Fraudsters target more legitimate businesses says FMA Report

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Wellington, November 21, 2020

FMA Director of Regulation Liam Mason

The Financial Markets Authority (FMA) has reported a steep rise in the number of investment scams attempting to impersonate legitimate businesses since the Covid-19 began in New Zealand.

One in five New Zealanders have been targeted by investment scams, the Report said.

Increasing notifications

From April 1, 2020 to November 5, 2020, the FMA issued 61 warnings about investment scams, of which 21 (34%) were impostor scams, where the names and details of legitimate businesses are unlawfully used by scammers to trick investors, such as fake websites or social media accounts. By comparison, during the same period in 2019, the FMA issued 40 warnings and only four (10%) were impostor scams.

The regulator is warning New Zealanders to be on the lookout for signs of such scams, which could include overseas phone numbers or addresses being mixed up with New Zealand contact details, or the website domain name not matching the content of the website. Other red flags might be the promise of high returns and ambiguity about what is being offered.

Awareness Campaign

The FMA is running an impostor scams public awareness campaign as part of Fraud Awareness Week, which started on November 15, 2020 and ends today November 21, 2020.

FMA Director of Regulation Liam Mason said that warnings about scams and fraud have been a priority for the regulator throughout Covid-19, as consumers may be more susceptible to seeking high return investments in uncertain economic conditions.

“We are constantly vigilant about the scams that are targeting New Zealanders but it is like cutting the head off a hydra – two more will pop up in its place. You can never stop or warn about them all and they often operate outside our reach, especially overseas,” he said.

Mr Mason said that New Zealanders should be inherently sceptical of any investment opportunity that seems too good to be true and to do a bit of background research if there are any red flags.

“In the past, scammers have attempted to exploit New Zealand’s image as a well-regulated market but these impostor scammers seem to be more sophisticated and could be due to growth of online commerce due to Covid-19. There is a lot of public information available regarding the registration of New Zealand businesses, which is important for our transparency, but scammers may try to exploit this,” Mr Mason said.

Christchurch firm impersonated

GRC Investments Limited, a private investment company based in Christchurch, is one of the New Zealand businesses that scammers have sought to exploit.

The FMA issued a warning in September that an investment scam appeared to be operating under a similar name – GRC Trustee.

GRC Trustee’s website falsely claimed that it was owned, operated and regulated in New Zealand, and gave the same Christchurch address as the New Zealand business. It even linked to a copy of Certificate of Incorporation of GRC Investments Limited to further fool investors.

Company Owner Garry Carleton said that GRC Investments had nothing to do with the impostor and never sought public investors and that it was solely used for private investing by him.

Mr Carleton learnt of the impersonation FMA contacted him.

“I was annoyed and worried; annoyed that investors’ money could be stolen and concerned that somebody might turn up on my doorstep and threaten my family if we didn’t pay what they’d lost to the scammers,” Mr Carleton said.

Avenues to mitigate risk

Fortunately, there were steps that he could take to mitigate the risk.

“Initially I felt powerless to do anything. I then remembered that the Companies Office has added optional fields to their website that let me to add extra details about my company. I have used those to add a warning about the scam, should anybody look up my company. Sure enough, as soon as I did this, the scammers’ website stopped linking to my company’s entry on the Companies Office website,” he said.

Mr Carleton said that he was updating other details of his company, to advise that they are private companies not dealing with the public.

He recommends that other companies should do the same and is in no doubt as to why such scammers are stealing identities of Kiwi companies.

“We have a good reputation because a majority of our businesses operate honestly and responsibly. The scammers are abusing that to steal other peoples’ money,” Mr Carleton said.

Who scammers target and how

More than one in five Kiwis have been approached about a potential investment scam in the past, according to supplementary questions in the FMA’s annual Investor Confidence Survey.

Men were significantly more likely to be approached than women (27% v 18%) and one-third of those aged 70 or over have been approached.

Cryptocurrency was the most common type of investment scam, which nearly half of those had been approached, followed by investment software packages and seminars, and shares.

Scammers use a variety of channels to approach people, but email was found to be the most prominent method (47%), followed by social media (25%) and the phone (24%).

What consumers and investors can do

Do not use contact details from the website. Find the company’s phone number or email address from an independent source, such as a directory, and contact the business directly

Check any claims of being licensed or registered in New Zealand.

Check the domain name through www.dnc.org.nz for .nz domain names and ICANN’s WHOIS service for .com domain names

What businesses can do

Issue direct and public communications to clients/customers warning your business is being impersonated (e.g. posting on your social media pages)

Report the case to a relevant government agency (e.g. FMA, CERT)

Update your business’ details on Companies Office or the Financial Services Providers Register to warn about the scammers

More information about investment scams can be found on the FMA website.

Source: Financial Markets Authority
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