By ADRIAN LOWCOCK 27/05/2009
City of London Police recently reported an increase in boiler room scams. Creative fraudsters prey on millions of people by selling them worthless shares. As the economy deteriorates these scams are only likely to increase with the gangs using more sophisticated techniques to convince their victims to part with their cash.
Traditionally the fraudsters have targeted elderly victims but new evidence suggests they have moved onto those who have been made redundant, looking to take a share of their pay-off money.
Fraudsters will often get the victim’s name from a share register, but will lie and tell you that the information was obtained from a marketing survey or a mailing you responded to. The techniques used will range from an aggressive pressurised sales approach to more sophisticated grooming where they appear convincing by giving share tips that pay off. They don’t, the conmen tells one set of people a share price will rise and another set the same share price will fall. Either way the fraudster has a list of people convinced that their advice is genuine.
What to look out for
As the scams become more sophisticated it is important that investors know what to look out for:
Focus on men
Boiler room scammers find men easier to deal with as women are likely to be more suspicious and require more information. Men are also more likely to feel embarrassed and not report the crime. Research has shown that victims are predominantly male and aged 50 or older. They tend to be experienced investors with a long history of investing.
False shareholders meetings
A new technique to gain credibility is to stage a so-called shareholders meeting. These are held in reputable hotels in cities such as London and Manchester. The presentations will seem very respectable and convincing to those in attendance.
British bank accounts
In the past, investors were told by boiler rooms to send money to accounts based overseas. However, many people have cottoned onto this so the fraudsters will now use a British bank account making the transaction seem more plausible.
Intimidation
The caller, claiming to be a genuine stockbroker, will state that the victim has made a binding "verbal contract" that they have recorded. Victims are then threatened with anything from intimidation to legal action to obtain payment.
Elderly targeted
The elderly and vulnerable are a traditional target market for such scams. Many people are persuaded to cash in their life insurance policies or investments and use credit cards to buy the valueless shares on offer.
New victims
There has been an increase in female victims and younger males, indicating the fraudsters will approach just about anyone. Women aged 50 or younger have yet to report any incidents, but this may only be a matter of time.
What to do
If you are worried about falling victim, the FSA's consumer website has tips and factsheets on boiler room scams:www.moneymadeclear.fsa.gov.uk
All financial services firms acting in the UK must be regulated by the FSA. You can check the FSA's register at www.fsa.gov.uk/register/home.do
The FSA also keeps a list of firms acting illegally, if they appear on this list don’t do business with them:www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/index.shtml
Reporting
If you are concerned you may have already been a victim of such a scam then it is important to report it.Go to www.cityoflondon.police.uk/CityPolice/ECD/Fraud/boilerroom.htm and complete the boiler room fraud questionnaire.
Then email the form to operationarchway@cityoflondon.police.uk or alternatively post it to Operation Archway, 21 New Street, London, ECM 4TP.