Police warn a scheme to ban calls that target pensions will allow the majority of swindles to continue
Cold calls offering investment opportunities should be banned because they are always scams, the police chief in charge of tackling financial fraud warns today.
In an exclusive interview with Money, David Clark, head of the economic crime directorate at the City of London police, said the government should send a “very clear message that any calls offering investment opportunities of any kind are from fraudsters”.
His comments come after the government outlined plans last week to ban cold calls — but only those specifically targeting your pension savings.
Yet Clark said all investors and savers — and not just those with a pension — are at risk of such scams. He said a clearer message would be to advise the public simply to put down the phone if somebody you don’t know calls from a company you have never had any dealings with, offering investment opportunities that sound impressive.
The amount lost to pension scams from cold calls was £18.7m between April 2015 and March 2016 but this figure is dwarfed by the far larger amount — £75.9m — lost to all cold-call scams in the same period. Pension scams are just a quarter of the overall loss to fraudsters. By targeting only these cold calls, the government is failing to tackle the much bigger problem.
Clark welcomed the government’s plan but said the ban needed to be widened to all investments: “The lives of thousands of people are irreparably damaged every year from this fraud and this would go some way to reducing it. It would send a very clear message to the public that any calls offering investment opportunities of any kind are from fraudsters.”
Citizens Advice is also calling for the cold-call ban to be extended. Gillian Guy, its chief executive, said: “If [the ban] is extended to include other financial products, it would mean if people are contacted out of the blue, they’ll know it’s a scam.”
Nick Hewer, former adviser to Lord Sugar on The Apprentice and now presenter of Channel 4’s Countdown, is spearheading the Financial Conduct Authority’s ScamSmart campaign to raise awareness of pension fraud.
He agreed, however, that cold callers can target anyone of any age and not just pension savers. He told Money it didn’t matter if you were 35 or 85: “If someone comes up with some marvellous scheme but you’ve never heard of them or what they’re talking about, do not fall for it.”
Hewer said he would “go along with” a simpler message of saying anyone who is offered investments by an unknown caller should put down the phone. “All cold calls should be viewed with the utmost scepticism,” he said.
In response, the government said that, because cold calling was used by many legitimate organisations, a balance had to be struck between allowing it to continue and ensuring consumers were protected. “We are specifically banning pensions cold calling to stop individuals, who are often elderly, being tricked out of their life savings or their largest financial asset,” it said.
Why is the government worried?
Since last April, new pension freedoms mean most people aged 55 or over can withdraw money from their nest egg whenever they wish. Previously there were strict rules about what could be done with the funds. Most people used them to buy an annuity, an income for life.
However, the pension freedoms have opened up opportunities for fraudsters, according to the government, with scammers calling potential victims to encourage them to transfer their money to unregulated or non-existent investments.
Those who are younger than 55 must not withdraw money from their pension and would face a tax penalty of as much as 70% if they did. Conmen may target this group without warning them of the danger of early withdrawals.
The FCA said: “You should be especially wary of any scheme offering to help you release cash from your pension before you are 55, as it is almost certainly a scam.”
What is an investment scam?
Anyone with investments or savings may be contacted out of the blue by a professional-sounding stockbroker offering investment opportunities that seem too good to be true.
You may also be promised free research reports, special discounts and “secret” stock tips. In reality, the investments may be very high-risk or, more commonly, non-existent.
Using hard-sell techniques, the fraudsters try to pressure you into making rushed decisions, giving you no time to consider the nature of the investment. They may direct you to highly professional-looking websites that are designed to lure you in.
Scammers will also use technical jargon and impressive job titles to make their business seem legitimate, according to Action Fraud, the fraud-reporting agency.
To make an investment, you may also be asked to provide your bank account details. Once the fraudsters have squeezed whatever money they can from their victims, they quickly disappear.
What does the government plan?
Cold calling is the most common method used to initiate pension fraud, which is why the government wants to ban the practice.
In its consultation document, published on Monday, the Treasury said its proposed ban will mean “you will never be cold called about your pension”.
It added: “The proposed ban will send a clear message to consumers that no legitimate firm will ever cold call them regarding their pension [and will encourage] consumers to put the phone down on cold callers immediately.”
The government also wants to give the Information Commissioner’s Office (ICO) the power to impose fines of as much as £500,000 on those who breach the ban — although the authorities lack any power to take action against firms or individuals not based in the UK making bogus calls from overseas.
What are the rules today?
The FCA can only restrict calls made by a firm it has “authorised”. It has no power to stop the many cold calls made by unauthorised individuals or companies.
The ICO can take action against organisations that, without consent, make automated and direct marketing calls to numbers registered with the Telephone Preference Service. You can register your telephone number by going to tpsonline.org.uk/tps/index.html.
How not to be a victim
•No reputable firm would call you out of the blue offering an investment opportunity. Put the phone down immediately.
•Always discuss investment opportunities with people you trust: friends, family or a financial adviser. Fraudsters will often encourage victims to keep the investment a secret, a ploy to stop others discouraging them from investing, according to the FCA.
•Do not invest before checking a company is registered with the FCA (register.fca.org.uk). Its register will also highlight “cloned” companies, legitimate firms whose details are being used by scammers to carry out fraud. A company that has been cloned is a perfectly legitimate business and is not involved in scams that illegally make use of its name.
•You can also use an online tool designed by the FCA to spot scams: scamsmart.fca.org.uk/warninglist.
Scams: what to do
•Immediately contact Action Fraud online (actionfraud.police.uk) or by phone (0300 123 2040)
•Stop all communication with the fraudster at once
•Alert your bank if you have given the fraudster your account details
•Keep any written communications you have received from the fraudster as evidence for the authorities
•Be aware you are now likely to be a target for other scams. Fraudsters often share details of people they have cheated
•Previous victims are vulnerable to “fraud recovery fraud”. This is when crooks claim to be lawyers or other officials who can assist them with recovering the money they lost – for a fee — but in fact do nothing to recover their funds
‘He seemed to know so much about me’
Barnaby (not his real name) thought he was getting a bargain when he was offered £7,500-worth of shares for just £6,000. The stock was from a company for which he had worked 13 years ago.
The “adviser” explained over the phone that he was a representative of Millennium Capital Partners and was getting in touch with ex-employees of the management consultancy Logica to offer them discounted shares.
The 59-year-old, from Edinburgh, left Logica in 2003. He now works for another management consultancy. He said: “The caller seemed to know so much about me and my employment history. He sounded very legitimate and convincing.”
Over the phone, the scammer convinced Barnaby he could make an immediate gain by selling his discounted shares. The fraudster also sent him documents to sign to confirm he was a former employee of Logica: “This all helped lure me in.”
Millennium Capital Partners is a legitimate company that is being used by fraudsters, according to the FCA register.
Unfortunately, Barnaby did not check the register and transferred £6,000 to a bank account specified by the conman — who then tried to con him out of another £20,000 by saying he was entitled to discounted shares at another company he had worked for in the past.
Barnaby said: “I said I would only do this once I had £7,500 returned to me. Of course this never happened, so I didn’t make the second transfer.”