Ten common types of fraud and scam

22 June 2021

3 minute read

Fraud and scams cost people millions of pounds a year. We look at some of the tactics criminals use to steal your money.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

What you’ll learn:

  • How romance fraud works
  • What the differences are between vishing, phishing and smishing
  • How courier scams work.

Fraud and scams can ruin your life.

Many people have been tricked into losing some or all their life savings, with criminals constantly coming up with new and sophisticated ways to part you from your cash.

A fraud is when someone else accesses your account and takes your money without your permission whereas a scam is when you are duped into giving or sending someone your money.

Here, in the first of our two articles on frauds and scams and what you can do to avoid them, we explore some of the tactics criminals use to steal your money.

Ten common types of scam and fraud

1. Romance fraud

If you’re looking for love, make sure you don’t fall victim to romance fraud. This happens when you start to develop what you believe is a genuine relationship with someone, only to discover later that they were only interested in your money.

Often romance fraud takes many months, with the victim slowly being groomed by their supposed new partner. The scammer will gradually start to request money, often starting with small sums and then requesting larger sums as time goes on.

2. Tour operator and holiday scams

Most holiday and tour operator scams take place online, with criminals setting up fake websites selling flights and breaks in the UK and overseas.

Often these mimic the sites of well-known airlines or holiday companies, and it’s only once you’ve paid that you discover your tickets never arrive, or that they are imitations.

Other holiday scams involve fraudsters posting advertisements on trusted booking sites and then encouraging people to pay them directly rather than via the site for a holiday or accommodation that doesn’t exist.

3. Ticket scams

These usually work in a similar way to holiday or tour operator scams, in that criminals set up fake websites selling tickets for popular events, such as concerts, plays and sporting events.

Once you’ve paid for your tickets, you’re either sent fakes, or they never turn up at all.

4. Phishing, vishing and smishing

Among the most well-known types of fraud is phishing, which occurs when someone tries to get hold of your personal information by sending out e-mails usually containing a link to a bogus website. Any information you submit via these websites can then be used by fraudsters.

Sometimes fraudsters will also attempt to get information from you by contacting you by telephone. This is known as vishing, as they are using their voice to extract information.

Alternatively, they may contact you by SMS text message, known as smishing. For example, you may be sent a text with a bogus link in it or be asked to reply with personal information to a fraudulent number.

The fraudster uses the details you’ve given to gain access to your account and make unauthorised payments without you knowing.

5. Investment scams

You’ll be called out of the blue and told about an investment opportunity that you can’t afford to miss, but if it looks too good to be true, it almost certainly is.

Fraudsters may have found your name on shareholder registers of listed companies, which are publicly available. Often firms running this type of scam operate from overseas but will have a UK business address to convince you they are legitimate.

You’ll usually be asked to invest in shares in a company you’ve never heard of, but fraudsters also push other investments such as diamonds, carbon credits or plots of land abroad. The salesman promises exceptional returns, which they claim are “guaranteed”.

You’ll be pressurised into making a quick decision, but once you hand over the money, you’ll usually never hear from the person who sold you the supposed investment again. If you do, they’ll typically ask you to invest more money.

6. Pension scams

You’ll be cold-called and asked whether you’d like to release cash from your pension, or access your retirement savings before you reach the age of 55. The government has banned pensions cold-calling, so if you are contacted out of the blue, it’s a scam.

7. Advance fee and lottery scams

With this type of scam, you’re asked to make a payment and in return are promised a much larger sum of money or a lottery win, despite the fact you never entered one.

The payment is supposedly to cover administrative or transfer costs, but once it’s made, the promised sum never appears.

8. Courier scam

You’ll receive a call from someone pretending to be from your bank or the police. They’ll tell you they’ve spotted some suspicious activity on your account, or that your card needs to be replaced. They may also say that the bank or your local branch are involved in the fraud, to scare you into believing the story and handing over your details. They’ll convince you that they’re genuine by asking you to call back on the bank or police’s real number. However, they’ll stay on the line, so you’re actually still speaking to them.

You’ll be asked for your PIN or details of your accounts. Once you’ve given these, the fraudster will send a courier to pick up your card, which they’ll be able to use because they’ve now got all the necessary personal information they need.

9. Safe account scam

This is similar to the courier scam, in so far as you’ll usually contacted by someone saying they are from the bank or the police. They’ll tell you that your local bank branch is being investigated and will ask you to transfer your money to a “safe account” they have set up on your behalf. The account will belong to a fraudster.

10. Invoice or mandate scam

This involves someone pretending to be from an organisation you have a standing order with, or a company you make yearly or one-off payments to, and is often a result of scammers intercepting emails between you and the legitimate payee. You’ll be sent an email advising you to send the money to new account details, but these details belong to a fraudster, not the genuine company.

Understanding the different types of fraud is vital, but so is protecting yourself and knowing where to go if it happens to you.

You may also be interested in

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

Reducing unnecessary risk

You need to decide how much risk you’re willing to take when you invest. This will largely depend on your financial goals, how prepared you are to accept losses, and how soon you need your money. In this section, we'll help you understand how to manage risk when investing.

Principles of investing

If you’re new to investing, knowing where to start can be a daunting task. Here, we guide you through your investment journey, from what to consider before you start, the different types of investment account, which might suit you, and the various asset classes. You’ll also learn why it’s important to focus on the long-term as an investor, and create a diversified portfolio which includes a range of different investments.