In South Africa, Be Wary of The Following Frauds

South Africans lost more than R1.5 billion in banking and card fraud alone in 2020, according to the South African Banking Risk Information Centre (SABRIC). When you include in additional frauds and victims who are too embarrassed to acknowledge being targeted, the figure is sure to rise dramatically.

The Financial Sector Conduct Authority (FSCA) has issued a new warning about a South African who allegedly scammed over 600 investors, some of whom lost more than R1 million, after making promises that investors could quadruple their money in three months by trading foreign exchange.

Then there was the story of a businesswoman who reportedly defrauded hundreds of would-be vacationers. Add to that a scam in which fraudsters pose as South African Revenue Service officers and claim to have “tax refunds” and/or summonses, enticing recipients to hand over their personal and bank account information.

Consumers have been hammered hard financially, according to Phiko Peter, client relationship manager at Allan Gray, with alarming gasoline price rises and food price increases. This, along with our desire for immediate results, provides a rich hunting ground for cunning crooks.

“These circumstances make us more vulnerable to deceptive ”special offers“ and get-rich-quick scams.” Furthermore, technological advancements have made rapid investment more accessible. Unfortunately, old-fashioned scams are getting a digital facelift, and fraudsters are leveraging online channels to defraud their victims.

Below, Peter discusses the most common investment scams and how to avoid being a victim.

The pyramid system of the twenty-first century

The emergence of social media has just made it simpler for con artists to get access to social networks, but the scam remains the same: a charming con artist presents a fantastic financial opportunity that offers incredible returns to a limited number of investors.

After that, each investor is urged to join and solicit additional investors (friends, family, acquaintances, and colleagues). As a result, these new investors attract even more new investors, forming a multi-level pyramid system with the fraudster at the apex.

Investors may see high profits at first, and they may confidently guarantee prospective recruits that their investment will pay off. These initiatives, however, are unsustainable. The plan is unable to offer returns to its investors once the pool of new investors and fresh investments has dried up, and it ultimately collapses, leaving investors with irreversible financial losses.

“In the digital era, many schemes are run using messaging services such as WhatsApp, which has proven handy for con artists who can now connect effectively and recruit with relative secrecy.”

These systems run well thanks to the use of digital payments. It'll be too late by the time the strategy unravels and the truth is out, he warns.

The money-laundering ruse

Through social media sites like as Facebook, Twitter, and Instagram, money-flipping frauds have defrauded numerous local investors.

Scams that claim to double or triple your money in a short amount of time are known as money-flipping schemes. Victims are persuaded to submit money to a con artist who promises high profits in exchange for a little fee. These investment opportunities are frequently presented in South Africa as FX trading, binary options, or offshore property prospects.

A fraudster will establish a legitimate-looking social media profile exhibiting exotic trip places, luxury automobiles, and designer apparel to carry off this social media scam. The fraudster uses these rich lifestyle photographs to portray himself as a successful and trustworthy investment.

To sell investors the dream and appeal into our need for rapid satisfaction, others would tout about working for less than an hour every day.

Once a victim has been duped, fraudsters may provide thorough investment reports to show investors how their money is increasing and persuade them to make greater investments. When an investor wants a withdrawal, they are confronted with a series of delays, and they may be requested to pay even more money to get the cash released. This continues until the fraudster deletes their account and stops communicating.

It occurs to the most well-intentioned among us.

While many of us assume we would never be fooled by these obviously blatant con artists, the truth is that it may happen to anybody.

You are not alone if you have been duped out of money in South Africa by a con artist. According to studies, even the most financially aware people may be deceived in difficult times.

Make your investing strategy scam-proof.

When evaluating a new investment, here are Peter's top red signs to watch out for:

A pyramid scheme is an investment that needs you to attract new investors in order to see a return on your investment. Be aware of ventures with several levels or tiers that categorise investors (e.g., bronze, silver, gold, platinum and diamond).

You should be careful if you don't comprehend how an investment product earns its profits and there are no obvious underlying assets.

Fraudsters try to generate a sense of urgency so that you spend less time researching and considering the possible investment. Avoid anything that is advertised as a “once-in-a-lifetime chance.”

Though previous success is no guarantee of future results, you should look into financial service providers with a good track record. The majority of con artists offer huge profits with no track record to back it up.

The investment is not regulated if it is not registered with a mainstream financial organization such as the FSCA. You should also contact financial organizations to confirm the registration of any new or inexperienced financial business.

The old saying still holds true: if something appears to be too good to be true, it most often is. A con artist is someone who plays on your emotions in order to gain money. Trust your instincts; they will save you money in the long run.