594 victims of financial frauds reported to the Austrian Financial Market Authority (FMA) in 2020 – the highest figure in an upward trend in fraud cases that has been going on for years. The average damage is around € 42,000 per person.
Many overlook the role of rating agencies. Credit Rating Agencies and other agencies rating closed-end funds, mutual funds or many other financial instruments are not only responsible for looking into the future and making forecasts. It is true that this is their chief role. But not the only one. Ratings also have a declaratory function. Anyone who finds a rating on a website of a rating agency can at least be sure that the address in question exists. A question remains, of course, whether e.g. a caller who poses as an employee of a particular company is actually an employee of the specified company. In any case, the risk of fraud is significantly reduced if an investor informs himself in detail on the website of a rating agency before making an investment decision.
Around 40% of the victims of fraud, says the report of Austrian FMA, were contacted by phone – with so-called “cold calling”, supposedly promising investments are offered during a phone call. Around 60% lost their money on the Internet – insider tips and financial products that promise a high profit with low risk were the most common bait here. About half of all scams are aimed at investments in crypto assets.
„Unfortunately, we have been seeing an increase in investment fraud for years. Financial fraudsters lure their victims into the trap with unrealistic promises, mostly with high returns and low risk,“ warn FMA directors, Helmut Ettl and Eduard Müller, and urge caution: „What sounds too good to be true is mostly not good at all.“
The FMA sees the reasons for the sharp increase – the number of victims has doubled compared to 2017 – in the persistent low interest rate environment and digital change: More and more people are investing online in supposedly promising products. The effective prevention of consumer harm through investment fraud is also one of the FMA’s 2021 supervisory priorities, according to the FMA Executive Board.
Before making an investment decision, the FMA advises people to check whether they have all the necessary information about the product and whether they understand it. Furthermore, to check whether the provider has been approved by the FMA or whether a warning has already been issued against him. In addition, the FMA provides consumers with a great deal of information on the subject of „recognizing financial fraudsters“ on its website, including a list of warning signals and examples of current scams.
^^^ RATING EVIDENCE GmbH 