How to avoid Ex-pat Scams

How To Avoid Getting Swindled

Fraudsters operating from so-called ‘boiler rooms’ are swindling British expats out of millions, according to statistics. So how can you avoid getting cheated?

Brits abroad are one of the most vulnerable sectors of the international community. When it comes to mis-management, mis-selling and cyber fraud, statistics suggest we are cheated out of a staggering £2 billion per year. Boiler room scams account for a significant proportion of our losses. Statistics released by the UK’s Financial Services Authority (FSA) suggest that the typical victim of a boiler room loses in the region of £20,000. And surprisingly, the victim is likely to be an experienced investor, probably a male in his 50s or 60s.

What Are Boiler Rooms?

Boiler rooms are close knit syndicates of fraudsters, usually based overseas who use a range of sophisticated high-pressure sales techniques to persuade investors to purchase dubious stocks and shares Of course, boiler rooms are not authorised by any regulator and are acting illegally by promoting and selling shares to investors. In the vast majority of cases, the shares they are selling will prove to be worthless and the boiler room will vanish, leaving the hapless investor severely out-of-pocket. Generally speaking, because boiler rooms generally target investors outside of the country they are based it is difficult for regulators such as the UK’s FSA to take direct action to shut them down. However, the FSA’s latest survey provides an insight into how the fraudsters function and an overview of the scale and nature of their operations.

Well over half (58%) of all respondents to the FSA survey had, at some time, fallen victim to a boiler room type scam and purchased worthless shares as a consequence. Of these victims, 13% had been conned more than once. Three victims each reported losses of over £100,000. The average loss was in the region of £20,000.

Jonathan Phelan, Head of Retail Enforcement at the FSA, says, “Boiler rooms can be lucrative operations that fraudulently earn serious money. £20,000 is a shocking sum and far more than most people can afford to lose.

“Sadly, victims are unlikely to see their money again because their shares will have been overpriced and nearly impossible to sell. Boiler rooms are not authorised by the FSA, and are based abroad outside our reach, so victims are not protected by the financial services compensation and complaints schemes. Our strongest tool is to make people aware of the scam.”

Who Are The Victims?

The survey found that boiler rooms tend to prey on older people. Of those who had fallen victim, 38% were aged over 60 while 26% of victims were 51-60 years. The majority of victims were male (81%) and most were experienced investors with 41% of victims saying they had been investing for over a decade.

Many respondents reported that the boiler room called them repeatedly over an extended period of time to encourage them to invest. While 15% of victims were persuaded to purchase shares during their first call, nearly half (49%) of victims were called four or more times before they succumbed. Regardless of whether they purchased shares or not, 63% of respondents reported that they were pursued by the boiler room for at least one month and nearly a quarter (23%) said they were receiving calls from the same boiler room for more than six months.

Mr Phelan explains further, “Boiler room salesmen won’t take ‘no’ for an answer. They will constantly call a target, trying to build a relationship and get their confidence. They will appear knowledgeable and highly professional but they are only interested in taking your money.”

Modus Operandi

Many of the respondents (57%) reported that they were first contacted by the boiler room out-of-the-blue on the telephone. And one quarter (26%) of respondents reported that they had been approached by four or more different boiler rooms.

This is hardly surprising, as the fraudsters often move from operation to operation taking lists of potential targets with them. These lists may contain far more than names and addresses. Sophisticated fraudsters will construct rounded profiles of their intended victims, amassing as much personal detail as possible.

Although boiler rooms do not necessarily operate from where they say, the countries most commonly cited as locations for their bases are Spain, the US and Switzerland. Anecdotal evidence also suggests Eastern European countries are becoming increasingly popular bases.

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