4 Ways to Protect Yourself from Financial Frauds

Falling prey to financial fraud is nothing new. It has happened time and again under several circumstances, targeting your hard-earned money to fall into this trap. According to the RBI statistics of 2020-’21, INR 1.38 lakh crore got syphoned out of various Indian bank accounts. There are certain fraudulent cases in the crypto market as well. These scams can happen to anybody at any point in time. However, you can negate the possibility of falling into such traps by being more cautious. Here, we will discuss the techniques to protect yourself from financial fraud.

Differentiation between underperformance and fraud

Lacking the time and energy to review your financial portfolio and status is one of the key reasons for falling prey to various financial frauds. Under such circumstances, many of us seek expert guidance. Such experts must possess proper licences and certifications as proof of authenticity to handle your finances. However, they too are not foolproof, and you might not experience the desired outcome, especially for your market-linked investments.

However, the underperformance of any investment plan has never been termed fraud. You must consider these factors to make the differentiation:

• Your financial advisor must make a clear and complete assessment of your financial status
• Thoroughly check your investment strategies
• Understand your level of risk tolerance, financial targets, assets, liabilities, health, age, etc.
• Assessment of the tax implications
• Recommend a befitting financial portfolio

Despite everything, if you still experience loss, then such poor performances can happen due to other factors. However, a lack of efficiency on your financial advisor’s part can even lead him/her to court under the following circumstances:

• Concrete proof of utmost professional negligence,
• Lack of proper service as claimed,
• Proper evidence(s) of fraud like investing your finances in some dubious plan, carrying unauthorised trade practices, etc.

Detection of potential financial fraud

You have to keep your eyes and ears open to detect potential financial frauds. Some important factors that may be indicators of financial fraud are:

• Unrealistically true benefit opportunities
• Overwhelming promises of exclusive benefits and freebies
• Investment opportunities offered by strangers and/or
• Lacking verifiable information and documentation.

Protecting yourself against financial fraud:

As the proverb says, “Prevention is better than cure”. It stands true in the case of finances too. As a wise and sound investor, you must clarify the following before investing in any scheme:

• Valid registration number from SEBI as an authentic RIA or IFA.
• Valid ARN registration number from AMFI.
• Valid PFRDA as proof of presence for NPS.

Avoid unrealistic schemes:

Offering unrealistic return promises is one of the principal tactics of financial fraudsters. They will allure you into their trap and then doom you. Any scheme offering returns like 3% or 5% per day, for example, is supposed to be a trap. You must accept:

• There’s nothing like “easy money”.
• Never invest in anything without understanding the working strategies of the scheme.
• Do not follow the trend of investing in any particular scheme.
• Try to contact the authorities at the earliest in case of any issues.

Identify the authentic

Consider certain factors to identify authentic investment schemes:

• Maintain proper documentation and keep updated records of the concerned scheme
• Keep a copy of the concerned agent’s registration certificate from his official email ID
• While emailing the agent, try to loop the customer care department and his/her superior
• Clarify all doubts related to commissions, exclusions, benefits of the concerned scheme
• Sign up for e-statements so that you can get constant updates about your portfolio and accounts.

Maintain Confidentiality

This is the easiest and the trickiest part. Ensure not to share your bank details, login details, OTP, passwords, CVV, PIN, etc., with anybody to maintain complete confidentiality. Also, be cautious while sharing your Aadhaar and PAN details too, as theft of identity could lead to scams and phishing. Financial frauds have aggravated considerably in recent years. However, if you maintain and implement taking these steps as discussed, you can avoid falling prey to such fraudsters.