How to protect yourself from investment scams

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Investment scams target your personal wealth by convincing you to invest in fake schemes and companies. They are widespread and can take many different forms. This guide will inform you of the most common types of investment scams, and arm you with the facts needed to make smart investment decisions.

Australians lost $66 million from investment scams in 2020, according to reports made to the Australian Competition and Consumer Commission (ACCC). However, as many cases go unreported, this is likely only the tip of the iceberg.

Investment scams might take different forms. Here are three of the most common:

You receive a call or email from a stockbroker offering amazing investment opportunities with high returns and a low risk. In reality, this ‘stockbroker’ is unregistered and intends to steal all the money you invest.
You’re invited to an investment seminar with free advice, food and drinks. However, at the event, you’re persuaded to invest in high-risk strategies that turn out to have hidden fees and undisclosed charges. You might also be encouraged to purchase expensive investment strategy books.
You are invited to download an App promising high returns for investing funds. The apps often encourage people to sign up friends and family for further commissions, and complete in-app tasks to increase their returns. Two known examples are “Hope Business” and “Wonderful World”.
Someone offers to help you recover funds for an upfront fee – this is called a ‘funds recovery scam’.

Meet Emma and Ben

NAB customers Emma and Ben (names have been changed) are married and own a successful business in central western QLD. With two young children and a growing client base, the couple began to consider investment strategies to support their three main financial goals: early retirement, a university fund for their children, and a sailing trip around the Mediterranean.

“We just wanted to make sure we were making smart decisions with our money,” Emma explained. “I really wanted to make sure that we were planning and had a strategy in place to reach our goals.”

A scammer makes contact

After some initial online research, the couple found several articles and forums on BitCoin investment. It seemed like a good way of making money, but Emma and Ben wanted to seek some advice first. They just didn’t know who to ask.

A man named James then contacted Emma via an investment forum she had subscribed to. He claimed to be a trader and offered a free introductory phone meeting to discuss investment strategies. He sounded convincing and his website had good customer reviews and a credible London address too.

An initial investment

“We opted in and went ahead with the one-hour free meeting, figuring we had nothing to lose. And to be honest, James our Broker was so impressive, we were in hook line and sinker,” said Ben. “The starting investment was only $2,000 and was being invested in new ‘Tech Stock’ which was dealing with emerging crypto currency. We saw dollar signs because, like many, we had read about people making millions off small investments, so it seemed pretty low risk.”

After the initial investment, Emma and Ben logged into their portfolio page. It had doubled in just a few days. James told them they were in a peak growth phase in which the purchase cost was low but increasing each day. The excited couple, predicting they were only months away from achieving their financial dreams, agreed to invest another $20,000.

Things take a turn

But things started to turn sour. James began ringing daily – sometimes several times a day – urging them to invest all their savings, totalling $72,000. Convinced that they were on a winner, they invested a further $50,000. And to make investing easier, they also allowed James access to their internet banking so that he could transfer the investment funds himself.

The next day, James rang with bad news - their investment was dropping. Over the next few days he made panicked calls to Emma and Ben with devastating news: the shares were in free fall. Not only had the couple lost their gains, they had lost most of their original investment. According to James, the only way to recover was to take a loan out on their house, and invest in another of his companies.

By now James was calling, texting and emailing almost hourly. “We couldn’t catch a breath,” said Emma. “The pressure was immense, now we were just focused on getting back to square one and we were in such a panic, I couldn’t sleep at night.”

Life savings lost

Faced with losing their initial investment, Emma and Ben applied for a loan of $150,000 from their bank. On James’ advice, they claimed it was for a new car and caravan. As soon as the money was available, James logged in to their internet banking and transferred the amount over to the investment company. Ben and Emma waited for the next update.

What happened?

They never heard from James again. Many calls, emails and text messages were left unanswered. They reported the matter to the police, and the officer on duty checked the MoneySmart list of companies you should not deal with. She found the details of James’ company listed, and let Emma and Ben know they had fallen victim to an investment scam.

Ben is still angry. “They have almost ruined us!” he says. “It has impacted our relationship, our business, and the future of our family. Mostly, I just can’t believe that we fell for that slick sales pitch. Not only have we lost our money, but we feel like idiots.”

Many victims of investment scams feel this way. However, it’s important to remember that investment scammers are extremely professional in their approach. They have their sales pitch down to an art with a fancy website with fake reviews to lure people in. Their job is deceiving people and they are skilled at it.

Some red flags to look out for

A promise of high return and low risk.
An investment company that makes unsolicited contact with you (often known as ‘cold calling’).
Payments that are requested though Western Union or other payment methods such as Bitcoin, gift cards or card payments.
Being asked to download an App that is not on the official Apple or Google Play app stores, or seems suspicious.

Follow these simple tips to protect yourself from investment scams

Confirm that anyone providing you with advice has an Australian Financial Services (AFS) Licence or Australian Credit Licence from the Australian Securities and Investments Commission.
Check for reported investment scams on the Australian Competition and Consumer Commission’s (ACCC) Scamwatch website.
Be wary of any investment seminars or ‘free’ advice that make big claims but provide minimal details.
Never provide your NAB Internet Banking login details to a third party.
Do your research before making any decisions and always allow yourself a cooling off period.
Consider discussing the opportunity with a friend or family member for an objective opinion.

If you’re a NAB customer and believe you may have fallen victim to a scam, please call 13 22 65 immediately and ask for the Digital Fraud and Scams Team.

Information, resources and tools

Australian Government | Australian Cyber Security Centre (ACSC)

The Australian Cyber Security Centre (ACSC) brings cyber security capabilities from across the Australian Government together in a single location. It’s the hub for private and public sector collaboration and information sharing to combat cyber security threats. ACSC provides topical, relevant and timely information on how home internet users and small businesses can protect themselves from, and reduce the risk of, cyber security threats such as software vulnerabilities, online scams, malicious activities and risky online behaviours.

https://www.cyber.gov.au/

Australian Government | ReportCyber

ReportCyber is a secure reporting and referral service for cybercrime and online incidents which may be in breach of Australian law. The ReportCyber website provides a cybercrime reporting mechanism as well as helpful information about cybercrime.

https://www.cyber.gov.au/acsc/report

Australian Competition and Consumer Commission | Scamwatch

Scamwatch provides information to consumers and small businesses about how to recognise, avoid and report scams using publications, videos and other online resources.

https://www.scamwatch.gov.au/

Australian Government | Office of the eSafety Commissioner

The Office of the eSafety Commissioner provides online safety education for Australian children and young people, a complaints service for young Australians who experience serious cyberbullying, and address illegal online content.

https://esafety.gov.au/

Australian Government | Attorney-General’s Department

The Attorney-General’s Department website provides helpful information and resources about your rights and protections in regards to identity security, freedom of information and cyber security. The Department has developed a range of resources to assist people protect their identity and recover from the effects of identity crime.

https://www.ag.gov.au/RightsAndProtections/Pages/default.aspx

IDCARE

IDCARE is Australia and New Zealand's not-for-profit counselling and support service set up to assist Australians impacted by identity theft and cyber-related crimes.

IDCARE can assist NAB customers to navigate through the process when identity details or credentials have been compromised through fraud or scams. IDCare is a free service for all Australians.