All investors know that putting money in the stock market comes with risk attached. Over the long term your investments will tend to rise, but along the way they’ll go up or down, and there is a chance of ultimately sustaining a loss. However there is a risk many of us don’t countenance very often, and that’s the possibility of falling prey to an investment scam.

Unfortunately scamming has become a cottage industry, to such an extent there are now several TV shows like the BBC’s Scam Interceptors which seek to raise awareness of scam tactics. Scammers stole £11.4 billion from UK individuals last year, according to the Global Anti-Scam Alliance, up £4 billion on the previous year, which puts some numbers on the growing threat. Many of us have got used to hanging up on cold calls, and ignoring annoying texts from weird email addresses which tell us a parcel is waiting for us. But there are two new digital strategies being used by scammers which are less well recognised, but which are definitely worth being aware of.

SPOTTING A WHATSAPP SCAM

WhatsApp has become a ubiquitous messaging service of choice for many people, offering a free and convenient way to stay in touch with friends and family. But scammers are increasingly using WhatsApp to try to part people from their money. These fraudsters often pose as senior members of well-known companies, including AJ Bell, contacting people with what appear to be exclusive investment opportunities.

After gaining your trust, scammers typically present high-return investment options, which are either entirely fictitious or misrepresented. You may be encouraged to act quickly, using pressure tactics that leave little time to think it through, or check any details of the scheme. Eventually, the fraudsters will request personal information or financial transfers, claiming it’s necessary to secure the investment.

Another trick being used is to set up WhatsApp groups which recommend stocks to buy in your own investment account. This might sound harmless enough, but these are usually low value shares in small companies that are used in so-called ‘pump and dump’ schemes. Scammers artificially inflate a stock’s price through false or misleading information, or by getting other investors to buy up stock via Whatsapp, then sell off the shares they own at a profit before the price crashes. This type of scam was featured in the book and film The Wolf of Wall Street, but of course back in the 1980s and 1990s, Jordan Belfort and his team actually had to call people up one by one to get them to buy in. Modern scammers can instead target large groups of people with the same strategy through social media and Whatsapp.

DEEPFAKE SCAMS ARE ALSO RIFE

WhatsApp isn’t the only technological advancement being used by scammers to steal money and information. As artificial intelligence (AI) technology becomes more affordable and widely available, scammers have begun exploiting it to create increasingly sophisticated and convincing videos, known as deepfakes. These deepfakes present a likeness, sometimes along with the voice, of well-known or trusted individuals to entice others to buy into their scam. MoneySavingExpert reckons the face of its founder, Martin Lewis, is used by scammers more than any other celebrity.

AI tools like these are transforming the landscape of cybercrime, allowing scammers to create a flood of realistic, manipulative content. While the technology is not perfect and may still show signs of inconsistency, it’s improving rapidly. Of course, social media provides helpful platforms for this kind of content to proliferate and hit multiple targets at once. Even if 99% of people ignore it, with enough social media views scammers can still make money from the few who fall into the net.

DISCLAIMER: AJ Bell, referenced in this article, owns Shares magazine. The author (Laith Khalaf) and editor of this article (Tom Sieber) own shares in AJ Bell.

PROTECTING YOURSELF 

While the increasing sophistication of scam tactics is worrying, there are concrete steps you can take to protect yourself. If something feels even slightly wrong, stop and double-check. The key to avoiding scams is awareness and caution. These schemes are designed to catch you off guard, push you into rash decisions, and prey on your trust. Scammers often use high pressure tactics to force you to act by some fictitious deadline. Staying informed, verifying information, and taking a moment to pause can make all the difference.

Scams often start with communication out of the blue offering ‘help with’ or perhaps a ‘review of’ your pensions or investments. Social media is also an increasingly lucrative hunting ground for fraudsters. If someone you don’t know contacts you about your finances, do not engage with them. If you believe someone is trying to scam you, report them to Action Fraud to help protect other investors.

Another tell-tale sign of a scam is the promise of huge, guaranteed investment returns, often over relatively short spaces of time. These investment ‘offers’ take many weird and wonderful forms, while the rise in popularity of cryptocurrencies has also been a fertile hunting ground for financial fraudsters. In addition, anyone claiming they can facilitate early access to your pension is almost certainly a fraudster.

If you’d like to know more about how to reduce the risk of falling prey to scams, or what AJ Bell does to protect its customers, please take a look at our Security Centre. The FCA’s ScamSmart website is another great resource to keep up-to-date on the latest tactics being deployed by fraudsters.

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