Be Careful And Watch Out For These Financial Scams

The cost of living is on the rise. People are desperate, which makes them more vulnerable to scams and criminals.

SABRIC, South African Banking Risk Information Centre, advises consumers to be skeptical of investments that seem too good to be true. This is to avoid being misled by investment promises that promise high returns and quick results.

These schemes in South Africa generally satisfy the criteria for either a traditional Ponzi scheme or a Pyramid scheme, according to SABRIC. Both schemes generate returns for investors who were not involved in legitimate business or investment activities. The scheme will collapse if there are not enough new investors to replace the existing investors. All monies invested are lost. People who expected to see a high return on their investment will not only lose the majority of their initial investment but also risk losing most or all of it.

SABRIC WARNS CONSUMERS ABOUT THESE ILLEGAL SCHEMES.

Social engineering techniques are used by scammers to convince victims to invest. These scammers will often present convincing statistics in order to make their offers seem appealing. Therefore, you should always be suspicious of these types of schemes.

To help consumers recognize these schemes and protect themselves, SABRIC offers the following tips:

SIGNS TO LOOK OUT FOR THAT IT IS A “GET RICH QUICK SCAM”:

  • It promises to pay double-digit returns.
  • It promises to be a chance of a lifetime.
  • It is difficult to understand how money is generated.
  • It is not a registered product and it is not offered by an authorized financial services provider.
  • The recruitment of more members is a key factor in determining the return or profit.

AWARENESS TIPS ON HOW NOT TO FALL VICTIM IN ORDER TO “GET RICH QUICK SCAMS”:

  • It’s very likely that it is a fraud if it sounds too good to be true.
  • Do not believe any investment that insists you do something “NOW.”
  • Avoid investments that promise high profits but carry little to no risk.
  • You must be careful when selecting investments and people to whom you make them.
  • Before you invest your money, do your research.
  • Before you invest, consult an impartial third party such as an unconnected broker/licensed financial advisor.

TIPS TO SPOT A PONZI SCHEME:

  • The promoter promises high returns that are not possible with conventional investments opportunities in a short time.
  • To lure investors, the promoter may use false qualifications or references in some cases. For example, an “attorney” with “many years of experience in the stock exchange.”
  • Investors are often lured to invest more money by high initial returns.
  • Many companies promise guaranteed returns, but no return is guaranteed. All investments involve risk.
  • Promoters can be very secretive about their business model.
  • The promoter is no longer available and the returns are dry up.
  • The scheme usually collapses quickly afterward.

TIPS TO SPOT A PYRAMID SCHEME:

  • The promoter promises high returns in a short time and your returns will increase as you recruit more people to the scheme.
  • Participation in the scheme requires a fee or an initial investment.
  • Participants will be asked to find more investors, and they will be rewarded for that.
  • There are multiple levels to the scheme, with each member collecting commission for a single transaction.
  • Growth can’t be achieved without financial investment.
  • Sometimes, participants are taught how to avoid detection methods.
  • They may disguise themselves as stokvels or even use virtual currencies such as Bitcoin to avoid detection by the formal banking system.
  • Tiered investment structure to encourage larger investments in the scheme (e.g. SilverGold and Platinum membership)
  • Investors complain (most often via social media) about the lack of returns. Typically, the scheme operator responds by promising that payment is imminent and (2) shifting blame to banks where accounts were frozen or closed.
  • General secrecy – e.g. There are no details about where or how the funds will be used. The scheme will be described in very general terms.
  • Investment in commodities trading, forex trading, or virtual currencies/virtual currency mining is all possible through these schemes.
  • With very high returns and encouragement to reinvest, short investment periods are possible – some as low as 10 days.
  • Requests to invest in pension funds or similar savings/capital.
  • These schemes are based on trust. An invitation to invest in these schemes can often be given by someone you know, such as a relative, community leader, or religious figure.
  • Closed user groups are showing an increase in messaging via WhatsApp. This is presumably because the app offers encryption at all levels and anonymity.

TWO PIECES OF ADVICE ARE ALWAYS HER HOME:

1 If it sounds too good to be true, it probably is. Before you hand over R1 of the money, make sure to research any financial products or opportunities.

2) Don’t give out your personal information (ID number, address, and contact numbers) to anyone. This information can be used by criminals to open bank accounts, create debt in your name, or even commit crimes with your identity.

Be safe rather than sorry