If they’ve seen a video of Elon Musk, Cyril Ramaphosa, or any other celebrity telling them how to turn R4 500 into R20 000 in a month – it’s a scam, says Gerhard van Deventer, head of enforcement at the Financial Sector Conduct Authority. From Moneyweb.
You can also listen to this podcast on iono.fm here.
Online scams are getting more creative by the day – whether it’s crypto or online stock trading. There are scores of AI-generated videos circulating online featuring the likes of Elon Musk and Cyril Ramaphosa, apparently endorsing some scheme that will turn R4 500 into R20 000 in a month. Some of these want you to send crypto, others are happy to take fiat – but the result is the same.
Once you try to withdraw your R20 000, you are urged to invest another R20 000, with the promise of turning that into R100 000 in another four or six weeks. And so the game continues. When you try to withdraw, you are told to pay “taxes” to the SA Revenue Service (Sars), or “fund lifting fees” or admin fees.
These obstacles are further opportunities to empty your life of everything you own – with the scammers encouraging you to borrow just a little bit more, so they can finally release the funds you think you have accumulated.
In this podcast, Gerhard van Deventer, head of enforcement at the Financial Sector Conduct Authority (FSCA), takes us through the latest innovations in scamming – crypto or otherwise – and explains how to alert family members who may be falling for an online scam.
“Unrealistic returns. There’s no doubt that that is the number one red flag,” says Van Deventer.
But you can actually turn that sentence around. In the 30 years I’ve been doing this, I’ve never seen an unrealistic return case that wasn’t some form of a scam. Either partly or wholly a scam.
“The best thing to do is this: if you get an offer that you think looks too good to be true, phone the actual Financial Service Provider or the actual financial advisor – using a phone number that you found yourself and then check. I’m sure they will advise you that you’re looking in the wrong place.”
Van Deventer also talks about the proliferation of online trading platforms offering highly leveraged Contracts for Difference (CFDs), a type of derivative that allows traders to bet on the movement of stock and crypto prices without actually owning the underlying asset.
The CFD product provider must have an Over-the-Counter Derivatives Provider (ODP) licence from the FSCA. There have been complaints from some of these trading clients that they were stopped out of trades when the market went nowhere near their stop-losses.
“CFDs are derivatives. They’re financial products. And if they [the online trading company] tell you that they don’t need a licence, then you need to walk away very quickly. That’s the first thing,” says Van Deventer.
“The second thing is, because they have an FSCA licence, they are subject to certain codes of conduct and closing out a position of a client when they shouldn’t, is certainly a problem. It can be as innocent as a systems problem, or it can be as serious as the first red flag,” he adds.
The FSCA has had to deal with financial service providers that nominate a well-regulated ODP in SA as their product provider, but then sneakily switch to an unregulated ODP registered in weak jurisdictions like the Bahamas or St. Vincent and the Grenadines.
The FSCA has beefed up its investigations teams to monitor and keep track of the ever-evolving fraud problem in financial products.
Van Deventer’s advice on how to talk to family members caught up in what looks like an online scam: First check whether the company is licenced by visiting the FSCA Search facility here: https://www.fsca.co.za/Fais/Search_FSP.htm
If it doesn’t check out, report the matter to the FSCA.
Check if the company has a website, then check its “Legal” page to see where it is licenced. Don’t be fooled by irrelevant legal documents like “Non-Disclosure Agreements” or “Privacy Policy”. Only look for actual evidence of licences in SA or well-regulated markets such as the US, Europe or the UK.
Van Deventer also delves into the FCSA’s clamp down on funeral operators illegally selling insurance policies.
For previous Moneyweb Crypto Pod episodes, click here.
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