Today’s financial scams can be surprisingly sophisticated. Fraudsters may impersonate trusted individuals or organizations, replicate legitimate communications or use publicly available information to make a request appear credible. For investors, knowing what to watch for, and when to pause and verify, can be an important part of protecting financial information and investments.

Here are five financial scam risks investors should keep in mind.

Investment opportunities that promise more than they deliver

Investment scams can take many forms, from fraudulent opportunities to schemes built around legitimate-sounding investments or relationships.

Promises of unusually high returns with little or no risk can be a warning sign. The U.S. Securities and Exchange Commission (SEC) encourages investors to be skeptical of opportunities that appear to offer high returns with little risk and to research investments and the people offering them before committing funds. 

What investors can consider: Take time to independently research an investment opportunity, the people involved and the organization offering it. Be cautious of opportunities that create pressure to act quickly or discourage questions.

Requests to send money or change payment information

A request involving a significant amount of money deserves extra scrutiny, particularly when it involves transferring funds or changing established payment instructions.

Business email compromise is one example. According to the Federal Bureau of Investigation (FBI), these schemes can involve criminals impersonating trusted individuals or organizations and making fraudulent requests for wire transfers or changes to account information. The FBI recommends independently verifying payment requests and changes to account numbers or payment procedures. The Federal Trade Commission (FTC) also recommends taking steps to verify who is requesting the transfer and being especially cautious when someone asks you to send money unexpectedly or in an unusual way.

Importantly, a fraudulent request may not always look fraudulent. A scammer may replicate a legitimate organization's branding and communication style. The SEC warns that phishing communications may use real company names, authentic-looking graphics and logos, and convincing websites. 

What investors can consider: When a request involves transferring funds or changing payment information, independently verify it before acting. Use contact information you already know to be legitimate to call a person you know. Do not rely on or call information provided in the unexpected communication.

Requests designed to create urgency, fear or excitement

Many scams are designed to trigger an emotional response before someone has time to carefully evaluate what they are being asked to do.

An investor might receive a message warning of suspicious activity, claiming an account needs immediate attention or suggesting an opportunity will disappear unless action is taken quickly. Other scams may use excitement instead, such as promising unexpected profits or rewards.

The SEC identifies fear and excitement as emotions fraudsters may use to encourage people to make quick decisions. It also identifies urgent messages about account problems, payment information or supposed account closures as common characteristics of phishing scams. 

What investors can consider: Treat urgency as a reason to pause rather than a reason to act faster. Ask why immediate action is required, whether the request makes sense and whether it can be independently verified.

Remember that impersonation can happen across multiple channels

Email is only one way fraudsters can make contact.

The SEC describes phishing, smishing and vishing as related scams delivered through email, text messages or phone calls. In each case, fraudsters may pose as entities a victim knows or trusts, such as an investment firm, bank or other service provider. 

These scams can go beyond simply copying a company's appearance. Fraudsters may use publicly available information to make a conversation more convincing, and caller ID can sometimes be manipulated to make a call appear to come from a legitimate source.

What investors can consider: Don't rely solely on caller ID, an email address, branding or a familiar name to establish that a communication is legitimate. If a message, call or text involves sensitive information or a financial request, independently contact the organization through a trusted channel.

Protect the accounts and information behind your investments

Financial fraud isn't always about convincing someone to send money directly. In some cases, criminals first try to obtain information that could provide access to financial or other personal accounts.

The SEC recommends enabling multi-factor authentication for online investment and financial accounts and keeping computers and mobile devices updated. It also cautions investors about sharing financial account numbers, passwords and other sensitive information. 

The FBI similarly recommends multi-factor authentication and being cautious about personal information shared online. 

What investors can consider:

• Enable multi-factor authentication on financial accounts when available
• Use strong, unique passwords
• Keep devices and software updated
• Review financial accounts regularly for unfamiliar activity
• Be cautious about unexpected links and attachments
• Limit the personal information shared publicly

When in doubt, pause and verify

While financial scams can take many forms, there is a common thread: fraudsters want people to trust a request and act before they have time to verify it.

That is why one of the simplest habits may also be one of the most useful: pause before acting.

For an unexpected financial communication, investors may want to ask:

• Do I know who is contacting me? Verify the person or organization independently.
• Does the request make sense? Consider whether it is consistent with previous communications or established procedures.
• Has anything changed? Pay particular attention to changes involving payment instructions or account information.
• Am I being pressured? Be cautious when someone creates a sense of urgency, fear or excitement.
• Can I verify this another way? Contact the organization or individual through a trusted channel you already know to be legitimate.

What to do if something doesn't feel right

A communication doesn't have to look obviously fraudulent to warrant a closer look.

If something seems unusual, stop before clicking a link, providing information or transferring funds, and take time to verify the request independently.

If funds have already been sent as a result of suspected fraud, the FTC recommends contacting the financial institution or company used to send the money immediately and asking whether the transaction can be reversed. 

October's Cybersecurity Awareness Month serves as an annual reminder to stay alert to online threats. But for investors, awareness is an ongoing part of protecting financial information and investments.

As financial scams continue to evolve, taking a moment to pause, ask questions and independently verify information can be a valuable step in protecting your financial interests.

Resources

• U.S. Securities and Exchange Commission/Investor.gov: “Don’t Get ‘Ished’: Tips to Protect Your Investment and Financial Accounts from Phishing, Smishing and Vishing”
• Federal Bureau of Investigation: Business Email Compromise
• Federal Trade Commission: What to Do if You Were Scammed
• Federal Trade Commission: What to Know About Wire Transfers