How to spot and avoid financial scams

Online fraud and cyber crime has cost people and businesses in the UK an estimated £28 million in just six months, according to figures from Action Fraud.

It received over 12,000 reports of cyber crime between October 2017 and March 2018, with hacking of social media and email accounts the biggest problem.

Katy Worobec, the economic crime chief at UK Finance, said the finance industry prevented £1.4 billion in unauthorised financial fraud in 2017.

However, she said criminals were now targeting individual customers, and £236 million was lost to authorised push payment scams where customers were duped into making payments.

“We have a trust reflex,” she said. “It makes us forget things and it makes us lose control.”

This is particularly problematic when it comes to financial scams, with criminals changing their tactics to prey on that trust reflex.

“The line is that there is suspicious activity on your account and you need to move your money to a safe account,” she explained. “It might involve having to make a transfer.”

When our judgement is faulty

Dr Jane Cox, an international human performance specialist, and wealth psychology expert, says when it comes to money and trust, we walk a thin line.

“Of course at some stage we have to trust people with our money in order to be able to make investments, or know where our money is more likely to grow,” she says. “We also need to trust people to get into business with them, and very often our ‘gut instinct’, which is where a lot of our trust is based, will be a good guide when it comes to figuring out the type of people you can connect with, work with, make decisions alongside.”

However, the big harm with the trust reflex when it comes to finances is that often we are desperate to make more money, especially when things have been tight. It is then that criminals are most able to exploit our weaknesses, she says.

“This is where our desire to hear something positive, or believe something has come along that will get us out of our financial constraints, does tend to exert an influence.”

When you are desperate for some cash, it is very easy to hear what you want to hear. You dismiss any doubt or use of common sense to temper that initial reflex. This can cost us dearly.

Are some people more susceptible to scams than others?

Some people are more trusting than others, particularly those who may have been a little more sheltered and exposed to less fraud, or deceit, during the course of their lives.

“Unfortunately the ‘school of hard knocks’ plays a big role for many people when it comes to making more discerning financial choices,” Cox says.

“Very often that comes after a few wrong choices have been made, or the wrong people were trusted.”

Some people are more vulnerable than others. The elderly may be less knowledgeable about the prevalence of financial fraud and how it is conducted.

Young people might have the belief that they are the ones who will be able to make their millions before they turn 30, and that they will be able to do it quicker and easier than anyone else.

The cost of the cons

UK Finance estimates that people who are duped into transferring money to fraudsters lose an average of £3,000 each.

A total of £236 million was lost last year, with banks unable to return nearly three-quarters (74%) of it.

One of the most popular and effective scams involves tricking people into thinking they are moving money into a solicitor’s bank account for a house purchase, or to a builder. The criminals hack into genuine email accounts and send out false requests for payment.

By the time the people who have made the payment have discovered their mistake, the money has disappeared and the account into which they made the transfer has been closed down.

UK Finance said that in 2017 there were 43,875 reported cases of these scams, with 20% of the victims being businesses who lost an average of £24,355 per case.

Now read our digital banking guide

Make yourself harder to scam

Before you make a large payment, it is important to double-check the details, and you can do this by ringing the payee and confirming their bank details.

When it comes to all aspects of your finances, it is important to stay alert and think things through, says Cox.

“Do your due diligence when it comes to making a big financial decision,” she says. “Don’t believe everything you hear.”

Remain involved with your money and keep an eye on how it is working for you. Hands off investors are very vulnerable to losing out. If it sounds too good to be true it probably is too good to be true.

“Small risks tend to reap small returns, whereas riskier investment reap the bigger returns,” she says. That’s why it can be tempting to take a big risk, especially if you are down on your financial luck.

“However keep a balance, and always try and spread your investments over lower and higher risk returns. Never risk more money than you can afford to lose.”

How to prevent being scammed: Stop and think

Take Five to Stop Fraud is a government initiative to help you spot and prevent a financial scam.

It recommends you are vigilant in the following situations:

1. Requests to move money: Your bank, utility providers, and other big companies will never contact you directly to ask for your PIN, password, or to move money to another account. You should only ever provide personal or financial details when you actively consent to it – when you sign up for a new service, for example – or when you are expecting to be contacted by someone from a financial institution or service provider.
2. Clicking on links or downloading files: Never click on a link or download a file from an unexpected email or text. Odds are, a criminal is trying to load malware onto your device that will give them access to your personal and financial details. If in doubt, phone up the person who messaged you and ask if they really sent it.
3. Personal information: Likewise, be very wary of unexpected requests for any kind of personal info via phone, email, or text. Instead, contact the company or person directly using a known email or phone number and confirm that they need your personal info.

Now read our guide to staying safe online

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Last updated: 12 July, 2018