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Be aware: Here are some of the common investment scams 

Don’t let yourself get caught.
Image: Shutterstock

Investment and financial fraud is on the rise across the world. Each day thousands of people are conned out of their hard-earned money by scams that have become increasingly sophisticated.

There are dozens of ways scammers use to gain access to people’s accounts, often masquerading as being from financial institutions. Investors need to be vigilant. If something feels or looks strange, stop what you are doing and get in touch with your financial service provider directly or your financial advisor. Never feel pressured to do something right away.

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Here are some of the prevalent investment scams in South Africa:

High-yield investments: The higher the yield, the higher the risk, is a well known investment saying. This type of fraud typically includes an unlicensed individual convincing an investor that an unregistered investment can produce a high yield with little to no risk. If you are approached online to invest in one of these, you should exercise extreme caution – it is likely a fraud.

If it sounds too good to be true, it probably is.

Closely related, many fraudsters pretend to be working for an asset manager and even use fake copycat websites with names of real staff members of legitimate companies. Always verify from different sources before parting with your money.

Advance fee: Fraudsters can also ask for an upfront payment to grant access to a supposedly great deal. They will use words like regulatory fee, tax, finder’s fee, commission or incidental expense to describe the fraudulent advance that they are asking for.

Fraudsters may even go as far as posing as professionals in the financial services industry, like a broker, so investors can feel more comfortable with them. Investors should be aware that fraudsters could even use official-sounding e-mail addresses. To avoid this scheme, investors should research advisors.

Pyramid schemes: Many South Africans have encountered a pyramid scheme through a family member, colleague or friend. Though a pyramid scheme may sound similar to a multi-level marketing program where earnings are based on the amount of sales, a pyramid scheme is an illegal practice.

Participants in this scheme can only make money by recruiting new participants and they also have to buy a large inventory of a product or products. Be skeptical of stories where the recruiter came out of poverty and acquired wealth through an investment programme.

Internet and social media fraud: Fraudsters use social media to appear legitimate through newsletters and blog posts. They also use it to collect sensitive information about you and spam you with unsolicited offerings.

This is a critical piece of awareness for investors. Just because someone has a social media presence, it doesn’t mean they are a legitimate business. Social media is an increasingly fertile ground for scammers.

Phishing: People are lured into clicking on links in emails or messaging apps that introduce malware on their devices, allowing fraudsters to gain insights to their confidential information such as banking and investments information.

They then use this information to communicate with financial institutions to initiate withdrawals from investments and bank accounts. These phishing emails normally originate from “trusted sources” tricking the recipient to believe it is fine to click on links provided. The best way to protect yourself is to ‘think before you click’, use antivirus software, check the full message name, double check the email from the sender, verify certain details on the mail and keep operating systems on your phone and computer up to date.

Identity theft: Identity theft is a major risk to people as our lives are increasingly online, especially during the lockdown. Identity numbers are stolen and used for the purpose of committing fraud, such as taking out loans, taking over accounts at financial institutions and withdrawing the funds.  To best protect against identity theft, keep passports, ID cards, driving licenses, utility bills and bank statements in a safe place – or shred old statements you no longer need.

We urge all investors to stay vigilant at all times. If you are unsure, your financial advisor or the investment institution have fraud hotlines that you can contact to verify information or report fraud.

Ramesh Ramdeen, head of Fraud at FNB Wealth and Investments and Ashburton Investments.

COMMENTS   10

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you could be forgiven for expecting to see a lot of the JSE shares in this mix of scams.

Missed the scam that took more from savers the past 20y than the rest combined : fund management and private equity fees

The are indeed a lot of scams I myself have been recently scammed of 11000 by a company named glenwal which was advertised by Ntando Duma and Mohale Mhlongo, and a lot of people fell for it.

The best article I have seen on MW in months. Well done. Probably cause it’s free from filthy identity politics. Keep giving us useful information. Thanks!

You forgot about crypto currencies

Many are now investing with a company called CBI…

It will end in tears

Who came up with the job title “Head of Fraud” ?

Biggest scam is privately-owned central banks issuing debt to governments that they force the citizens to pay back for generations in the form of taxes.

The truth of the matter is that the common denominator of failure and loss is YOU – not taking personal responsibility. Notice comments such as “I was scammed…..” “They ……” “My friends were doing it so….” etc. No one can scam you if you do not fall for it or unless you were careless about security.

Oinvest, Basfour investments was fined 60 million by FSB due to scamming customers money by manipulating cfd trading, they are not licensed now but still trying to scam the public.

End of comments.

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