How to recognise a risky situation 

Despite supervision and regulations, malpractice in the financial markets does occur and may affect sincere private investors and savers. It is worthwhile remembering that if an offer appears too good to be true, it probably is.

Requests for personal and account details

Criminal activities can be conducted via bank account and credit card scams. For this reason, you should avoid giving your personal and account details to outsiders. Never enter your own credit card numbers or other details into a suspicious online service.

It is commonplace nowadays that investment products are sold to customers over the telephone. If you are dealing with a ‘scamster’, the caller makes an attractive offer but hardly ever gives any information about herself. These people may also ask for the customer's personal and account details or password for an online service. Never give your details to an unknown caller, even if asked to do so because of the large sum of money to be transferred. Always request a written offer with the service provider's contact details clearly stated.

Investment tips, uncovered promises

Information about investment targets sold with uncovered promises is spread via internet discussion boards and newsletters. Investment tips and attractive promises or offers may also come in the form of a letter.

It is difficult to investigate the real background of an investment tip. What appears to be an unbiased analysis, may be purposeful and based entirely on manufactured data. There have been cases where shares and corporate bonds with exceptionally good yields have been promised, but closer investigation has revealed fabricated companies that have raised money for their owners. The shares or bonds had no real value, and the monies invested were lost.

Offers without a prospectus

When securities are offered for subscription, the offer must be presented in the form of a prospectus that has been approved by authorities. A prospectus must be prepared even if securities are offered by a non-listed company.

Prospectuses can also be fabricated. It pays to be careful and to always check the authenticity of the offer. If an approved prospectus for the offer has not been published, extra caution should be taken.

You can check in FIN-FSA's prospectus register to see whether an authority has approved a prospectus. FIN-FSA also keeps a list of known offers made without a prospectus. 

Credit cards against payment

Appropriate bodies for granting credit cards are banks and credit card companies. Normally fees are charged for a card only when the card has been supplied to the customer.

Credit cards may be offered over the internet or by other means against payment. It is common that a card is granted to an applicant with a history of delinquent payments. A card may be advertised in a misleading manner by using well-known company's product name even though there is no real connection between the two.

If the card provider does not seem to be reliable, it pays to be cautious. It pays to be extra careful if payment for the card is requested before the card has been supplied.

Suspicious letters

Suspicious letters can arrive via email or regular mail.

Letters appearing to be official have been received from abroad in recent years. Assistance is often requested for the transfer of inherited or other funds from one country to another. The writer asks the recipient to get in touch and promises significant compensation for the help. Prior to the transfer of money, the recipient is asked to supply personal details. It is often requested that the recipient pay a sum of money to the sender as a kind of guarantee that the remainder of the money can be paid.

A request for money may also come in the form of a chain letter. Many chain letters are based on a pyramid structure. High yields are promised for a very modest payment. New funds are transmitted higher up in the pyramid structure, which is why the activity appears lucrative. When the flow of money from the outside dries up, the pyramid collapses.

In such situations it is common that there is no yield and any money paid out is lost.

24 October 2011