How to spot a fraud

There are a lot of ways to spot an investment scam and protect yourself from fraudsters. Operators of boiler rooms, for instance, usually approach you through uninvited phone calls, emails, faxes or post.

So, as a general rule, it is best to avoid companies that regularly cold-call you on the telephone or contact you through unsolicited correspondence.

"The first rule is that nearly all unsolicited emails or calls promising great wealth in return for certain private information are likely to be scams. No bank or organisation will approach the public in this manner.

Therefore, ignore the opportunity no matter how great the temptation or how desperate you are for money.

Any other action will waste your time and reduce your protection to future privacy," John McGaw, senior advisor of Golden Oryx says.

"The second rule is that if you are tempted, do as much due diligence before giving out private information. Google where possible. Meet the person or people to see the colour of their eyes. Your instinct may confirm your earlier suspicion.

"Think the offer through very carefully and don't be shy or embarrassed to share your temptation with an experienced professional — lawyer, accountant, financial adviser," he adds.

If you do entertain financial offers, it is important to do a background check of the people and company you are dealing with.

Credentials

"If they persuade you with a good story, ask for their credentials. Where are they authorised to conduct business, and by whom? Who are their principals, and what track record do they have? Are the directors trustworthy? Are they selling something that offers consumers protection in a properly regulated environment?," advises Steve Gregory of Holborn Assets.

McGaw says make sure you also obtain a passport copy from the person negotiating with you, proof of private address and place of work.

Also, request for a certificate of incorporation of the company and check under which regulatory system the company adheres to.

"Finally, having done all these and you still invest, make sure you obtain a receipt. The more written proof you have of the transaction, the more likely you can file a criminal case for theft or fraud in the event that the return on investment never materialises. In this event, contact the police immediately," McGaw adds.

While still in discussion over an investment offer, Gregory says you also need to establish if you can turn to an ombudsman or a regulatory body in the event that you're not satisfied with the company or the financial product.

One of the telltale signs that you're being conned is a lapse in communication after you've handed over your money.

"Probably the telephone number has ceased to operate, the e-mail address is inoperative and the scammer has simply vapourised," adds McGaw.

"Signs that you may be being duped include refusal to answer your questions and anger from the salesman for wasting his time. Actually he is probably wasting yours. Take the name of the company concerned and research it online. This may lead you to people who have used the services of scammers and help you identify companies you do not want to deal with," explains Gregory.