Common Expat Investment Scams And How To Avoid Them

Investment firm AES International issued a warning to British expats living in Spain to be wary of potential financial fraud after scammers targeted them because Brit savers now have access to their pension pots at the age of 55.

The firm’s head of pensions, James McLeod, said: “There are many unregulated and unqualified advisers working in Spain who see the pension eligibility rules as an opportunity for swindling hard-working people out of their life savings.”He warned that fraudsters urge unsuspecting expats to withdraw funds from their pension scheme based in the UK but there are rules that must be followed and failure to do so could see heavy charges being levied by HM Revenue and Customs.

This is where airline pilot Jeremy Donaghy-Sutton fell foul after transferring his pension cash under a pension liberation scheme, which means his plan of an early retirement has now ended.

He is also being chased by HMRC to pay 55% of the transferred amount because people aged under 55 cannot access their pension pot unless they are very unwell. This hasn’t stopped scammers targeting British expats with promises of being able to access the pension pot without penalties.

Mr Donaghy-Sutton told the Daily Telegraph that a financial adviser based in Spain said he could take half of his pension pot tax-free to buy a property rather than obtaining a mortgage. This was untrue.

However, he is not alone and the UK’s Financial Conduct Authority is warning British investors living in the UK or overseas to be wary of the growing trend of expats being targeted for their pensions.

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The situation is becoming so bad that there’s an organisation to help those who have become pension liberation scam victims. In total, the 800 members are owed around £30million and they say thousands of British expats may have been affected.

Offshore funds at the centre of fraud scams

Sean Browes works with a firm operating on behalf of The Pensions Regulator to recover money stolen in pension scams and he says that offshore funds are at the centre of pension liberation and fraud scams.

Mr Browes explains: “Fraudsters persuade people to hand over money or their pension fund by promising excellent investment returns but they shift the money into offshore trusts where we can’t find out about the people involved.”

Financial experts say pension scammers often use three particular terms:

– Legal loophole – They will suggest they have a way for someone aged under 55 to access their pension pot without having to pay tax. They do not – there are no loopholes.
– Sophisticated investor – used by scammers to charm an expat investor into believing they are a sophisticated investor so an unregulated investment will appeal. Be warned that unregulated investments are outside compensation schemes.
– Free transfer – There’s no such thing as a free transfer. Investors must now pay for their advice (in the UK) and the pension fund transfer will incur administration charges.

It’s not just scammers targeting expats for their pensions – they also fall prey to crooks wanting to sell them property.

Among the famous scammers targeting expats include John ‘Goldfinger’ Palmer who was sentenced to eight years’ imprisonment in 2001 after fleecing 6,000 would-be British expats with a Tenerife timeshare scam.

And British expats in Spain are ruing the day they encountered ‘Sir’ Nigel Goldman, who fled the country in 2014 after dozens of investors lost millions of euros when his investment advice fell flat.

Upon returning to England, Goldman then began selling coins over the Internet until furious customers accused him of fraud, which led to a British police investigation and an appearance in Reading Crown in January. Goldman, also known as Howard del Monte, was found guilty on two counts of fraud and was handed a 12 month suspended sentence as well as being placed under a 15-month long house curfew. He now has to wear an electronic tag and has had his passport taken away. A Spanish investigation into his activities that left expats out of pocket are ongoing.

Among the most popular investment scams carried out in the UK aimed at British investors and expats alike are those for film production where the film production company is a fraudulent vehicle; land banking with investors offered the chance to buy a small plot of agricultural land where house prices are high but there’s no development potential for the land.

Overseas property scam

Another popular investment scam is for overseas property, particularly involving expats buying off plan developments in other countries with a promise that they will reap higher rewards by investing early. There are also share scams where investors receive a cold call offering them overpriced or worthless shares and an investment in rare earth minerals whereby the investor will receive metals for selling at a profit, without being told that companies will not buy these from individuals.

Not all scams are easy to recognise. Around 1 million investors in China, including many expats looking for better returns on their money, have been scammed out of £5.3 billion because they invested with an online peer-to-peer lender which, unknown to them, was a giant Ponzi scheme. Now 21 people behind the fraud have been arrested and two of those who masterminded the project have confessed to their involvement. Chinese authorities say that the scam by Ezubao is one of the biggest financial frauds in their history.

The scheme became successful very quickly – it took just 18 months to become China’s biggest online finance platform – by offering investors returns of between 9% and 15% – much higher than they could get with mainstream financial products.

Protect yourself

The most important piece of advice for expats is not to rush into making an investment – no matter how great it sounds or how much pressure the salesperson is putting on them. It’s important they carry out their own research and take time before coming to a decision.

Expats should also be wary when they are contacted by telephone by an investment company and should this happen then they should ask the person making the call for their contact details and for an official piece of correspondence. If they fail to do either of these things, then it’s probably a scam.

Expats should also never provide cash to someone because they have deposited money into their account; they should wait until the funds have cleared before providing money.

One such scam that has been reported by the BBC has seen thousands of immigrants being targeted this year by fraudsters who are posing as Home Office staff to demand money so they can remain in the UK.

Thousands of people have been targeted and have handed over several thousand pounds each to the scammers who use ‘phone spoofing’ to help with the fraud; essentially, they were able to have the real Home Office number displayed on the recipient’s phone so when they checked and found it was a real number they believed the scam to be ‘real’.

AES is also warning expats about scams to buy properties in Spain which are later found to have been built illegally and the homes are then taken away from the expats.

Expats are also prone to identity theft and when they move overseas this becomes a complex situation.

Fraud prevention company Cifas says growing numbers of expats are falling victim to identity theft and the firm’s Simon Dukes said: “Expats are aware of some of the scams in their new country but not in their home country.”

He said the big issue for expats who live overseas is they may not review bank statements regularly or even check their credit report which means that should their identity be hijacked, it’s often too late to challenge the culprits.

He added: “One irony is that the expat victim of identity theft is often unable to prove who they are because they are often calling from abroad or their computer IP address is overseas.”

The other big issue is that an expat may have rented out their family home which means their tenants have easy access to their personal details and are then able to apply for bank loans and suchlike without the expat finding out.

The US-based Identity Theft Resource Centre has this advice to escape the attentions of fraudsters:

– Check your credit report for unusual activity
– Change all of your passwords before leaving for an overseas assignment with a stronger combination of numbers, letters and symbols; this will make it harder for scammers to access an expat’s bank account
– Ensure all mail is redirected or switch to having online-only bank statements
– US expats can freeze their credit by contacting credit bureaus to discourage lenders from giving credit in their name

Also, UK expats can set up a property alert with the Land Registry should scammers try to take possession of their property or obtain a mortgage for it – other countries have similar schemes.

Seeking advice

Expats who believe they may be about to be duped with a scam can always seek advice from a reputable and professional independent financial adviser before they spend large amounts of money on a high risk investment.

It’s also a concern that clever fraudsters targeting expats may be using the details of a firm authorised to conduct financial investments but their contact details may differ slightly from those of the FCA register, for instance, if they are based in the UK. It’s important that all expats do not check a company’s details on their website or with an email they have sent but instead use a publically accessible register to carry out the address confirmation.

Essentially, expats can protect themselves from being scammed by using their common sense – if an investment sounds too good to be true, then it probably is. They should also ask themselves a number of questions about the validity of the company, such as whether they can visit their head office and whether they can speak with other investors to see if they have enjoyed the promised returns.

Indeed, this is a big issue because in an environment in which interest rates have been at record lows for their longest ever period, savers and expats working abroad are looking to get better returns on their money than they would otherwise enjoy by leaving their cash in a savings account.

However, anyone – whether they are a financial adviser or firm – who is making claims that they can generate returns that are higher than those offered for a savings account needs to be treated with extreme caution and expats should always be vigilant to the efforts of scammers who are becoming more sophisticated in their operations.

More information

The scale of investment scams in the UK is set to be around £1.2 billion, which is why the Financial Conduct Authority has created the ‘Scam Smart Investor’ website. This offers tips and advice for UK-based investors, but the information is also useful for investors based overseas.

AES International has published a useful booklet entitled ‘Expat Pensions – The Ultimate Guide‘ to help avoid falling prey to scammers.

The Pensions Regulator has also launched a campaign to warn investors that scammers are after their pension pot. More information about the Regulator's Scorpion campaign.


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