Types of financial scams

With examples of scams growing on a daily basis, it’s never been more important to learn about how to tackle potential scams. Read on to learn more.
Colby Brin
Profile
January 9, 2023
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4
min read

In today’s digital world, dozens, if not hundreds, of sophisticated financial scams seek to take advantage of innocent, unsuspecting victims.

The best way to protect yourself is to be aware of them and to know what to do if you come across them online. So, read on to learn these examples of scams and discover the different types of financial fraud that you need to be aware of.

Phishing

Perhaps the most common type of financial scam in the digital age is phishing. This is where you receive an email or text message from what appears to be a legitimate source (HMRC, Amazon, your bank, Apple, etc.). You’re asked to open a link and log in to your account when you open the message.

But the link provided is to a third-party source that collects your personal information when you type it in, which can then be used to steal money from you or to access your personal files.

The easiest way to spot a phishing scam is to check the email address or number from which the message was sent. Spammers aren’t able to use a real domain name, so be mindful of this if you suspect a phishing attack.

What to do 

Crucially, you should never click the link sent to you in a phishing message. You can find out more about phishing and how to detect it at Action Fraud.

Scamming examples — investment scams

In most instances, investment scams occur over the phone. They vary in levels of sophistication, but the scammer’s goal is always to get you to part with money to invest in a company that doesn’t exist.

The most sophisticated investment scams are backed by legitimate-looking websites, testimonials, and even social media profiles, so they can be tricky to spot, making them particularly dangerous.

What to do 

If somebody calls you out of the blue and asks you to invest in a company, always treat the call with suspicion. You should then run a search on the FCA website to check whether the investment opportunity is real. If the company isn’t listed with FCA, don’t take any further action.

Pension scams 

Following the introduction of the pension freedoms legislation in 2015, retirees can now access large sums of money from their pension pots.

As a result, scammers have developed examples of scams to try and get unsuspecting victims to part with their pension savings, often by calling up and pretending to offer an investment opportunity or something similar.

You should treat all calls about your pension with suspicion and never conduct a transaction over the phone.

What to do 

Again, you can check the FCA register for the investment opportunity you’re invited to contribute to. Still, you can also check the company’s credentials on the Companies House Website for more information about their legitimacy.

Pretending to be your bank 

When it comes to types of financial frauds, another common trick is calling or messaging you, pretending to be your bank. This scam comes in various forms, but it can often be similar to a phishing attack, where your supposed bank contacts you and asks you to log in to your account. 

The key thing to remember is that your legitimate bank will never contact you to ask you for personal information, and most notifications and actions from your bank will appear on your online banking dashboard.

So, always treat direct messages from your bank with suspicion and never give out any personal information to someone pretending to be from your bank.

What to do 

The best way to deal with this scam is to ignore the message or email. If someone calls you and pretends to be your bank, tell them that you will call them back – hang up the phone and dial your bank directly and ask them if they’re trying to get in touch with you.

If you suspect a potential bank fraud, you should report it directly to Action Fraud so it can be investigated.

Door-to-door scams 

One of the biggest issues with door-to-door scams is that they are extremely varied but can also be intimidating.

Some common scams involve people moving from door to door, asking for a charitable donation for a cause that doesn’t exist.

Alternatively, door-to-door scammers may get you to part with money for a service (like a new driveway) that never materialises.

They may ask you to sign up and pay a deposit, so always treat such calls with caution and never part with any money until you can verify the company.

What to do

You can find out more about door-to-door scams via this helpful resource from Age UK, as many door-to-door scams disproportionately target older people. If you believe that a scammer is in the area moving around your neighbourhood, you should contact Action Fraud to report it.

Pharming 

Pharming is very similar to phishing, but the key difference is that the scammer targets the website you’re visiting instead of sending you a direct message or email.

When you type in a website’s domain, you get directed to a fake version of the site in question, where you inadvertently type in your personal or financial information. While some pharming scams are sophisticated, others are of poor quality and are easily discernible if you’re paying attention.

Look out for re-directs and strange-looking domain names to detect a pharming scam before it’s too late.

What to do 

Spotting a pharming scam is all about being observant and being mindful of the website that you have arrived at.

As mentioned, many pharming scams redirect you to a new website with a strange domain, so you can usually tell that something’s not right. Equally, the replica site is usually of poorer quality than the original, helping you to identify a problem.

If you suspect a pharming scam, log out from the website immediately and clear your cache. A good way to protect yourself from these scams in the future is to use a VPN. 

Types of financial fraud — pretending to be HMRC 

Last but certainly not least, some scammers have developed types of financial fraud where they pretend to be HMRC to try and get you to part with information. This can be highly effective, as most people are motivated to act if they receive a notice or summons that pertains to be from HMRC. 

One HMRC scam of recent times is an automated phone call where the message states that HMRC is suing you and you must press 1 to speak to a caseworker, who will then try and extract personal and financial information from you.

Moreover, HMRC will never send notifications of a tax rebate or ask you to disclose personal or payment information via text or email. So, if you receive such a message, don’t take any action. 

What to do 

HMRC gets in touch via official channels – either by mail or email, depending on your settings. Like your bank, HMRC representatives will never ask you to disclose personal or financial information. They typically get in touch to provide you with something (such as a code).

If you suspect scamming examples where HMRC is concerned, log in to your online tax portal and check for notifications. You can always call HMRC to report a potential fraud and ask them whether the enquiry was legitimate.

Colby Brin

Head of Copy

Colby Brin is Head of Copy at HyperJar. With over 17 years of professional writing experience, Colby’s been a journalist, ghostwriter, language consultant, and writing trainer. Having previously served as Head of Copy at Wise, he’s worked in fintech for over six years. A native of New York City, Colby graduated from the University of Michigan, and has lived in London for two years.

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