Recently, the nation was once again shocked by the news of a retiree losing nearly RM5 million to a scam triggered by a simple response to a Facebook advertisement.

The scammer’s tactics were all too familiar – they lure victims with promises of high returns, coax them into opening an ‘investment’ or ‘trading’ account, and show impressive (unrealised) profits. However, when the victims attempt to withdraw their funds, the money mysteriously vanishes.

Despite the Securities Commission’s extensive efforts to combat scams and raise public awareness through workshops, public service announcements, live interviews on mass media, and social media posts – targeting a wide range of society, from youths to pensioners – we continue to fall into these traps.

Being aware of the modus operandi of scammers

Why is this the case? How do we safeguard ourselves from falling into scams? The first step is to be very aware of the modus operandi of scammers.

The Securities Commission’s 2023 Annual Report reveals that the primary channels for these scams are social media platforms, particularly Facebook and Telegram. Scammers are transitioning from mule bank accounts towards e-wallets and cryptocurrency, as it is easier for the authorities to detect and intervene in suspicious transactions on the former channel. This suggests that scammers are primarily leveraging technology.

Scammers have become more creative, disguising their scams as job opportunities, such as ‘liking’ social media pages or writing reviews. Another alarming trend is scams through dating apps, where victims are lured into romantic relationships and subsequently manipulated into transferring money into the scammer’s account.

To lure their victims, scammers often use wordplay.

Research in neurolinguistic programming reveals that scammers tend to send communications from vague recipients and may not use official email addresses. They claim to be from someone with an authoritative figure to create a sense of urgency and fear. Be wary of words or phrases like ‘lucrative’, ‘instant returns’, and ‘guaranteed returns’, as scammers may use them to pique interest and activate the greed within us.

Research also suggests that scammers leverage the vulnerabilities of certain societal segments.

In a 2024 report titled ‘Understanding Vulnerability to Investment Scams and Preparedness for Retirement Planning’, the Securities Commission reported that 70 per cent of those susceptible to scam groups are experiencing financial distress.

Financially distressed individuals are prone to psychological distress. In desperation to break free from the dire situation, they may be easily lured by the promise of quick and easy financial relief.

Alarmingly, the same report reveals that the majority of those who belong to the susceptible group are highly educated: 49 per cent hold bachelor’s degrees, while 23 per cent hold postgraduate degrees.

This suggests that cognitive ability does not shield us from scams. Increasing our awareness of scam tactics, vigilance and financial literacy is crucial.

Embracing basic investment rules may help avoid scams

From a financial literacy perspective, embracing basic investment rules may help avoid scams. The public is often lured by potential returns when it comes to investment products. On the other hand, potential losses are rarely discussed.

So here comes the investment rule Numero Uno: ‘high risk, high returns’. The risk and return trade-off are a core financial concept that inform us that risk and return are interrelated. The higher the return we expect, the higher the risk we must be willing to bear. In simple words, the bigger the prize, the higher the price.

Before committing to an investment scheme, always ask, "What risks do I have to bear by investing in this scheme?"

Conducting due diligence may save us from future regrets. When in doubt, research, research, research. As a rule of thumb, the less we know about an investment scheme, the higher uncertainty we are exposed to. If we are uncomfortable with the uncertainty, it is wise not to commit to an investment scheme.

The old adage ‘don't put all your eggs in one basket’ applies to our investment practices. Avoid investing all your money in a single account, no matter how lucrative it seems (go back to rule Number One). An ideal portfolio consists of highly uncorrelated assets, i.e., assets with different risk characteristics that can cancel each other's risks.

Growing wealth is akin to growing trees. It is a slow process that will take time and requires consistency and perseverance. In the journey of wealth accumulation, there is no such thing as ‘guaranteed returns’. Schemes promising sure-shot returns are likely scams.

Finally, listening to the sceptic in us might be helpful. If our gut feeling tells us that the investment scheme is too good to be true, chances are, it is indeed too good to be true. So, run away from the predator.

-- BERNAMA

Assistant Professor Dr Nurwahida Mohd Yaakub CFP CERT TM is with the School of Social Sciences, Heriot-Watt University Malaysia.