It’s a sad state of affairs that there are fraudsters hard at work to relieve hard-working people of their money but expats around the world are particularly vulnerable because they may trust someone they shouldn’t in their new country or because they have never come across a certain scam before.
Indeed, it’s important to learn about some of the most common scams since this knowledge will help bring some measure of protection. In this article, we’ll spell out many of them.Sadly, the prevalence of financial scams aimed at expats living in Spain – though these ‘qualified’ advisors work around the world – is still a concern, with fraudsters pretending they are regulated as financial advisors.
The fake advisor will convince their client they have their best interests at heart but place their money in risky investments and the money will then disappear. These are often substantial sums and may involve someone’s life savings.
Financial advisor scam checklist for all expats
Here’s a quick financial advisor scam checklist for all expats who are approached by a financial advisor and asked to make a financial investment. Even if they have been recommended by a friend or a colleague, you should still:
– Ask questions about the advisor’s qualifications and experience
– Ignore testimonials since they are probably false
– Ask to speak with a client who has enjoyed the advisor’s services
– Clarify charges and fees from the very beginning
– Do not spend money up front until you are aware of these fees and also of commissions
– Do not spend money until the advisor’s credentials have been checked
– Do not be shy about asking for a second opinion on any financial advice
One of the big issues for British expats, in particular those living in Spain, is pension liberation schemes.
Since April 2015, British pension savers over the age of 55 have been able to access their pension pot to invest as they see fit. Unfortunately, this offers fake financial advisors great potential for scamming unwary pensioners.
British pension savers under the age of 55 cannot access their pension savings unless they meet specific criteria, for instance they are seriously ill.
Despite what the financial advisor may be claiming, there is no loophole for accessing a pension pot under the age of 55 without paying a tax penalty to HM Revenue and Customs. This means the pension saver will probably lose their money to the financial advisor and be hit with a hefty tax bill; they will probably end up losing most or all of their savings.
The scams are known as pension liberation schemes, and the Financial Conduct Authority (FCA) regularly issues warnings and alerts about them.
Indeed, one leading pensions provider says that cold callers are targeting people aged over 50, and around one in eight retirement savers has been contacted to offer a free pension review and to ‘unlock’ their pension fund.
The findings come from Old Mutual Wealth, which found that scammers are increasingly posing as bogus independent financial advisors and the number of pensioners contacted has risen 56% on the previous year.
The research also reveals that the fraudsters are offering to transfer a saver’s pension pot to another pension fund or to a Qualified Recognised Overseas Pension Scheme (QROPS) or a self-invested pension plan (SIPP) but they are charging huge fees for the service and the savings are then placed in dubious investments where the money disappears.
A spokesman for the firm said: “These pension liberation firms are promising to move money into alternative investments that offer fantastic returns but rarely pay off.”
There’s even a watchdog set up by those concerned by the growing number and sophistication of the scams called Pension Life; they say regulated financial advisors are also endorsing pension liberation schemes.
Financial advisors may appear to be regulated
Pension Life says that financial advisors may appear to be regulated and qualified but their ethics are questionable and when recommending a pension liberation scheme, they’re often not acting in the best interest of the client.
Alongside Spain, the FCA has unveiled the world’s top locations for financial scams aimed at expats and in second place is Hong Kong where expats are deluged with cold calls from advisors offering a free pension review.
The FCA says there has also been a rise in cold calls from Brazil where fraudsters are offering alternative investments, for instance investing in teak tree plantations – but these are often worthless.
The top five also sees Russia making an entry as a leader in cybercrime, with fraudsters targeting expats with various moneymaking schemes.
There’s also a warning for expats who are living in southeast Asia, who are particularly vulnerable to independent financial advisors who are unregistered and are working illegally. Those in Thailand are the most at risk.
US expats are also particularly prone to financial scams, which is why the Internal Revenue Service (IRS) publishes a ‘Dirty Dozen’ list of scams every year to help potential victims be informed and stay safe.
Topping the list on a regular basis is identity theft with fraudsters filing a tax return with someone else’s Social Security number. The IRS is cracking down on this particular scam.
US expats also suffer telephone scams with fraudsters pretending to be an IRS agent and demanding payment. There’s also growing use of ‘phishing’ scams, which sees fraudsters use fake websites and send unsolicited emails that appear genuine but aren’t. Their aim is to steal personal information.
The complicated tax system for Americans has also seen a growth in tax professionals setting up shop to help taxpayers complete their tax returns. While many are legitimate professionals, others are stealing identities, perpetrating refund fraud and attempting other scams.
This last scam has also led to a growth in fraudsters promising a big tax refund by asking the US citizen to sign a blank return before the fraudster can check the person’s tax records. If there is a refund to be had, the victim will not be seeing it.
US expats are also being warned about fake charities but this advice also extends to all expats around the world.
Taxpayers should be aware of fraudsters
The IRS says taxpayers should also be aware of fraudsters that masquerade as a charitable organisation so they can attract money from unsuspecting contributors. Anyone making a charitable donation should ensure that their money is going to a legitimate cause.
It should also be noted that the victim does not even have to be living and working overseas to be targeted in a scam since there’s a growing number of fraudsters targeting people looking for work abroad by email.
This has led to a warning from LinkedIn for expats to be wary of anyone offering a dream job out of the blue, particularly if there is a request for a payment to process their application or to obtain a visa.
Any company worth working for is not going to ask potential recruits to pay money upfront to process their job application.
To help deal with spam or phishing emails, expats should:
– Set up a filter (if your email client doesn’t already filter these out)
– Never trust unsolicited email
– Be wary of email attachments and do not open them
– Do not click on any link within an email message
– Have a quality antivirus software installed – and keep it updated
– Have a personal firewall installed
There are also a couple of other tips for expats who receive unsolicited emails and that’s to check the email address itself. If it’s a free email service provider, such as Gmail or Hotmail, then it is probably not from a potential employer.
Be wary if there’s bad grammar, such as spelling mistakes, in the email and if there is a request for financial or personal information, particularly if it is of a type that is not normally on a CV.
Another issue for expats, particularly in poor countries, is being approached by someone who is begging for help in paying hospital bills. They often have a fake injury to help bring credence to their claims.
Should the expat offer to take them to the hospital or a pharmacy they may find that the injured person is not interested in being taken there and may well take off.
Female expats are often targeted by a woman who claims her child is sick and in hospital but the hospital is in another city and she will ask for cash to travel there and will promise, sincerely, to repay money the following day. To prove how honest she is, the woman asking for money will hand over her telephone number but it’s unlikely the expat will see their money again.
A twist on this particular scam is for a woman to knock on the door of an expat’s home with a crying toddler or baby and she will ask for money to help feed her child. Expat forums warn people to check through the peephole to see who is on the other side of the door before opening it.
Expat forums in Abu Dhabi also warn new expats to be wary of a family that appears to be in a broken down car by the side of the road who may ask for a small amount of cash to refill their petrol tank or carry out repairs. They will tell the expat that they are from another country or another emirate and simply want to return.
These families are very convincing and reputedly earn a small fortune with this particular scam.
Unusual scam in the Middle East aimed at expats
An unusual scam in the Middle East aimed at expats is a telephone scam telling the ‘lucky’ recipient they have won a lot of money in a draw being held by a mobile phone network and to claim their prize they must buy prepaid phone cards from the company, call them back and give them the pin numbers. There is no money and the person calling will be stealing telephone credit.
Unfortunately, one of the biggest scams that affects expats around the world is housing. This is a huge problem since expats are looking for a home and may not appreciate or understand how the local market works so they will respond to adverts from landlords.
While many expats are assisted by their employer in finding housing, not all expats or companies have this service. So some expats have to rely on the Internet or a local housing provider, such as a letting agent.
There are ways and means of checking whether the accommodation offer is legitimate by researching how much rent is for other homes in the area. Most capital cities are very expensive so any advert offering cheap rent should be approached with caution.
Expats should also be wary about handing over money without seeing the accommodation first. They should not be hurried into making a decision when they aren’t even in the country. Anyone asking for money upfront is probably a fraudster.
However, it should be appreciated that while expats are not targeted for violent crimes they are often targeted for financial scams and all expats should be wary of anyone, whether it’s a friend or a colleague, who is offering an incredible deal that will bring riches.
Anyone can fall victim to a financial scam but expats are particularly prone to them because they may not have come across the particular scam previously and their guard might be down because they are in new surroundings and making friends who, they believe, are helping them.
The simplest piece of advice for expats looking to avoid becoming the victim of a scam of any type is to err on the side of caution and walk away from someone asking for money or someone claiming to be a financial advisor with an incredible offer to make lots of money.
In the worst case scenario, the expat may receive verbal abuse or they may lose a friendship but what they won’t lose is money they cannot afford to lose because they were duped.
FCA's Scam Smart website
IRS ‘Dirty Dozen’ tax scams