The FCA has gone to great lengths to regulate the conduct of finance industry players in the UK. In an effort to protect consumers, the FCA has a guide that is bound to help you avoid being scammed and/or dealing with unauthorised firms.
The consequences of dealing with unauthorised firms are dire. For instance, individuals who conduct business with unauthorised firms aren’t covered by the Financial Services Compensation Scheme or the Financial Ombudsman Service in case anything goes wrong. To avoid losing your hard earned money, it is important to avoid unauthorised firms. Furthermore, most scams are orchestrated by unauthorised firms.
This leads us to a very important question; how do you avoid scams and unauthorised firms in the UK? Below are 10 important steps to consider according to the FCA.
Step 1: Don’t accept cold calls
You should treat cold calls with extreme caution to avoid being scammed or dealing with unauthorised firms in the UK. Ideally, you should not pick cold calls and if you do, hang up immediately. It doesn’t matter how attractive an investment sounds, most scammers cold-call potential clients. They may also email or text you. For this reason, never open or respond to unsolicited correspondence. It is possible to set protective mailing and telephone preferences to keep you safe.
Step 2: Check if the firm you are about to deal with is registered or authorised
This has to be the easiest but most overlooked way of avoiding scams and unauthorised firms. You shouldn’t deal with any firm that isn’t authorised or registered by the FCA. The FCA has a register (https://register.fca.org.uk/) that lists firms as well as individuals that are authorised or registered to conduct business in the UK. It is advisable to access the register directly from the FCA website as opposed to clicking links in emails for security reasons.
It’s also advisable to beware of registered firms which don’t volunteer adequate information to the FCA since firms aren’t obligated to provide a lot of information about their business. When confirming the identity of any authorised firm on the FCA register, ask for the FRN (Firm Reference Number) as well as the contact details. It’s also good to call the firm back using the switchboard number on the register as opposed to any direct line they may offer you. If you can’t find contact details or the firm claims the details are outdated, call the FCA consumer helpline (0800 111 6768) for help.
Step 3: Check the FCA list of unauthorised firms
FCA has a special list (https://www.fca.org.uk/consumers/unauthorised-firms-individuals) containing all unauthorised firms. To avoid being scammed, make sure you check if the FCA has blacklisted the firm or individual/s you want to conduct business with. The FCA list contains all firms as well as individuals that the FCA has received complaints about. Although the list changes regularly, the FCA adds new firms and names as frequently. Please note that you shouldn’t assume that the firm or individual you are about to deal with is legitimate simply because they are not in the FCA list. The firm/individual may not have been reported to the FCA yet.
It’s also worth noting the FCA has another list (a warning list) http://scamsmart.fca.org.uk/warninglist/ that contains names of individuals and firms that contact people unexpectedly about investment opportunities. You can use this list to see the kind of investment opportunities, firms and individuals you should avoid.
Step 4: Conduct additional checks
Today’s scammers use tactics that keep evolving so don’t stop even after checking the FCA’s list of unauthorised firms. For instance, you should investigate the firm’s website using Companies House (https://www.gov.uk/government/organisations/companies-house) or directory enquiries to ascertain if the firm has issued the correct details on their website.
Step 5: Be cautious of cloned firms
Most scammers pretend to be subsidiaries of a company authorised by the FCA. The scammers usually claim to be overseas firms authorised to conduct business on behalf of FCA authorised firms. Beware of such firms (commonly referred to as cloned firms). To avoid being scammed by cloned firms, check the website of the authorised firm to confirm if the firm has subsidiaries or authorised partners.
Step 6: Stop sending money immediately
If you have already started conducting business with a firm but start getting suspicious that you are being scammed, stop sending money to the firm or individual in question immediately. If you have already surrendered your bank account details, inform your bank immediately.
Step 7: Beware of overseas firms
Most scammers today will present themselves as overseas firms making it hard for you to check and ascertain if they are regulated. Luckily, the FCA has compiled warnings from foreign regulators here: http://www.iosco.org/investor_protection/?subsection=investor_alerts_portal. These warnings are about foreign firms operating illegally and/or scamming people in the UK. Before dealing with any overseas firm/scheme, find out how that firm/scheme is regulated.
Step 8: Report unauthorised firms
If you suspect you have been dealing with an unauthorised firm, contact the FCA immediately through their consumer helpline number (0800 111 6768). The FCA has a reporting form that allows you to report as much information as possible about the ”suspect” firm or individual.
Step 9: Be cautious about further scams
Scammers take advantage of the fact that individuals who have been scammed will want to get their money back. As a result, beware of individuals or companies that call to assist/help you get your money back.
Further scams can assume many forms. For instance, you may be offered another deal that comes with some fees that must be settled before you can get your money back. You can also be threatened with some legal action if you request for a refund or stop sending money. Scammers also ask for personal information such as bank account details for them to send you a refund. Instead of getting back your money, the scammers can attempt to steal your funds and/or sell your personal information.
Step 10: Don’t forget about fake liquidators
The FCA has received numerous reports that scammers are impersonating liquidators/claiming to represent legitimate liquidators. Such scammers usually charge a fee, tax to sell/release/return your investment. You may also be asked for an upfront payment. Avoid such firms/individuals by all means. You can find legitimate liquidators by clicking here: https://www.gov.uk/find-out-if-a-company-is-in-financial-trouble
Although there may be other steps to follow when you want to avoid fraudsters and unauthorised firms in the UK, the above steps are the most important according to the FCA. If you follow them to the letter, you don’t have to worry about being a victim of any financial scam in the UK.