Investment Fraud Warning Signs

When you’re considering an investment, watch out for these five fraud warning signs. Each one alerts you to a different tactic scammers use to convince you to fall for a scheme.

If you think you’ve been scammed or have questions about an investment, contact BCSC Inquiries.

High Returns, Risk-Free

Few investment products have guaranteed returns. The higher the potential returns, the higher the risk. If someone gives you a guarantee or stresses that the investment is risk free, run away.

People who have fixed incomes or are nearing retirement may be targets for this type of investment scam.

Profit like the Pros

In this warning sign, fraudsters approach investors with an opportunity to take part in an elite investment opportunity. The fraudster may say the investment relies on inside information or that you can be a part of an investment outside of the mainstream public market.

Whatever the case, know that so-called exclusive investments are easy ways for you to fall victim to a scam.

Offshore, Tax-Free

Scammers will often use the words “offshore” and “tax-free” together to convince you of the benefits of investing your money abroad. The person may also make references to “offshore accounts” or “tax havens.” The problem is offshore investments are difficult for Canadian authorities to investigate—lowering the chances of you ever getting your money back or being able to prosecute the scam artist.

You can spot an offshore, tax-free scam if a fraudster tries to sell you on a way to earn a return without paying  taxes. Remember, most investments have tax implications. If the promised tax savings are false, you may also be required to pay the Canadian government money in back taxes, interest, and penalties.

Get in Now

High-pressure sales tactics are a big red flag. If someone says you need to act quickly on an investment, think twice about participating. You should always have time to think through an opportunity and bring it to an outside source you trust for a second opinion.

Your Friends and Family Can’t be Wrong

These frauds start when a scammer works their way into a tight-knit community like a church, neighbourhood, or ethnic organization. After building trust within the group, the scammer will ask members to invest in an opportunity that may exhibit some or all of the above warning signs. This is known as affinity fraud.

One way to protect yourself from affinity fraud is to ask questions when new, charismatic people start giving investment advice to members of your community. Never proceed with an investment if you don’t know the person or opportunity in detail. You may find that the scammer earned the trust of a respected member of the group before approaching you, and has used that relationship to meet other people connected to you.

Protect Yourself from Investment Fraud

You can learn how to spot investment scams and protect yourself from fraud with the resources on InvestRight.org. You may also want to visit the Fraud Prevention Month 2017 page to watch the Fraudster Crooner fraud warning song and learn how to conduct a background check.

If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393, or through e-mail at [email protected]. You can also file a complaint or submit a tip anonymously using BCSC’s online complaint form.

InvestRight.org is the British Columbia Securities Commission’s investor education website.