Source: Financial Markets Authority
MR No. 2020 – 43
19 November 2020
The Financial Markets Authority (FMA) has reported a steep rise in the number of investment scams attempting to impersonate legitimate New Zealand businesses since the emergence of COVID-19.
FMA research has also shown one in five New Zealanders have been targeted by investment scams.
From 1 April to 5 November 2020, the FMA issued 61 warnings about investment scams, of which 21 (or 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, in the same timeframe during 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.
The FMA is running an impostor scams public awareness as part of Fraud Awareness Week, which runs from 15 to 21 November.
Liam Mason, FMA Director of Regulation, said 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’re constantly vigilant about the scams that are targeting New Zealanders but it’s 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,” Mr Mason said.
“The best solution is for New Zealanders to 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’s 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.”
Christchurch investment 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 – G.R.C Trustee.
G.R.C Trustee’s website falsely claimed 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 GRC Investments Ltd’s Certificate of Incorporation, to further fool investors.
In fact, GRC Investments had nothing to do with the impostor and never sought public investors. It was solely used for private investing by its owner, Garry Carleton.
Mr Carleton was first made aware of the impersonation was when the FMA contacted him.
“I was annoyed and worried when I first found out,” Mr Carleton says. “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.”
Fortunately, there were steps Mr Carleton could take to mitigate the risk.
“Initially I felt powerless to do anything, but then I remembered the Companies Office has added optional fields to their website that let me to add extra details about my company. I’ve 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.”
“I’m now looking at updating my other companies’ details, to advise that they are private companies not dealing with the public.”
He recommends other companies do the same, and is in no doubt why such scammers are stealing Kiwi companies’ identifies.
“We have a good reputation because the vast majority of our businesses operate honestly and responsibly. The scammers are simply abusing that to steal other peoples’ money.”
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 targeted had been approached about. This was 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 over the phone (24%).
What consumers/investors can do:
- Don’t 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 NZ.
- Check the domain name, which can be done via 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 FSPR to warn about the scammers
More information about investment scams can be found on the FMA website.
FMA Media Relations Manager
021 220 6770
FMA Senior Adviser, Media Relations
021 945 323