“Woeful” Police Response to Fraud Highlights Need For a Proactive Approach to Meet Investment Aims

The police response to a series of investment frauds has been slammed as “woeful” by the watchdog monitoring police performance. Matt Parr, Her Majesty’s Inspector of Constabulary and Fire & Rescue Services shared his conclusions when it was revealed that of 69 known cases relating to a single scam, only one had been investigated by the police.

That number could well be the tip of the iceberg relating to a scam dating back to 2018, which has so far claimed £3.9m of retail investor funds. One victim lost £465,000 to the scammers who pretended to be from the legitimate private bank Kleinwort Hambros. The criminals convinced unsuspecting victims to transfer money to them using branded documents and the names of actual employees at the bank.

Police Investigations Draw A Blank

Kleinwort Hambros has taken significant measures to warn the public of the scam, but their actions to rectify the situation have outstripped the efforts of the police. Of the 69 cases reported to Action Fraud, only five made it through the vetting process and were forwarded to the local police forces to initiate an investigation. The force in question, Greater Manchester Police, reported that only one of the five case files was received, and it is now filed under “This crime has been closed with no further action to be taken”.

Accepting and Managing Risk

The Hambros case highlights that retail investors are operating in a buyer-beware market. The risk of cold callers targeting victims is very real and largely unmanageable. It points to those who might have a nest egg they want to invest taking proactive steps to find a trusted broker, take a position, and remove the temptation which might arise from hearing about a scheme that is too good to be true,

Market risk, the possibility of investments going down rather than up, is another risk that can’t be avoided. However, with bank savings rates being much lower than the inflation rate, people are being driven to other asset groups to try and secure a return. Given the lack of support for those caught in scams, proactive and well-thought-out efforts by individual traders appear to be the least bad option.

The steps the UK authorities take to tackle reported fraud:

• Step 1- The first stop for victims of scams is Action Fraud, the UK’s national reporting center for fraud and cybercrime. It is run by the City of London Police.
• Step 2 – The National Fraud Intelligence Bureau (NFIB) is advised of the crime and decides if cases should be passed to a local police force for further investigation.
• Step 3 – Local police forces then decide whether or not to investigate.

Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers and you can share your experiences here. If you want to know more about this particular topic, or have been scammed by a fraudulent broker, you can also contact us at [email protected]

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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