FCA publishes more gloomy data about binary options fraud, no action yet

Maria Nikolova

The regulator estimates that average daily losses due to binary options scam exceed £87,000 in the UK, but makes no announcement on particular action against such fraudsters.

The volume of warnings issued by the Financial Conduct Authority (FCA) regarding investment fraud, including binary options scams, is rising. The regulator has earlier today published another warning, as its new ScamSmart campaign launches. But as the watchdog unveiled some gloomy numbers about the size of losses due to binary options fraud, it did not say anything about a particular action against such scammers, apart from trying again to raise public awareness about common types of fraud involving CFDs, cryptocurrencies and binaries.

The FCA reveals that last year investors lost £87,410 per day to binary options scams in the UK. Social networks are increasingly used as channels to attract investors to such fraud.

The profile of investment scam victims is changing. While historically over 55s have been most at risk to investment fraud, the FCA’s latest study conducted as part of its ScamSmart campaign, found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%). Action Fraud figures underline this trend, showing that under 50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud (34% v 21%).

More than one in five (23%) respondents said that online customer testimonies and reviews increase their trust in an investment company. Yet, scammers are known to create highly professional looking online investment platforms that feature fake customer reviews, logos, and statements, to lure in prospective investors. A further one in ten (11%) said they wouldn’t conduct any of the listed checks at all, such as checking whether the firm was regulated by the FCA or registered with Companies House, before deciding to “invest” their money.

On January 3, 2018, binary options became a regulated investment product, meaning that all firms trading in binary options will need to be authorised by the FCA. Individual complaints regarding binary options can be referred to the Financial Ombudsman Service and clients of binary options firms have access to the Financial Services Compensation Scheme. However, those protections will not compensate investors for any losses from trading.

On January 12, 2018, the FCA published a list of 94 firms without FCA authorisation that it understands to be offering binary options trading to UK consumers. Many of these firms claim to be based in the UK but the FCA believes that most of the addresses they provide are false and that the firms are actually based overseas. The FCA said it was examining each of these firms to determine whether any are genuinely operating from within the UK. If they are, the FCA will consider taking enforcement action through the courts to stop their illegal activity.

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