Watch out for online investment sharks
Looking for an investment that will give you exceptional returns with no risk to your capital? Want to know how you can avoid paying taxes on income from your investments?
Well, forget it. Not only is there no such investment, your unrealistic expectations put you squarely in the sights of fraud artists who want nothing more than for people to believe that they can deliver the ultimate investment.
Unfortunately, this message doesn’t seem to be getting through to Canadians and despite the efforts of regulators, scams that feed on our desire for the perfect investment are thriving. Though they rise and fall in popularity over time, in reality, most types of investment fraud have been around for years, says Michael Bernard, communications manager with the British Columbia Securities Commission.
“The problem is so huge that no one has a handle on them,” says Bernard.
Crooks use Internet
What authorities do know is that the Internet has made it easier than ever for crooks to find victims and is also helping con artists achieve an undeserved degree of legitimacy. Recently, a number of scams being investigated by securities regulators in B. involve what are touted as high paying, risk-free offshore investments being promoted on the Internet.
Often fraudulent companies set up entire websites to entice victims. While there’s nothing illegal about investing offshore, the attractiveness of the phoney offerings is based partly on claims that income will be hidden from Canadian authorities and untaxed. In reality, all offshore income must be reported on your Canadian tax return.
Not only are people inclined to believe information found on the Internet, “they’re also more willing to send money to strangers they meet over the Internet than to strangers they might meet in any other way,” says Michael Watson, director of enforcement with the Ontario Securities Commission (OSC).
A variation is found in Internet chat rooms used by con artists to talk up the price of a given stock or stocks. They contribute to the online chats or discussions posing as investors.
When the OSC recently undertook to illustrate how the Internet can be used to drive investment scams, the regulator created a fake website modelled on actual websites that were operated by con artists.
“We thought if we created a scam that was obvious-by knowing that we’d created it and what it was-it might send a strong message to people,” says Watson.
The ironically named phony website, NoRiskWealth.ca, proved hugely successful, serving to confirm the fears of regulators.
“In the time it was up, it attracted the kind of response we were afraid it might,” says Watson, noting that the site logged 1,200 visits from interested investors in just six weeks.
Just as alarming is the fact that older Canadians attract more than their fair share of attention from crooks.
“Clearly, people who have built up some equity are targets,” so it’s not surprising that some thieves single out British Columbia because of its large population of retirees, says Bernard.
Victims who end up losing their savings have little recourse to authorities.
“The reality is if you sent your money over the Internet to someone who wasn’t lawfully receiving it, you’re probably not going to get it back,” says the OSC’s Watson.
“There’s often very little paper. With no trail, no documentation, it’s far too late when authorities become aware,” adds Bernard.
The problem is compounded by the fact that these types of crimes are under-reported. As with victims of any kind of investment fraud, many people are too embarrassed to admit that they’ve been duped, says the OSC’s Watson. But speaking up about your experience is one way to help shut down these investment scams and prevent others from becoming victims, says Bernard.
“We want to hear from you and we’ll certainly respect your confidentiality.”