Calls about 'boiler room' scams on the rise, says Financial Markets Authority
Calls to the securities watchdog about "boiler room" scams are on the rise.
A boiler room is the name given to a group of criminals who cold-call investors to sell them worthless shares and other fake investments.
They are never based in the country whose citizens they are cold-calling, so it makes it almost impossible for law-enforcers like the Financial Markets Authority (FMA) to catch them, or get investors their money back.
Just four months into its 2016-17 financial year, the FMA has had 25 calls from boiler room victims compared to 30 calls in the previous 12 months.
The FMA is raising awareness about boiler rooms as part of Fraud Awareness Week, but says the calls it gets are "probably the tip of the iceberg".
It believes annual losses run into millions of dollars.
"It is hard to quantify money involved as some complainants do not wish to talk about the amount they have lost. This can be because they wish to keep it private, they may feel embarrassed that they have lost a substantial amount," said FMA spokesman Andrew Park.
"Of reports to us directly, we are aware of individuals losing amounts between $4000 and $700,000."
Often people are duped into making multiple share purchases like finance professional the FMA has released a video about, who was sold fake shares in the Chinese online retailer Alibaba.
The FMA's advice on cold-calls about investment "opportunities" is hang up.
"The best response is the dial tone," it said.
"These scams are not just affecting first-timers but professional, experienced investors," said Paul Gregory, the FMA's director of "investor capability".
"These crimes are much more prevalent in New Zealand than people realise and scams really can happen to anyone."
Gregory said boiler rooms mostly sell shares but sometimes they sell fake FX trading, "binary options" and sports investment schemes.
"We recommend when considering any investment make sure you do your research, deal with a licensed provider and talk to an adviser if you need to," Gregory said.
Boiler room operations can be incredibly slick, with legitimate-looking web fronts.
Bronwyn Groot, from BNZ's Financial Crime and Security team, said: "These scams take fraud to a new level – they are incredibly slick operations that target informed, high-value investors."
"The money loss is huge, around half a million dollars in just one case alone," Groot said.
One of the key signs of a boiler room, and the one that gave them their name, is the high-pressure sales tactics their salesmen use.
"Urgent sales tactics should automatically set off alarm bells," Groot said.
Here's the FMA's advice:
- If you receive a call about a financial offer, hang up.
- Never share personal financial details with someone you don't know.
- Only deal with a registered and licensed financial provider. Check them out on the Financial Services Providers' Register.
- If you have doubts, talk to an adviser.
- Listen to your bank or financial provider contacts if they believe you may have been a victim of fraud. Do not transfer any more money.
- Check the company calling isn't on the FMA's warnings list.