Allan Gray scam warning

Allan Gray has warned South African investors of the rising prevalence of fraud and investment scams targeting their portfolios. 

These scams typically involve the impersonation of skilled financial professionals, such as advisors, to win the customer’s trust before committing the crime. 

Criminals have also become increasingly sophisticated by using deepfakes of high-level executives or investment managers and impersonating authorities. 

Allan Gray’s Twanji Kalula explained that while the methods employed by criminals may change, financial crime is a constant threat to investors. 

He said financial historians have traced examples of fraud all the way back to 300 BC, when two Greek sea merchants attempted to sink their vessels to cash in on insurance policies. 

While financial systems have evolved significantly since then, fraudsters continue to target financial service providers and investors for access to their capital. 

In South Africa, financial institutions detect and prevent thousands of cases of fraud each year. However, despite these ongoing efforts, fraud attempts remain prevalent. 

The Association for Savings & Investment South Africa recorded a 26% year-on-year uptick in the number of fraud cases affecting investors in 2024, and, according to a recent report, South Africans lost in excess of R2.7 billion to financial crime in 2024.

Just over a month ago, Old Mutual warned the public about a highly sophisticated investment scam using a deepfake of its chairman, Trevor Manuel. 

This followed warnings from Standard Bank about the significant rise in extortion, email, and text scams targeting banking customers. 

It said that scammers are particularly targeting individuals going through significant life changes, such as changing jobs, leaving school, or preparing to attend university. 

Fraudsters typically target these individuals to try to gain access to sensitive information, which can then be used to access financial accounts. 

One of the tactics increasingly used by scammers is fake non-compliance notifications to induce individuals to share confidential information. 

With this method, fraudsters exploit the bank’s need to comply with the Financial Intelligence Centre Act (FICA).  

They pretend to be the bank, sending customers emails and SMSs, claiming that their accounts are not FICA compliant.

Upon clicking the link, customers may be redirected to a fake login site or prompted to enter sensitive information, such as their card number, expiration date, customer verification value (CVV), or one-time password (OTP).

In other cases, they impersonate authorities such as SARS, the Reserve Bank, or the police to ask clients for sensitive information. 

Protection

Kalula explained that one of the easiest ways to avoid falling victim to fraud or scams is to remember that if it sounds too good to be true, it probably is. 

Any investment that promises extremely high returns, particularly in the short term, and guarantees them should be approached with trepidation.

From Ponzi schemes to cryptocurrency cons, scams remain rife as would-be investors are lured by promises of enticing returns, often for little effort. 

Many fraudulent schemes bank on our innate “fear of missing out” on a great investment opportunity to rush our investment decision-making.

Thus, Kalula reminded investors to always invest through a sound investment vehicle that is regulated by the relevant authorities. 

Another key step in avoiding fraud and scams is to understand how returns will be generated with the investment. In other words, understand where your cash is going and where returns are coming from. 

Investors typically earn returns by investing in an asset that either increases in value over time or generates income. Many assets do both. 

If an investment provider cannot explain how returns are generated, or the investment requires the investor to recruit other people to generate returns, something is amiss, Kalula said. 

Often, investors are exposed to the greatest risk during financial planning, with fraudsters looking to exploit this vulnerability to gain access to accounts or sensitive information. 

When considering the services of a financial professional, such as an independent financial adviser, it is worth doing additional research to confirm that they are adequately qualified and in good standing with an appropriate professional body, Kalula said. 

For example, advisors should be part of the Financial Planning Institute of Southern Africa (FPI), which enforces a strict code of ethics and meets numerous requirements to acquire and retain their professional designations.

Another trick that scammers use to defraud investors is impersonating employees of reputable financial institutions – particularly via social media platforms.

When in doubt, contact the entity using their official, verified contact information to resolve any matter. Do not divulge personal information, including OTPs, passwords and pins, as no financial services company will ask you for this information, Kalula said.