Financial scams have been on the rise in the UK for years and the Covid-19 pandemic may have made matters even worse. From identity theft and Covid-19 financial-support scams to fake parcel deliveries, financial fraud is evolving and taking lots of different forms depending on the intention of the scammers.
Data from Action Fraud shows a whopping 33% year on year rise in fraud and cybercrime cases for the period between April 2020 and March 2021. Detailed reports show how victims in England, Wales and Northern Ireland lost over £2.3bn in the period under consideration as the number of cases reported climbed to 413,553.
A separate research report by Citizens Advice revealed that over 36 million UK adults have been targeted by scammers since January 2021.
Considering these and many other fraud reports, it is important that you know the latest in the financial scams universe and how to protect yourself. Here are some of the most prevalent scams in the UK and what to do to minimise your risk of being a victim.
Online Shopping and Auctions Fraud
This category of fraud is by far the biggest threat especially during the pandemic as more and more people pivot to online shopping to get their supplies. Some of the victims reported how they bought things online which were never delivered or sold items for which payment never came through.
As part of the fraud schemes, buyers may also receive items of poor quality, different from what was advertised. Others may be charged for hidden costs or even subjected to shill bidding where they end up paying inflated prices in bidding wars. The data from Action Fraud showed a 65% year on year increase in the cases reported in this category.
Covid-19 Financial-Support Scams
Right from the early months of the Covid-19 pandemic, the UK government put in place financial relief measures to cushion business enterprises and individuals. Among the financial help schemes put together were cash grants, loans, job support schemes and test and trace support payment programs.
Unfortunately, scammers discovered loopholes in some of these support schemes thus using them to target their victims. The fraudsters often send Covid-19 relief fund claim forms via email or social media platforms to collect personal information including credit card details. Some of the emails look as if they are from government departments and have links leading to sites that collect personal information.
Fake Loan Fraud
Scam artists and fraudsters have been targeting vulnerable members of the public with fake adverts for fast loans. The promise is that the victims could be approved even with bad or no credit history.
However, before the loans are approved and processed, the victims are asked for advanced fees to cover the loan insurance and other payments. Once the scammer receives the upfront fee, they usually stop communicating and even their lines may go off.
Following the enactment in April 2015 of the Pension Freedoms legislation, UK pensioners now have the flexibility to access their Defined Contribution (DC) pots starting from age 55.
Between 2017 and August 2020 pension scammers defrauded their victims over £30 million, according to data from Action Fraud. With company dividends dwindling or suspended, savings rates at rock bottom and stock markets showing unprecedented volatility, some pensioners have become susceptible to fraudsters offering them ‘high guaranteed returns’ in alternative investment schemes.
Other pension scams are structured in a way to convince pensioners that they can access their retirement funds before they hit 55 years of age. This can expose their withdrawals to huge tax charges thus losing out on their hard-earned funds. Some scammers may even make loan or cashback offers against pension pots and pressure you into making quick decisions.
This type of fraud is not new, but the unique challenges posed by Covid-19 have made card transactions skyrocket. According to UK Finance, a trade association that brings together the UK banking and financial services sectors, a total of £574.2 million was lost through UK-issued cards in 2020.
A big chunk of this was orchestrated through card-not-present (CNP) transactions via phone and online. Fraudsters may steal card information physically or electronically and copy the cardholder’s name, account number, card expiration date, billing address and other useful information. Using these details, they can transact online or via phone.
Between April 2020 and March 2021, Action Fraud reveals that over 27,773 incidents involving cheque, card, online banking fraud have been reported. The total cost of these cases has been put at £183.9 million.
How to Avoid Financial Scams
Having seen how the scams are engineered the losses involved and how the victims are targeted, here are some tips to help you avoid them.
Be suspicious of get-rich-quick schemes and deals that appear too good to be true.
Avoid making or being forced to make hasty decisions especially involving payments. Take time to seek independent advice and if possible legal opinion before entering into any agreement or disclosing confidential information.
Never send money to a person or an entity you don’t trust. This includes sending banking or personal information or using payment methods that you don’t fully understand.
Instead of clicking on links attached to emails, visit the concerned websites, and log on directly using their official URLs.
Beware of glowing or exaggerated testimonials as many of these are used as baits to hook you on and get scammed.
Ensure the passwords you use online are strong and securely stored. Using phone numbers or birthdays as passwords can expose you to hacking.
Always check the email address you receive information from to see if they are from the right domain. In addition, be on the lookout for spelling mistakes or bad grammar as most scams tend to have inconsistencies and errors.
Always Report A Scam
If you spot a scam don’t hesitate to report the matter to the relevant authorities. In the UK, you can report a scam online or call Action Fraud on 0300 123 2040. Other reporting avenues you can use are your bank or payment provider. Your report may go a long way in helping other potential targets avoid being scammed.