Protect Yourself Against Bogus Investment Opportunities


Cold calls, emails or bogus internet websites are common techniques used by unregulated persons to solicit business for bogus investments. Increasingly, consumers are being bombarded by spam mails or unsolicited faxes/mails/phone calls regarding various investment or money making opportunities. However, some consumers may not be familiar with the various scams and swindle schemes available. In this article, MoneySENSE brings you some examples of commonly-found scams and tips to deal with them. 

Common Scams and How They Work

You may have heard of people who are victims of the following scams, or have received letters/emails/phone calls that could be part of such scams. Read on to find out more about the characteristics of some of these more commonly found scams and ways to deal with them:

Type of Scam  How it works
Boiler-Room scam, also known as “Cold Call”
  • Salesmen make repeated unsolicited calls offering the sale of shares in third party business, often in companies you have never heard of.
    Maintain websites to give consumers the impression that their operations are legitimate.
  • Overseas boiler-room scams may make use of Singapore telephone numbers to create the impression that they are based in Singapore.
    Salesmen may make use of high-pressure tactics, promise high returns with low risks but do not provide a lot of information about themselves or their investments.
419 scam, also known as “African/Nigerian scam”
  • Fraudsters send emails/letters/faxes/SMS claiming acquisition or inheritance of huge sum of money.
  • They then seek help from victims to supply a foreign bank account number to transfer the money out of Africa (or any other country).
  • They offer huge commission but victims are made to pay large sums of up-front payments as taxes or fees to transfer the ‘funds’.
  • Another ruse used by the fraudsters is to dupe victims into believing that blackened US currency notes can be used after being ‘washed’ by special chemicals.
  • Victims are made to pay up-front payments to buy the special chemicals.
Lottery scam
  • Fraudsters send emails/faxes/mail/SMS or call the victims claiming that they have won prize money in overseas lottery.
  • Fictitious documents such as lottery tickets might also be enclosed.
  • Fraudsters may request for consumers’ bank account number or personal particulars to facilitate the transfer of funds.
  • Consumers are also asked to pay large sums of up-front payments as taxes or fees for administration and transference of funds.
Ponzi scam
  •  Fraudsters promise high returns to investors, often claiming their investments are low risk simultaneously.
  • Fraudsters then use part of the money deposited by subsequent investors to pay dividend or interest to earlier investors.
  • Investors are lured into believing the investment schemes are genuine and encourage their friends or relatives to participate. Alternatively, they may decide to increase their own investment.
  • Ultimately, the scheme collapses due to lack of number of new investors.
Pump and Dump scam
  • A company may post a glowing press release about its new venture or profits. The company may then become an unwitting victim of a pump and dump scheme.
  • Fraudsters may buy stocks of this company. Fraudsters then post stories on bulletin boards, blogs or forums on the attractiveness of the stock. Often, there is no way to verify the authenticity of these posts.
  • Investors may then rush in to buy the stock, resulting in the stock price of the company being pushed upwards.
  • Fraudsters then sell their stocks at a profit. After they have sold their stocks for a profit, the stories cease and the stock price of the company falls.

Check the website of Commercial Affairs Department (CAD) of the Singapore Police Force regularly for crime alerts and information on other common scams.

Below are a few tips provided by MoneySENSE on how you can protect yourself from falling prey to scams in general:

1. Watch out for tell tale signs that indicate that you may be dealing with an unregulated person:

You are usually contacted by telephone or by unsolicited emails or facsimile. All subsequent contact is usually through the same medium. There is seldom any face-to-face meeting. Even if there is, the meeting is usually conducted in a location other than a proper office.

High-pressure sales tactics are used to persuade you to invest before you have the opportunity to think about the investment product or to conduct checks on the person offering it. Claims of a "once-in-a-lifetime opportunity" or a "limited time offer" are common.

The sales representatives will claim to have inside or confidential information that will generate a windfall from investing. There will usually be promises of high returns, "guaranteed" profits and quick gains. More often than not, these sales representatives are smooth-talkers who give the impression that they are very knowledgeable about investments.

2. Do not get carried away by a good sales pitch or promise of high returns.

If it's too good to be true, you're probably right. Always ask for brochures and documents to be sent to you so that you have sufficient time to establish the facts, review the product and make an informed decision. For online solicitation, download and print a hard copy of the on-line solicitation that you are considering. Make sure you catch the Internet address (URL) and note the date and time that you saw the offer. Save this information in case you need it later.

3. Do not sign blindly

Do not sign on blank forms without understanding what you are signing. Never give your identity card, bank account information or credit card number to someone you do not know or without first clarifying why it is needed.

4. Do not deal with unregulated entities

If the entity is based outside of Singapore, check with the respective overseas authority if the entity is regulated. Usually such entities will claim to operate from well known financial centres and to have offices world wide. Some websites which you can check with are:

If the entity is based in Singapore, you may conduct the following simple checks:

This is a list of financial institutions regulated by the MAS to operate in Singapore. After you have found the entity in the Directory, be sure to note what activities it is authorised to conduct in Singapore. 

This is a list of unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or authorised by MAS. The list is not exhaustive and will be updated.

This is a list of representatives providing financial advisory or capital markets services under the  Financial Advisers Act (FAA) and the Securities and Futures Act (SFA).

MAS' regulatory regime aims to safeguard the interests of consumers by ensuring that only competent and professional persons who meet appropriate standards of business conduct can provide financial products and services in Singapore.

When you receive an unsolicited sales call from an unregulated person, you should report the matter to MAS (email: consumers@mas.gov.sg) immediately.

MAS may take regulatory or other enforcement action if warranted. Where there has been a breach of the law, MAS will refer the case to CAD for investigation. If you have reasonable grounds to suspect the unregulated entity or person of any wrongdoing, you may wish to report the matter to the CAD of the Singapore Police Force. CAD is in charge of investigating commercial and financial crimes. The contact details of CAD are as follows:

Commercial Affairs Department
Singapore Police Force
391 New Bridge Road #06-701
Police Cantonment Complex Block D
Singapore 088762
Tel: +65 6325-0000
Fax: +65 6223-3171
Website: www.cad.gov.sg  

Conclusion

There would always be new scams and bogus investment opportunities designed with only one purpose: to get consumers to part with their money. Consumers should make sure that the persons they are dealing with are legitimate and authorized. For more information on dealing with unregulated persons, read the article “Pitfalls of dealing with unregulated persons”

Sample of scam correspondence:

---------- Forwarded message ----------
From:
Date:
Subject: Get back to me
To: undisclosed-recipients

Hello Dear Sir,

I am an investment consultant working with _____ at their offshore department.I will be happy to work this deal out with you if we can do business.

During one of our peroidic auditing I discorved a dormant accounts with holding balance of 15,000,000 (FifTEEN Million British Pounds) which has not been operated for the past three years.As at this moment,I am constrained to issue more details about this business until your response is received.

If you are not familiar with my Bank profile, please take a moment of your very busy schedules to read about my Bank website;______ and send your response to my email address or better still end at Tel No:_____

Thank you for your time and attention.

Chief investment
Consultant, 

 

This article is prepared in collaboration with the Commercial Affairs Department (CAD).