Beware - A scam business looks real.

  A high level scam business can appear very authentic, with offices, staff and glossy literature. Knowing the tricks of a scam organization can keep your money safe.

   In the Financial Planning industry, investment advisers require licences. Requirements to get a financial services license are not hugely difficult, particularly if it is only a restricted license that covers only one or two things such as running a trading seminar or selling a black box. Even unscrupulous people can get a license if they are willing to submit the necessary paperwork.

   In Australia licensees are subjected to surveillance by ASIC. There are annual (or more frequent) compliance audits and licensees may face prosecution if matters turn up in their audit that contravene license conditions. As a condition of having a license, licensees must have professional indemnity insurance, must have demonstrated that a compliance system is in place, are bound to disclose commissions, risks and benefits and most importantly are obliged to be a member of an ASIC approved independent external complaints resolution service like the Financial Industry Complaints Service.

   But if a person is operating a scam business and is not licensed you have no protection whatsoever.

   Recovering your money may require a lawsuit through the courts (if you can find the conmen behind the scam business). You may find that they hire better lawyers than you, you may find that you don't have enough money to afford any litigation and above all you may find that the operators are straw men with no assets for you to recover, having stashed everything in secret offshore accounts.

Spot a scam business:
Frequent change of name and address

  Conmen remain in one place only as long as necessary. When the word does eventually get out that the product is a scam and the media start exposing the conmen will have changed the business name or have skipped town. Always check the length of time a business has been operating.

  Don't just rely on the fact that the business has fax facilities, glossy brochures, a website, secretaries and consultants and a nice office downtown. These things can easily be arranged and the costs justified when the scam is to rip off huge sums of money in a short time. The pawns in the business (secretaries and maybe salesmen) might not even know it is a scam operation. They may even end up scammed themselves when the business closes shop overnight leaving wages unpaid.

  If a person or business is in the financial planning industry and licensed, expect to receive a Financial Services Guide. (Or an Advisory Services Guide, if they are licensed with an older style license and haven't converted to an AFS license yet). If there is no FSG (or ASG), do not deal with this organisation.

  Some scam businesses try to win your trust by providing credentials that mean absolutely nothing at all.

  Examples of meaningless achievements include:
• Company is registered with ASIC, business name listed with state Dept of Fair Trading. (All companies and business names must be registered, this is not the same as being a licensed financial services provider.)

(Henry Kaye's National Investment Institute told people orally and in their marketing material that the company was "approved by ASIC", which was either to claim that the company was registered, just like all other companies, or licensed, which was in fact a lie.)

• That the guru has given seminars to so many thousands of people. How many tickets they've sold to unsuspecting get rich quick suckers is more a measure of their advertising success than the quality of their information.

• A common claim among property gurus is that their customers buy millions of dollars worth of property using the techniques they teach. Buying lots of properties is no indicator of whether you've made reasonable money while accepting reasonable risks. The point is irrelevant because it really only reflects how much money borrowed.

• Trade marks, copyrights. (Registering a Trade mark is just a matter of being the first to apply for one.)

  Like seminar peddlers, scam artists don't make money by selling information, they make money by promoting a dream. They show off a photo of their yacht (actually, it might not even be their yacht), or their sports cars purely to incite desire in the prospective victims. As long as they are thinking of having better things and about all the money they'll make, their usual sense of caution will drift away long enough for them to pull out their cheque book and write out a cheque to sign up for the course or attend the more expensive advanced version of the seminar or commit to some investment scheme.

  If promoters focus on pictures of big beautiful houses, luxury yachts, private jets, handsome well dressed couples walking barefoot along the beach, but give little detail about the investment product then you could be seeing a warning sign.

  The typical targets for scam artists are the people looking for the kind of information that will enable them, without much effort on their behalf, to become extremely wealthy in a fairly short period of time. They don't want to hear about the guy who spent twenty years building a successful business or the person who made careful investments and good returns over many years and is now able to retire a multimillionaire at the age of 50.

  Naturally all advisors and investment providers want to promote the idea that you'll get more wealthy if you follow their plan but get rich quick scammers take this to another level. Making the fortunes that enable such a lifestyle from the capital that a middle class worker could scrape together would require rates of return that are simply unachievable in anything less than several years.

  If all you hear is wealth and how quickly you can have it, if you are thinking about all those debts of yours and how finally you can get out of debt and get that Ferrari you always dreamed about, then you can take it as a signal to tread more cautiously.

  As long as the relevant disclaimers are given to advise that no investment is free of risk, people can get away with telling people any old thing and charging whatever the market will bear.

  Testimonials without complete names and addresses are really not worth the paper they are written on unless those people can be contacted and asked personally. Even then, unless there are many you could contact if you wanted to, the testimonial givers might be a plant.

  The most outstanding thing about positive testimonials is that they nearly always seem to come from brand new users who have only just started using the product. For example it is not uncommon for these testimonials to be made from someone writing to the company rejoicing that in their first week of trading they've already made good money, sometimes it relates to their first trade or first couple of trades. Very rarely do you hear about someone claiming to be a successful user when they've been doing it for many years, even though some get rich quick companies have been around for a very long time.

  Of course this particular recognition point is difficult for people to use when checking out a company because generally you only get access to other customers when you become a customer yourself.

  Companies also regularly search the Internet for negative reviews of their products and have their lawyers send nasty letters to webmasters and ISPs. Some companies have a very aggressive policy of silencing Internet critics.

You are here:
Spotting a Scam Business - The features of businesses and organizations which are out to take your money while under the guise of a legitimate business operation.

Offshore Scams and Rip-offs - an introduction to the biggest offshore investing danger.

Spotting a scam - How to recognize a scam. Common traits of offshore scams.

Spotting a Con-artist - How to recognize the typical characteristics of the conman after your money.

Common scams - a description of the main types of scam commonly perpetrated offshore and onshore.

Avoiding scams - How to go about avoiding being caught up in a scam onshore and offshore.

Reporting scams - Where to report scams and bodies that can be of assistance.

Information scams - a warning about a type of scam that targets small amounts from offshore information seekers.