FCA warns of increased online investment fraud risks

Since binary options investments - which allow consumers to make bets on the expected value or price of a stock, commodity, currency or index - became regulated on the 3rd of January 2018, the FCA has published a list of 94 firms without authorisation that it believes are offering binary options trading to UK consumers.

The regulator says fraudsters offering investments in binary options, contracts for difference, forex and cryptocurrencies are increasingly promoting themselves via social media channels.

The rise in people being targeted online is also changing the profile of investment scam victims. While historically over 55s have been most at risk to investment fraud, the FCA’s latest study found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).

Action Fraud figures reinforce this trend, showing that under 50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud (34% v 21%).

More than one in five (23%) respondents said that online customer testimonies and reviews increase their trust in an investment company, despite scammers using fake customer reviews, logos, and statements, to lure in prospective investors.

A further one in ten (11%) said they wouldn’t conduct any of the listed checks at all, such as checking whether the firm was regulated by the FCA or registered with Companies House, before parting with their money.

Mark Steward, Director of Enforcement, FCA, commented: "As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.

"While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money."