Investors report thousands of scams, but watchdog chases just 10

Nearly 25,000 possible frauds were logged, but the FCA says many can’t be investigated.

Almost 25,000 reports of possible investment scams were flagged by worried investors to the City watchdog last year, but only 10 were ever investigated.

Financial Conduct Authority (FCA) data shows it received 24,366 reports of unauthorised business activity between January and October 2020. But the watchdog opened few formal investigations.

Baroness Ros Altmann, consumer rights campaigner and a former pension minister, says: “Investment scams can cause immense damage to people’s lives, robbing them of their life savings, and it is so important regulators improve their vigilance on behalf of the public.

“Reports of potential scams have taken far too long to be investigated, and by the time regulators have acted it is usually far too late to prevent thousands of victims losing out. A rapid response is required.”

UK Finance, the trade body for the banking sector, is warning that criminals have been exploiting and adapting to Covid-19, with a growth in fraud and scams that target people online.

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Many of these scams harvest customers’ personal and financial details, for example through phishing emails or smishing text messages impersonating trusted organisations.

A survey by pension provider Canada Life found 5.2 million UK adults (11%) had either fallen victim to or knew someone who had fallen for a scam since March. One in four of these (28%) related specifically to pension fraud.

Andrew Tully, technical director at Canada Life, says: “Covid-19 has presented a clear opportunity for fraudsters to prey on the growing financial fears of their victims.”

According to the FCA data as of October there were 166 individuals and 47 firms under investigation related to unauthorised business activity.

The watchdog said it does “review and assess every report of unauthorised activity”, and a “large proportion” of the reports sent to it related to issues it was already aware of. It said many other reports were on activities which are not regulated by it, or concerns about authorised firms that are dealt with by its supervision, rather than scams, team.

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Its action to track and stop fraudsters returned almost £6 million to consumers last year, and secured court orders to return another £14 million, it said. The regulator also fined firms and individuals it does regulate £80 million across 2019 and 2020.

Investigations are the watchdog’s highest level of action, but it said the remaining reports were logged for intelligence purposes or opened as enquiries to look into further. Enquiries can result in consumer warnings, or orders to remove a company website. 

The FCA opened 885 enquiries in the first 10 months of 2020, closed 913 and issued 1,053 alerts about unauthorised firms, almost double the number the year before. 

Many of the alerts, around 40%, related to clone firms, where scammers set up a website that looks almost identical to that of a real firm to trick investors into parting with their cash.