Investor scams still ongoing in spite of tighter regulations

Published:  17 Jan at 6 PM
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Over five years after the Madoff case hit world headlines, small-time fraudsters continue to trap unwary investors, with expats especially at risk.

Enforcement agencies in first world countries are upping the ante and catching more scammers than previously, but in many popular expat destinations as well as in the USA and UK, it’s business as usual from the fraudsters. A recent arrest in Indiana, USA involved an FA who’d defrauded his clients out of millions of dollars through dodgy deals.

Global investment firm CEO, Daniel Karson, warns that investment fraud in the main isn’t hi-tech, adding that charm and a convincing spiel are the weapons most commonly used. FAs, he says, commonly ignore any regulations in place in countries where they operate.

The MO used sets up a level of trust through regular meetings, bogus references from so-called clients and other pre-arranged personal referrals. Preferred targets are those who’ve recently come into money, such as retirees, expats who’ve sold their homes in their country of origin before moving overseas, and those who’ve received inheritances or final salary pensions.

Financial fraud nowadays isn’t as obvious as the Madoff-style Ponzi schemes: it’s more likely to be based on misrepresentation of risk elements or omission of relevant facts. Insurance-wrapped bonds paying high commissions to salesmen, the promise of unrealistically high or guaranteed returns, lock-ins beyond a reasonable time for older investors and unreasonably high management charges can decimate capital sums within a few years.

The key to avoid being scammed lies in choosing the right advisor. It’s more difficult than it sounds for expats living abroad, as dodgy FAs will often insist they’re registered with the authorities in their home countries. However, registrations don’t cross borders and many fraudsters are working illegally, leaving no redress for clients when it all goes wrong.
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