Fraud warning for South African investors

There has been a significant uptick in fraud in South Africa, and local investors are urged to remain vigilant and take steps to protect themselves.

This is according to investment platform Satrix’s head of brand, René Basson, who said recent Southern African Fraud Prevention Service statistics paint a concerning picture.

These statistics revealed a 32% increase in fraud incidents and a staggering 54% rise in impersonation fraud victims compared to 2023. 

“The digital landscape has become a hunting ground for sophisticated scammers. They’re not just after your personal information; they’re targeting your hard-earned investments,” Basson warned. 

“Globally, we’re seeing increasingly clever tactics, from fake investment platforms to impersonation of financial advisers on social media.” 

She urged investors to arm themselves with knowledge and exercise extreme caution, especially when encountering investment opportunities online.

Basson explained that while social media platforms have become valuable resources for investment tips and financial news, they have also opened new avenues for fraudsters. 

“Social media is well and truly integrated into our daily lives. However, investors need to stay alert, considering the increasing number of scammers taking to social media. Often, the scams are so believable it’s easy to be deceived,” she said.

The Association for Savings and Investment South Africa (ASISA) also recently warned that investment companies have seen increased fraud via social media channels. 

“Fraudsters have even taken to imitating key personnel by using their profile photos and company logos,” Basson said. 

“If you receive a request for financial assistance from a family member or friend via social media, contact that person directly to ensure they are the person you’re communicating with.”

These organisations are not alone in their warnings about increased fraud in South Africa, as several local banks have also started warning their clients about potential risks.

Capitec CEO Gerrie Fourie recently warned that banking fraud in South Africa is a “nightmare” that affects everyone. “It’s a nightmare for everyone. It’s not only us – fraud is massive,” he said.

Fourie explained that the bank invests a lot of money and resources to secure and protect its systems. “That’s our number one focus,” he said. 

The South African Banking Risk Information Centre (SABRIC) aggregates and reports all fraud reported by the South African banking community to provide a holistic picture of the banking fraud landscape.

In October last year, SABRIC published its Annual Crime Stats 2022, revealing that the year saw a spike in reported incidents of digital banking fraud, with a 24% increase compared to the previous year.

The report revealed that cybercriminals stole over R740 million from unsuspecting users through digital banking fraud in 2022.

The organisation explained that this was largely due to the growing number of fraud cases related to banking applications and Internet banking.

Nedbank has also noticed a steady increase in fraud attempts over the last five years and has urged customers to pay attention to all the fraud advice their banks provide.

The bank told Daily Investor that while it maintains state-of-the-art fraud detection systems, such systems can never replace thorough consumer fraud awareness. 

“Nedbank considers client awareness to be a key element in the fight against crime,” the bank said. 

“Whenever new attack vectors are observed, we ensure that awareness is rolled out to our customer base as quickly as possible.”

Tips to stay safe

Basson offered the following tips to help South African investors safeguard their investments and personal information:

• Strengthen your passwords: Strong passwords are non-negotiable. Use at least 10 characters comprising a combination of upper and lowercase letters and special characters such as & or @. Use different passwords for different investment websites.
• Embrace two-factor authentication: Two-factor authentication offers additional protection. A thief would need both your devices (cell phone and laptop) to access your account.
• Keep software updated: Investors should regularly update and install anti-virus software on all their devices.
• Avoid public Wi-Fi for financial transactions: Never use public Wi-Fi to perform financial transactions.

Basson also emphasised the importance of adhering to fundamental investment principles when evaluating investment opportunities online. 

“As always, there are timeless truths regarding investing, and they apply equally to social media,” she said. 

She urged investors to keep the following in mind when considering investment-related content on social media:

• Understand what you’re investing in: If you can’t articulate it, don’t invest in it. Does the investment suit your risk profile? Will you have to tie your money up for a certain period, and if you do, for how long? Who is offering the investment, and is it regulated? The FSCA’s website lists all entities registered as authorised financial product providers.
• Research and ask questions: Review the company’s website after confirming that it is authorised to sell the product. Do they provide contact details, and are they transparent about providing information on the company and its investment professionals? A Google search may also highlight the company’s incidents.
• Don’t be pressured into investing: Take your time to read through everything, understand the investment, read the fine print, and understand how the investment will fit into your overall portfolio. Only invest when you feel ready. Someone pressuring you into investing or providing your details is a warning sign. Scammers often use this tactic.
• Trust your intuition: Trust your instincts if they tell you something about the social media post or investment isn’t right. Get advice from an authorised financial adviser before proceeding with the investment.
• If it sounds too good to be true, beware: Promises of high returns are warning flags – especially when markets are struggling – including promises of returns within a short period.

Basson cautioned investors to be particularly careful when interacting with investment firms online. 

“At Satrix, for example, we operate a DIY platform. We never initiate contact about investments or request personal details via phone, SMS, or WhatsApp. If someone claiming to be from Satrix does this, it’s a scam,” she said.

She advised investors to double-check whether they are on an investment company’s official social media pages before engaging or sharing any information. 

Investors can do this by visiting the company’s official website and following links to their verified social media accounts.

Basson further advised investors who have fallen victim to an investment scam to report the incident to the police immediately and alert their bank. She said quick action can sometimes mitigate the damage.