Don’t fall prey to fraudsters

Authorities in the UK say they are winning the fight against ’boiler room’ fraud.

This is the name used for scams in which unsuspecting investors are lured by conmen into buying worthless, or even non-existent, assets. These smooth-talking fraudsters often cold call their victims, or find them by advertising or through seminars, and tell them silky lies about a sure-thing investment - often shares in a small company - which is bound to make them rich. In the UK last year the average victim lost £20,000 (Dhs120,000), according to the country’s Financial Services Authority, even if the number of people taken in by such schemes fell by 7 per cent last year. Growing publicity about the problem could explain why fewer people are being fooled.

But what’s good news for investors in the UK could be bad news for expats in other countries, including the Middle East. Boiler room scams exist all over the world and when one jurisdiction gets too hot to handle, the conmen stoke up their activities elsewhere.

It’s a grey area, of course. One man’s boiler room scheme might in some cases be another man’s legitimate ‘high-risk, high-reward’ investment. But some of these people are just out and out crooks by any standards, selling investments that they know perfectly well will never come good. Here are some ways to spot them:

LOOK HARD AT THE WEBSITE

If you are invited to invest in or through a company that you’ve never heard of or dealt with before, trawl its website carefully and check every statement it makes. If it claims a business relationship with a household name company - a favourite trick of con artists - check if this is really the case. Similarly, test assertions that it

has thriving businesses in other countries. A few minutes research on the internet is often enough to verify such claims, or cast doubt on them. And don’t be taken in by vague talk about huge teams of employees. It could be hot air.

CHECK OUT INDIVIDUALS

Conmen know how to shed their skin like a snake. They change their names many times over, move from country to country to cover their tracks, and can constantly set up and quickly close multiple companies, in totally different types of business. So be sure to know who you are really dealing with.

LOOK AT MESSAGE BOARDS

Forums about financial cons and conmen (eg www.scam.com) make for fascinating reading. If you have doubts about anyone, type their name into one of these sites and see what comes up. Be careful, though; you shouldn’t believe everything you read on forums either. The websites of financial regulators can also be a useful source of information about conmen who have been caught for past misdeeds. If in doubt, consult your trusted financial advisor. He or she can’t guarantee that your investments will make money, but at least they can steer you away from ones that are not even designed to raise cash.