Allan Gray fraud warning for South Africa
Allan Gray has warned that investment fraud and scams remain a significant and serious issue facing South Africans and has offered a host of tips to avoid being a victim.
Twanji Kalula, communications manager at Allan Gray, warned that scams remain rife as would-be investors are lured by promises of enticing returns, often for little effort.
Scams range from Ponzi schemes to cryptocurrency cons. The Association for Savings & Investment South Africa (ASISA) recorded a 26% year-on-year uptick in fraud cases in 2024.
“When it comes to investing, the adage rings true: If it sounds too good to be true, it probably is. Any investment that promises extremely high returns, particularly in the short term, should be approached with trepidation,” warned Kalula.
He added that when considering an investment, one should seek to understand how one’s capital will be used to generate returns.
“Investors typically earn returns by investing in an asset that either increases in value over time or generates income. Many assets do both,” he noted.
“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.”
He said that a common form of cybercrime is phishing, in which criminals impersonate banks and financial institutions via phone, email, or SMS to access sensitive personal data, such as login details.
“Cybercriminals try to create a sense of alarm to spur investors into taking immediate action,” added Kalula.
Kalula said that investors should be sceptical of any urgent request to change a password, verify details, avoid having an account suspended, or prevent a fraud attempt.
Kalula believes investors should view any urgent request to change a password, verify details, or prevent an account from being suspended or a fraud attempt with scepticism.
Another tell-tale sign of phishing is a fake sender address in an email. One should also make sure the sender’s address is accurate and contains the correct domain name.
Phishing emails are typically riddled with spelling and grammatical errors.
Still, criminals are now utilising AI to enhance the quality of their communications, allowing them to target victims with greater accuracy.
Another common tactic scammers use to defraud investors is impersonating employees from reputable financial institutions, particularly through social media platforms.
“Exercise caution when someone claiming to be a representative of an established company tries to solicit new investments via social media platforms, as they may be using a fake or compromised account to do so,” said Kalula.
There are four main steps that Kalula said will help lower one’s chances of being a victim of financial crime:
Invest with reputable financial institutions
One should only invest with financial institutions that are regulated by the Financial Sector Conduct Authority (FSCA) and hold a Financial Services Provider (FSP) number.
Most reputable firms are also unlikely to use social media or any instant messaging platform to initiate new investments, manage existing investment accounts or engage with clients over their investments.
Get the right advice
Criminals often win over their victims by pretending to be knowledgeable financial professionals.
When seeking the services of a financial professional, including an independent financial adviser, it is essential to verify that they are in good standing with regulators, such as the Financial Planning Institute of Southern Africa (FPI).
Protect your investment accounts
One should also avoid opening attachments or clicking on links in emails and SMS messages without verifying their authenticity, as they may be malicious.
One should also prioritise password hygiene regularly by protecting every investment account with a unique, complex password.
Alert on the phone
South Africans should also avoid unsolicited phone calls from anyone claiming to be affiliated with a financial institution.
If you are in doubt, hang up and contact the entity using its official, verified contact details.
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