How to spot a financial scam before it spots you

How do you tell the difference between a genuine investment opportunity and a scam?

Many people are desperate to find that quick fix to their money problems or to make their money grow fast, which can cloud their judgment.

As Warren Ingram (Galileo Capital) cautions, financial scams are not just a problem for the elderly or the naive.

"These scams are increasingly sophisticated, and they catch smart, educated people every day."

In South Africa, billions of rands are lost to scams every year.

Understanding how they work is one of the most practical things you can do to protect your money, Ingram says.

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"Scammers are not relying on your stupidity. They're exploiting how your brain works under certain conditions: urgency, excitement, fear, and trust."

"When you're told that an investment opportunity closes tonight, or that your bank account will be frozen unless you act now, the rational part of your brain shuts down. Pressure is a tool, and scammers use it deliberately to stop you from thinking clearly or asking questions."

Social proof is also used successfully as a tool. As Ingram says, if someone you know, or someone who appears credible, has already invested and is showing you returns, your guard drops.

"Many of the biggest scams in South Africa have spread through church communities, family groups, and WhatsApp chats, precisely because people trust the person sharing the opportunity."

The warning signs to know

Guaranteed returns are always a red flag, Ingram emphasizes. No legitimate investment can guarantee you a fixed return, especially one that sounds unusually high. If someone is promising you 20% or 30% a year with no risk, they are either lying or running a Ponzi scheme where early investors are paid using money from new ones.

Urgency and exclusivity are classic pressure tactics. Ingram points out that any genuine investment opportunity will still be available tomorrow. If you're being told you will miss out unless you commit today, "that is not excitement, it is manipulation".

Vague explanations are another warning sign. Legitimate investments can be explained simply - if the person promoting it cannot tell you clearly where the returns come from, walk away.

Unregistered providers are also a major risk. Remember that in South Africa, anyone offering financial products or investment advice must be registered with the Financial Sector Conduct Authority, the FSCA. You can verify this on the FSCA website. If they are not registered, they are operating illegally.

The scams most active in South Africa right now

Crypto investment scams remain very common. Ingram says these typically involve a polished-looking platform, promises of automated trading profits, and initial small withdrawals to build your trust before you are encouraged to put in larger amounts. Eventually the platform disappears.

Bank impersonation fraud is growing rapidly. You receive a call from someone claiming to be from your bank's fraud department, warning that your account has been compromised. They sound professional, have some of your personal details, and ask you to transfer your money to a safe account. That safe account belongs to them.

Romance scams are devastating financially and emotionally. Someone builds a relationship with you online over weeks or months, gains your trust, and then introduces a financial emergency or investment opportunity. The victims are not gullible, they are human, and they have been systematically manipulated.

What to do if you suspect a scam

Stop and slow down. Urgency is the weapon. Removing urgency is your defence. Tell whoever is pressuring you that you need a week to think about it. A scammer will push back hard. A legitimate business will not mind.

Check the FSCA register at fsca.co.za before handing over any money.

Report suspected scams to the FSCA or to the police. And if you have already been caught in one, report it immediately. Many people feel too embarrassed to come forward, but reporting is the only way to stop others from losing their money too.

Scroll up to the audio player to listen to Ingram's detailed advice