£1.4 million Lost Each Day
National Fraud Intelligence Bureau Records Almost 100,000 Victims of Investment Fraud Since 2020

The National Fraud Investigation Bureau (NFIB), part of the City of London Police, is responsible for analysing fraud data, tying together information from fraud in different parts of the country and providing intelligence reports to police forces and law enforcement agencies for investigation. The NFIB also has the power to close bank accounts, websites and phone numbers used by scammers.

According to records seen by the PMI, the NFIB has seen an incredible 98,525 reports of investment fraud since January 2020, and nearly 27,000 of those in 2023 alone—the highest rate in the four years of the research.

In the period covered by the FOI request, over £2.6 billion was lost to all types of investment scams, with 2023 seeing a total loss of £526,638,015, the equivalent of £1.4 million each day.

The most common types of fraud detailed in the research are boiler room fraud and Ponzi or pyramid schemes.

Sometimes referred to as ‘share sale’ fraud, boiler room fraud is a type of investment scam in which victims are contacted out of the blue by fraudsters claiming to be stockbrokers who encourage them to invest in schemes or products that do not actually exist, or do exist but are virtually worthless. The term ‘boiler room’ comes from the way scams like this used to be conducted; with a large team of fraudsters contacting victims from a single basement or boiler room.

The salespeople are often extremely persuasive and will make claims such as the investment is a “sure thing”, a “once in a lifetime opportunity”, or is for a “limited time only” to convince the victim to act quickly and without taking due care.

According to the FOI request data, boiler room scams were responsible for a staggering £553 million of the total lost to investment schemes, and the NFIB saw over 20,000 victims of these types of scams between January 2020 and December 2023.

We have covered several Ponzi scam cases on our blog. Action Fraud, the National Fraud and Cyber Crime Reporting Centre, describes Ponzi schemes as “‘get rich quick’ investment scams which pay returns to investors from their own money, or from money paid in by subsequent investors.”

Ponzi investors might be promised a high-interest rate, which will be paid within a certain amount of time. They are told that their money will be invested at low risk; however, the money handed over is never actually invested, and the value of their ‘investment’ never increases.

Supposed profits are, in fact, taken from later investors’ money that has been paid into the same scheme. When people try to cash in their investments, they realise the money has disappeared and their ‘investment’ never existed in the first place. Eventually, the scheme inevitably fails.

Similarly, a pyramid scheme focuses on promising a lucrative business opportunity that requires the victim to make an initial, upfront investment to enable them to partake in the business or sell a particular product. Investors are then tasked with recruiting more people to the scheme, who also make the same initial investment with the same promises.

Each recruited individual in the pyramid has to pay a percentage of their earnings or income (usually from recruitment) to the person above them. This means that those at the top earn a lot, while those at the bottom are often left considerably out of pocket.

Ponzi and pyramid schemes affected 12,323 victims in the years 2020-2023, with victims losing a total of £499 million.

Other types of investment fraud reported to the NFIB included:

• Fraud recovery
• Pension liberation fraud
• Prime bank guarantees
• Timeshares and holiday club fraud

If you are considering an investment opportunity, either directly or as a way of building your pension pot, it is important that you familiarise yourself with the warning signs and hallmarks of a scam, even if you consider yourself to be an experienced investor.

Some red flags of investment fraud include:

• Promises of ‘low risk, high return’.
• Being contacted out of the blue or through ‘cold approach’ techniques such as unsolicited calls, emails, or texts, someone knocking on your door, or someone unexpectedly messaging you on messaging apps or social media.
• Claims are made by the individual or company contacting you – that the opportunity is time-limited or must be completed by a specific date to receive the ‘best rates’ – to pressure you into agreeing and sending money without having time to carry out sufficient background checks or get expert advice.
• Being told not to let anyone know about the investment as the offer is just for you – this is to stop friends, colleagues, or family members from detecting the fraudsters.
• The company is not registered with the City watchdog, the Financial Conduct Authority. The FCA has a list of registered providers and a warning list of unauthorised businesses to avoid. Beware – just because they are on the list does not mean that a scammer is not ‘cloning’ the details of a legitimate provider – it is easy to create professional and genuine looking but fake websites, social media, contact details and testimonials.

When considering investment opportunities, always remember the old adage: if it seems too good to be true… it probably is.

Although there are many different types of investment scams, and fraudsters are constantly changing and updating their tactics, there are a few ways that you can safeguard yourself and your finances:

• Do not answer unsolicited calls, texts, emails, or social media requests relating to investment opportunities – legitimate, regulated companies will not get in touch in this way.
• Use Financial Conduct Authority (FCA) resources to back up your research – look up the investment opportunity using the FCA online warning list tool (if the option is listed, do not proceed) and check out the company on the FCA Financial Services register to ensure that the firm or individual is registered.
• Do your research and look for online reviews.
• Get independent advice from a regulated, FCA-authorised financial adviser before entering any investment opportunities; spending time and money here should save you a lot of time and money in the long run if you were to get scammed.
• Take your time to consider your options, and do not rush into anything; genuine companies will not pressure you into investing.

In some cases, the type of tactics the scammers use to get hold of your money will fall under the umbrella term of Authorised Push Payment (APP) fraud. APP fraud occurs when the victim is convinced to make a payment from their bank for what they believe to be a legitimate opportunity. As the transfer is instantaneous, the scammer can move the money straight away into a second, often overseas, account, by which time it is virtually impossible to recover.

If you have lost money to an investment APP scam, you should immediately report the fraud to your bank, the police and Action Fraud. This may trigger a criminal investigation into the scam.

Your bank will investigate the case, and depending on the case circumstances, you may receive a refund, but if the money has been moved on, this is not always possible. Banks are increasingly being held to account and shouldering responsibility for APP investment scams if they have failed to take sufficient steps to protect their customers from fraudsters.

If you have lost money to an investment push payment scam and your bank is refusing to compensate you, then you can take the matter to the Financial Ombudsman Service (FOS), an independent, government-backed body responsible for resolving disputes between consumers and financial institutions, such as banks.

In recent years, as scammers have become more sophisticated, FOS has dealt with increasing numbers of cases involving banks’ safeguards and processes to protect their customers from falling victim to APP fraud and has upheld the victims’ complaints. TLW Solicitors’ dedicated APP Fraud team is experienced in dealing with FOS and successfully securing redress for our clients.

Sarah Spruce, Legal Director and Head of the investment scams and APP fraud team at TLW Solicitors, commented on the data revealed by the FOI request:

“These figures are truly staggering, and it is quite shocking to see just how prevalent and costly these investment scams are in the UK, but it does also reflect what we’re seeing with our own clients.

My team deal with individuals, day-in-day-out, who have fallen prey to scams like this and have lost considerable sums of money, even when they believed themselves to be seasoned, experienced investors. It just goes to show that you can never be too cautious when it comes to your money. We always say, if the investment seems too good to be true, then it usually is!!”