The latest nice little earner, according to the City of London Police National Fraud Intelligence Bureau (NFIB), is the recovery room scam. This involves targeting people twice, with conmen returning to the victims of boiler room fraud and conning even more money from them by promising to get their original money back in return for an upfront fee. Now that’s chutzpah.
Boiler room fraud is a crime where investors are cold-called by bogus stockbrokers and persuaded to buy either worthless or non-existent shares or genuine shares at vastly inflated prices.
The NFIB is now coming across even more shameless con artists, who actually threaten to report their victims to the police if they don’t follow through on the fraud.
As they comment, rather drily, on their website: “We would like to assure investors that the City of London Police do not and would not act as a debt collection agency in these matters.”
There is also a new version of the fraud called land banking, in which people are conned into buying useless plots of land instead of shares.
This sort of fraud has been around for nearly 20 years. And while we all like to think we would never fall for such a con, the figures show that thousands of people still do, including many experienced investors.
The Financial Services Authority says victims lose an average of £20,000 each, with the total amount lost in the UK each year reaching around £200 million. The City of London Police say the real figure could be much higher, as many investors are simply too embarrassed to admit they have been scammed.
So how do they succeed? As HSBC warns, they can look and sound legitimate. They have professional-looking websites, UK contact details, and may mention companies you have heard of. They are also notoriously persistent and can hound a victim for months in the hope of a sale, catching out even seasoned investors.
Among recently convicted con artists are a gang led by Nigerian immigrant George Abrue, who made up to £20 million by selling non-existent shares in companies with plausible-sounding names such as New Power Technology and the Bio Fuel Solutions Corporation. Another is David Mason, a conman who sold shares in a bogus company called EduVest, and convinced 32 people to shell out a total of £270,000.
The FSA offers the following advice to anyone who suspects they are becoming embroiled in a scam:
We strongly advise you only to deal with financial services firm authorised by us, and check the FSA Register to ensure they are.
To verify the identity of someone claiming to be from an authorised firm, ask for their contact details but always call them back on the switchboard number given on our Register.
If you do decide to buy the shares being offered, check the current price, as the firm may be buying shares from other brokers and selling them above market price.
If you think you have been approached or been the victim of a share scam, report it on the FSA Consumer Helpline on 0845 606 1234 or use the boiler room reporting form.
You should also report suspected boiler room fraud to the police. If you have sent money to an overseas account or by another form of money transfer, contact ActionFraud.org.uk or call 0300 123 2040.
If you sent money to a UK bank account, contact City of London Police Fraud Desk on 020 7601 6977.
Of course, the most obvious advice is to stop the scam before it starts, say ‘no thanks’ to the cold caller and put the phone down sharpish. HSBC’s Mark Hemingway reminds us all of this timeless advice: “If the deal looks too good to be true, it probably is.”