It took just two weeks for Lin (not his real name) to see his life savings evaporate.
In a ruse involving a mysterious woman who directed Lin to a “broker” dispensing “trading strategies”.
The 49-year-old Singaporean was eventually told to download a mobile application called MT5 which he would supposedly use to make trades.
After opening an account on the app and transferring more than S$26,000, Lin was then given detailed instructions to follow that supposedly would guarantee him a profit.
At first, everything seemed to be going well — Lin saw his profits grow in the thousands.
Then one day, the broker dropped Lin a message, informing him that a trade was going on and asked if he was confident to invest that day.
This time, the broker encouraged him to "buy more since you're confident" and Lin followed suit.
Yet within minutes, Lin’s investment took a sudden nosedive; Lin not only lost all the money he’d invested in MT5 but his account had accrued a deficit of S$53,000.
Under pressure from the broker to pay off his debts, Lin transferred another S$10,000 into the app and borrowed money from his friends.
The whole time, though Lin never did a check on the company, the whole operation seemed legitimate enough that he did not suspect he had been duped until he was informed by the police.
He had in fact fallen prey to an investment scam that hoodwinked him to the tune of S$50,000.
Unfortunately, such cases are on the rise in Singapore.
According to the Singapore Police Force, investment scams here have seen a 126 per cent increase, totalling 1,102 cases with losses of at least S$69.5 million between 2019 and 2020.
And as technology takes an increased presence in our lives, you can only imagine that those numbers might be rising.
So how can we protect ourselves from investment scams like the one Lin unfortunately found himself tricked by?
There are three simple steps that you can follow to evaluate the veracity of any investment opportunity:
Ask as many questions as you need to fully understand the investment opportunity. If there’s some part of the investment that doesn’t quite make sense to you, keep asking questions until it does.
After all, if you are going to be handing over a sizable amount of money, whoever is getting it should be happy to field your questions.
Here are some questions that you might want to ask:
- How are the profits generated?
- What is the maximum I can lose?
- How long must I stay invested? What happens if I want to withdraw my money?
- What are my options for recourse if anything goes wrong?
Make sure you continue to ask for clarity if the answers don’t seem to add up.
And if they’re unable to answer your questions or appear to avoid answering them, that's a red flag.
Even if a company is able to answer all your questions, you will still want to do some checks.
Especially with information so readily available on the internet, a simple search can turn up lots of information about a company that's placing a proposal in front of you.
For example, you might stumble upon someone sharing their negative experience, or read that the salesperson you’re interacting with had previously been involved in a questionable transaction.
You’ll also want to look out for indicators that the company, its owners, directors and management members are genuine and providing a bona fide opportunity.
Here are some things to look out for:
- Check if the information provided by the company about itself is true. For example, check their address, business registration number and track record.
- Check if the company’s owners, directors, and management members really have the qualifications and experience they say they do.
- Check if there are any complaints or negative comments about the company or its related persons in the news or online forums.
After doing your own research on the company, one final step you’ll want to take is to confirm the company’s and its representatives’ credentials.
The Monetary Authority of Singapore (MAS) has a few resources online that make searches easy:
- The Financial Institutions Directory — a list of financial institutions regulated by the MAS, including details of the activities they are authorised to provide.
- The Register of Representatives — a list of individuals who conduct activities regulated by MAS.
- The Investor Alert List — a list of persons who may have been wrongly perceived as being licensed or authorised by MAS.
The MAS strongly encourages individuals to deal only with regulated entities, so that they can be protected by the laws covering such activities.
What should I do if I suspect I’ve fallen prey to a scam?
You’ll want to make sure you have receipts of everything — text messages, transactions, statements.
If you’ve spotted any suspicious charges on your credit card you should contact your bank immediately so they can reverse the charges and, if necessary, block future transactions on your card.
Finally, you should make a police report, which can be done online here.
Where else can I learn about investing my money wisely?
You can visit the MoneySense website for more information on investing.
MoneySense is Singapore’s national financial education programme. Its aim is to help Singaporeans to manage their money well, and make sound financial decisions on their own.
The website also provides more information on how to avoid falling to the kind of investment scams that our friend at the top, Lin, got duped by.
Writing this MoneySense-sponsored article made the writer recall all the times he was scammed into doing chores at home.
Top image by Pickawood via Unsplash