What are financial scams?
Financial scams are fraudulent schemes that lead to the loss of invested assets through deception.
Financial scams carried out by entities authorized to carry out financial activities
Financial scams can manifest in various ways, including unlawful behaviors carried out by entities authorized to conduct financial activities, exploiting direct contact with their clients.
Financial scams and financial abuse
In other cases, financial scams are perpetrated by unauthorized entities. Here, in addition to fraudulent behavior, another element comes into play: financial abuse, which involves irregular companies that simulate investment platforms.
This type of fraud takes advantage of the appearance of well-structured and professionally designed online investment brokers, often using deceptive advertisements to promote illegal financial services.
The post-scam recovery fraud
In some cases, following a financial scam, a post-scam recovery fraud occurs. This involves alleged debt recovery agencies or supposed lawyers who contact scam victims, claiming they can help them recover their lost money.
Cold calling
Cold calling is a technique aimed at catching the investor off guard and unprepared, using call centers located in foreign countries. The telephone operator speaks Italian poorly and persuades the investor to open an unauthorized trading account to deposit their money, promising substantial profits.
Word of Mouth, Pyramid Schemes, and the Ponzi Scheme
The word-of-mouth technique is used by all unauthorized operators who rely on remunerative affiliation mechanisms: those who have already joined the financial proposal are encouraged and incentivized to spread the initiative, with the prospect of achieving attractive profits through recruitment activities.
Pyramid schemes promise earnings based on recruiting new participants and can be structured up to 15 levels deep, functioning as financial chain letters.
In a Ponzi scheme, investors are paid using the money from new investors, creating an unsustainable cycle that eventually collapses.
Phishing
Phishing is a technique that exploits email to steal personal data from victims who, driven by curiosity or deceived by the sender, click on a malicious link where they enter their credentials or download an infected attachment.
The senders pretend to be well-known organizations, such as banks or services actually used by the user, contacting and deceiving them with the pretense of having detected issues that require the insertion of personal information.
Phishing can also occur through websites that require login via registration and can take different forms depending on the communication channel used, such as smishing—phishing via SMS—and vishing—voice phishing.
Romance Scams
Victims, mainly women in their 50s, are contacted on social networks through friend requests and by means of images of very attractive men who present themselves as entrepreneurs or military personnel stationed in war zones or holding high-level professional positions. They make the victim believe they are single, widowed, or divorced.
Once the relationship is established, requests for money, gift cards, cryptocurrencies or other types of payments are forwarded, motivated by fanciful reasons related to serious health problems or the desire to buy a house to live in together.
Financial scams with cryptocurrencies
Financial scams involving cryptocurrencies can take various forms.
Unauthorized Trading:One of the most common financial scams involves unauthorized platforms collecting tokens and cryptocurrencies from investors, promising easy profits without having any authorization to carry out this activity.
Bogus mining: Mining is a legitimate process used to generate new cryptocurrencies, involving networks of computers creating new Bitcoin and verifying transactions. In a scam scenario, users sign mining contracts with fraudulent providers who claim to lease computing power for cryptocurrency mining. These providers, however, lack real mining equipment and simply collect funds from investors before disappearing.
Phishing: Fraudsters attempt to steal private keys from crypto wallets and extract information related to victims’ online wallets, ultimately gaining unauthorized access to their funds.
Blackmail: Scammers claim to have compromising information about a victim and demand cryptocurrency payments in exchange for not revealing it.
Ponzi Scheme: Similar to traditional pyramid schemes, Ponzi schemes in the crypto world promise high returns by using the investments of new participants to pay earlier investors, eventually collapsing when new recruits dry up.
Pump and Dump: A form of market manipulation where fraudsters artificially inflate the price of a cryptocurrency through false endorsements or misleading information. Once the price rises, they sell off their holdings, leaving other investors with worthless digital assets.
Financial Scams via the Internet and Social Networks
Unauthorized operators use the Internet to contact investors, often through social networks such as Facebook and LinkedIn, to deceive them and promote fraudulent investments.
Scams Using AI
Artificial intelligence can be used to create convincing fake identities. For example, it is possible to dynamically alter one’s appearance during a video call and construct a persona using deepfake technology, which can then be used to deceive victims.
Useful Behaviours to Safeguard Savings
CONSOB recommends conducting a preliminary verification for websites offering financial services. Investors should ensure that the operator they are investing through is authorized and that a prospectus has been published for financial product offerings. Authorized entities are registered in the list of investment firms (SIM) maintained by CONSOB, which can be consulted on the Authority’s website.
It is also crucial to check whether the entity has already been flagged by CONSOB. If so, CONSOB may have issued a warning or taken action to order the cessation of activities conducted through a website.
Before proceeding with any investment, it is advisable to gather all relevant information about the company and its authorization status.
To avoid falling victim to social engineering tactics such as phishing, investors should pay close attention to warning signs and make decisions based on data and logic rather than emotions.
Administrative Measures: Taking Down Unauthorized Financial Intermediary Websites by CONSOB
CONSOB has ordered the taking down of websites that illegally offer financial services.
the Authority can order Internet connectivity service providers to inhibit access from Italy to websites that provide financial services without due authorization.
Closure of Social Media Accounts
Meta has also taken action to remove social media accounts that are considered tools for committing fraud.
Offences relating to financial fraud. The Offense of Unauthorized Investment Services and Activities
Financial scams can constitute multiple criminal offenses.
These include the abusive exercise of investment services and activities, activities, which is punishable by imprisonment from one to eight years and a fine ranging from €4,000 to €10,000.
The offence of Aggravated Fraud Using IT or Telecommunication Tools to Conceal Identity
Financial scams may also constitute the crime of fraud aggravated by the use of computer or telematic tools suitable to hinder one’s own or others’ identification: this is a new aggravating circumstance for cases where the fraud is committed remotely through digital means that obscure the identity of the perpetrator or others involved. The penalty includes imprisonment from one to five years and a fine ranging from €309 to €1,549.
The Crime of Extortion
Another criminal offense that may apply in financial scams is extortion, which is punishable by imprisonment from five to ten years and a fine ranging from €1,000 to €4,000. If extortion is carried out through the commission of cybercrimes, the penalty increases to imprisonment from six to twelve years and a fine ranging from €5,000 to €10,000.
Studio dal Pozzo, law firm based in Milan, provides assistance to private individuals, organizations and businesses.
