Pensioners Scammed in Gold Bullion Fraud

This case is a reminder that impersonation scams are on the rise. There are different types of impersonation fraud, but all involve a scammer posing as a trusted person, such as a solicitor, accountant, business owner or in this case the police. They may email or call to say that a bill is overdue and provide bank account details where the payment should be sent. There may be a sense of urgency, distracting you from double-checking that the payment details or contact information provided are correct.

In the reported case of the police impersonation scam, the scammers wanted gold and cash, supposedly to help uncover fraud within high street banks, and who wouldn’t want to protect their own accounts and help the police with their enquiries?

Impersonation fraud is often Authorised Push Payment (APP) Fraud. Other types of APP fraud include romance scams, cryptocurrency scams, and ‘Dear Mum/Dad’ scams. All involve a credible-sounding build-up, such as developing an online ‘relationship’, persuasive phone calls or emergency requests for money, leading you to authorise your bank to transfer money to an individual or business, believing the transaction to be genuine.

Because these transactions are made online through ‘Faster Payments’, they arrive in the scammer’s bank account almost immediately. The scammed money can then be quickly moved to another bank account, often overseas, which you cannot trace. This means your money could have disappeared before you even realised you’ve been scammed.

In these cases, banks are often reluctant to refund your lost money, as they view you as being responsible for authorising the payment in the first place. However, there have been a number of important decisions by the Financial Ombudsman Service (FOS), which say the banks should do more to protect their customers from losing money through scams.

The Financial Ombudsman Service (FOS) was set up to settle disputes between financial organisations (such as banks) and their customers. It is a Government-backed service helping people with a wide range of financial disputes and claims, including bank accounts, loans, mortgages and investment advice.

In one recently reported case, FOS was asked to investigate a dispute between a couple and Coutts & Company, after they were defrauded in a sophisticated police impersonation scam, similar to the reported gold bullion case. The couple had been contacted by so-called police officers from Scotland Yard, investigating possible fraud by an employee of their bank, Coutts. They were told that to help catch those involved, they would have to buy gold bullion bars, which would be collected from them by a courier. In return, they would be reimbursed in full, plus a reward, for helping the police.

The couple made payments for gold which totalled over £120,000, the gold was then delivered to their home, and the following day was collected by the courier, as arranged. The couple only realised they had been scammed, almost two weeks later, when they did not receive a phone call, as promised, from the ‘police’. They contacted both the police and their bank to make a complaint.

Coutts investigated their case and concluded that they would not reimburse the couple as they had paid a genuine company, in exchange for gold. They argued that the couple only lost out later when they handed the gold to the fraudsters. The couple were not happy with that decision, so took their complaint to FOS.

An initial FOS investigation recommended that Coutts pay 50% of the couple’s loss, plus interest, saying that the bank had a responsibility to identify unusual and out-of-character payments from their customers’ accounts. They could have flagged the payments made to the gold company and asked more detailed questions about the transactions. Banks have the authority to delay or block such payments, as they have a duty of care to protect their customers from fraud or money laundering.

FOS concluded that the couple, too, should bear some responsibility for the loss, as they made no attempt to establish from the so-called police officer how buying gold would help catch an employee suspected of fraud. They were also untruthful in what they told the bank, saying that the gold was for personal investment and that no third party had asked them to purchase it. The couple disagreed, saying that they were elderly and unfamiliar with scams. They trusted people and believed they were helping the police.

A further review of the case was carried out by FOS, who aim to consider what is ‘fair and reasonable’ in the circumstances. They upheld the original investigator’s decision, concluding that Coutts should have done more to question the couple about the large and unusual payments, to ensure they weren’t at risk of financial harm.

The bank would be expected to have considerably greater knowledge of scams than their customers – they should be aware that older people tend to be targeted more often, and those scam victims are often coached by the fraudsters on what to say (or not to say!) to the bank, and that very often several payments are made in quick succession.

FOS concluded that Coutts did not do enough to provide scam warnings to the couple or prevent the payments from being processed. The couple had to bear some of the responsibility, too, as they had been targeted by scammers previously and had contacted their bank for advice at the time, so should have known to take more care when contacted out of the blue on this occasion.

Gold has long been viewed as a valuable commodity and perhaps even more so when the financial markets are low. As a precious metal, there is a finite amount of gold on our planet, so as demand increases, prices follow. The price of gold was more or less constant throughout the 1980s and 1990s but has risen more than six-fold since then – good news for anyone holding a long-term investment.

But what sort of gold investments are available and how do you protect yourself from fraud?

There are several ways to invest in gold. Most people think of buying gold bullion bars and keeping them safe in a bank vault. There are also gold coins (the Britannia and Sovereign) and gold jewellery. It is also possible to buy shares in companies that mine gold or buy into funds (a collective pool of money, managed by an investment firm) which invest in mining companies.

Remember that where there are investment opportunities, there are also fraudsters hoping to cash in.

Popular gold scams include:

• An investment opportunity to reopen a disused mine, where you help fund the tools and equipment needed to work the mine, with a promise of a high-interest rate of return and a share of the proceeds of the mine. However, the mine may not contain as much gold as promised or it may be uneconomical to mine it. Why did the mine close in the first place?
• An opportunity to purchase gold bullion, with an investment broker promising to keep it in a secure vault for you and sell it once the price rises. How can you be certain the broker ever bought the gold in the first place?
• An offer to purchase gold dust, ingots or bars for a price well below the market value. Too good to be true? This gold may be fake!

Gold scams, like many other APP frauds, raise a number of red flags.

Inexperienced investors should take particular care to spot these signs:

• If the price or amount of gold being offered seems too good to be true, it probably is! The price of gold worldwide is based on Gold Fixing, a process that takes place twice daily by the London Bullion Market Association, a trade association made up of traders and other firms involved in the mining, production and storage of gold. Would-be investors can easily check the current price of gold online.
• High-pressure sales tactics by email, phone or through social media advertising are designed to make you act quickly, without taking time to carry out proper research. An offer may be marketed as time-sensitive and followed by a barrage of messages reminding you not to miss out. No genuine financial adviser or investment broker would force you to invest in this way.
• A professional-looking website or brochure, which looks legitimate, but does not contain much background information on the company or details of their proper authority to trade in the UK. Anyone offering investments in gold or precious metals should be regulated by the Financial Conduct Authority (FCA), the UK’s only independent, public body in charge of protecting the integrity of the UK financial system. However, regulation in itself will not necessarily prevent you from becoming the victim of a scam.

A number of worldwide gold investment scams have been reported in recent years, with eye-watering losses reported for investors. One such investment, Monex, was pitched as a “safe, secure and profitable way to invest in precious metals” but used high-pressure sales tactics and cost investors $290 million.

Another OSGold, promised returns of 30 to 45% for investing in an off-shore gold vault. Thousands of accounts were opened, but investors’ money was never used to buy gold. They received fake statements showing the promised returns. Still, the funds were used by the company’s founder and his associates for personal expenses and in other businesses, and losses were estimated at $250 million.

The same features are repeated in other gold scams– unrealistically high returns promised to investors, high-pressure sales tactics being used, and evidence of Ponzi schemes, a type of fake investment scheme where returns are paid to earlier investors from the money taken from later investors – the money is never invested in what was intended and eventually runs out.

Sarah Spruce, Head of the APP fraud team at TLW Solicitors commented:

“The specialist team at TLW are dealing with several cases for clients involving gold scams. What is concerning is how the banks can allow their clients to transfer their money as part of these often overseas and unregulated investments. As long ago as 2016 the Government watchdog, the Financial Conduct Authority issued a formal warning about United Arab Emirates based Rhombus Commercial Brokerage that dealt with gold related investments, stating: ‘We believe this firm has been providing financial services or products in the UK without our authorisation.’

Anyone concerned about theirs or a loved one’s gold investment should get in touch for a no obligation initial discussions to explore available options.”