an individual basis to stop them falling prey to potential scams.

    At a firm level, we’re also going to start sending clients a monthly scam update, including warnings about the latest scams doing the rounds and generally encouraging clients to question the financial material they receive.

    I’ve also been in touch with our local police force who are running a community scheme to tackle fraud. It’s all about trying to spread the word into different areas of society.

    Education is something that every advice firm can get involved in, and if one clients passes on the message to someone else, then we can all help in that respect.

    But it’s been proven that financial education is just a small part of the answer, and on its own it isn’t enough.

    The next stage is mitigation, understanding what systems are working to tackle scams and fraud and what we should be implementing across the financial services sector.

    When it comes down to it, I’m fully aware that a small advice firm like our’s doesn’t have the same weight as multi-billion pound organisations.

    That’s why I’m working to set up a cross-industry panel of businesses to open up the conversation between advisers and planners, providers and fintech firms.

    There are other companies that are keen to be involved too, such as CybSafe, which integrates with a firm’s technology to work out the weak spots.

    For example, they can test whether someone is clicking on links they shouldn’t be, and flag that further education might be needed.

    At a practical level, mitigation means introducing features such as two-factor authentication, or browser authentication to prove a device belongs to the right person.

    Providers can also play their part – for example, Intelliflo assigns each user a randomly generated PIN code, which they ask for every time they communicate with you.

    These kinds of conversations happen on a small scale, but I think it needs to be bigger. We can then try to develop some form of industry standard for the processes that should be in place.

    From there, you can start to use the weight of a panel to try and drive policy change.

    The need for change

    I’ve also been in touch with my MP David Davis on this issue.

    Part of the reason for speaking to him was about trying to bring in some type of audit trail or process, so that there’s a way of authorising people before they advertise through search engines like Google or through social media.

    While there have been some proposed legislation changes they don’t go nearly far enough, and the changes are narrowly focused on pensions and pension scams.

    Legislation to tackle scams has been proposed for so long, yet nothing’s happened. And that's the problem.

    While there's this delay, while people are thinking about taking action, there's millions of pounds being lost.

    It’s hard to get a website shut down - it requires a lot of work from a lot of different stakeholders, whether that’s Action Fraud, the police, or internet service providers.

    And as soon as you shut one down, the next one's already up and running, or even the next 10.

    The emphasis needs to be on the front end. Rather than putting out the fire, we need a system to stop it starting in the first place. At the moment, it's just completely reactive, which isn't the way to stop what is a growing problem.

    "If you were to ask 100 people what they would do if they were burgled, many would say 'call the police'. But if someone thinks they’re a victim of financial fraud, I would say maybe 10 per cent would know what to do."

    There are great efforts being made, like the ScamSmart campaign being run by the FCA and The Pensions Regulator. Members of the Personal Finance Society can also sign up to devoting 15 minutes a month to identify and report potential scams.

    However, while this is all positive there probably needs to be more weight behind it. Currently, there’s no way of reporting beyond the FCA’s website, and no forum to share warnings about scams or best practice for preventing them.

    While education and prevention can slow these things down, the real change has to come through policy shift.

    My recommendations have gone in front of the Minister of State for Security at the moment, and I'm waiting for them to come back with feedback.

    I hope it doesn't fall on deaf ears. This is part of the reason I'm trying to keep getting the message out there.

    With a lot of adverts, it’s outside the FCA’s scope, unauthorised schemes promoting gold or whiskey or whatever it happens to be.

    Locally we had a couple of young guys who made some money on foreign exchange trading and are now holding themselves out as professional trainers. Unfortunately, this ended up being published in the paper as a local success story.

    Or you’ll have people posing in front of sports cars that aren’t their’s, saying “you too can make all this money by investing in x”.

    Who ya gonna call?

    From a personal perspective, it’s been great that we’ve been able to take what we did for that one client on the ‘Pru’ scam and start to spread that message a bit further.

    I’m so grateful that other firms have taken the time to read that original article, and that it’s helped somebody else. You don’t know much money would have been lost had it not been for the publicity.

    If you want to do more to help in the fight against scams and fraud, I’d recommend signing up to the ScamSmart initiative if you haven’t already.

    I’m also in the process of setting up a forum at stopthescammer.org to kick-start more of a joined-up approach.

    The final point I wanted to flag was around the lack of a framework for people who potentially have been scammed.

    If you were to ask 100 people what they would do if they were burgled, many if not all of them would say “call the police”.

    Likewise, if you’re involved in a car crash, you know that you need to speak to the police, the ambulance service and your insurers.

    But if someone thinks they’re a victim of financial fraud, I would say maybe 10 per cent would know what to do. It’d be great to have a framework to pass to clients and others about the steps they can take to protect themselves. 

    Clients are lucky in that they have an adviser to protect them. There’ll be others who have money and are vulnerable without having the benefit of an adviser behind them.

    Someone might lose a few thousand pounds from a multi-million portfolio, and while not ideal it’s unlikely to have a lasting impact.

    But if somebody loses the retirement savings they’ve worked their whole life for, they can’t earn that money back as much as they want to or try. That’s why it’s so crucial that something is done.

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