Spot the scam

Red flags include high return, low risk claims, pressure selling tactics


News that about 70 retail investors were crying foul over an exotic agarwood tree investment scheme made headlines yet this sort of story is far from rare.

Time and time again, the lure of reaping easy and high returns continues to lead retail investors into a minefield of financial risks.

In this latest case, investors outlaid sums ranging from $5,000 to $60,000 with Tropical Forestry Venture (TFV) to grow aquilaria trees that would be harvested for its valuable agarwood and oud oil used in fragrances and spas.

These investors were expecting high returns of between three and seven times the sums invested.

However, TFV has folded with no compensation in sight for those who made investments. It is just another new twist on a sad old tale.


Besides TFV, there have been several firms, including The Gold Guarantee, Profitable Plots and Sunshine Empire, that have surfaced in recent years at the shady end of Singapore's financial services sector.

Beware of "too good to be true" investment schemes which typically offer promises of attractive returns and low or no risk. The use of pressure selling tactics is another giveaway. The growth of the Internet means these tricksters may be a click away.

Mr Puah Soon Lim, investment specialist at Finexis Advisory, says that most scams are the doing of smart conmen.

"The ones that are skilful are deliberate and understand human psychology. They make use of social triggers like reciprocity, scarcity, social proof and authority. This is very much the work of a smart con artist," he notes. "The first step is to know that everyone has some blind spots and can be vulnerable. Be able to recognise some red flags and persuasion techniques."

Here are some things you should know.

Avoid falling victim to investment scams


It often starts with an unsolicited call from a person marketing an investment scheme that may include non-existent stocks or exotic investments like wine, raw land and trees. You could be asked to make payment to a bank account or be invited to attend a sales presentation at the office.

It may appear normal except that the marketing person may be carrying out a financial activity not regulated by the Monetary Authority of Singapore (MAS).

Check whether the person is regulated by the MAS. If you choose to deal with unauthorised individuals and firms, you forgo the protection afforded under the laws administered by the MAS, especially if they are based overseas.

The regulations mean that such schemes cannot be sold to retail investors without the MAS first authorising or recognising them. Sellers will have to make their scheme details and business plans known to the authorities and, in some cases, register prospectuses. They will also have to disclose material information to consumers so that they can make well-informed decisions.

These requirements will make it harder for such schemes to offer lofty promises and claims to retail investors that they cannot deliver.

Consumers can expect to be given licensed financial advice from trained advisers on some of these products and be brought through an advisory process where a reasonable basis for recommending them is established. They may also seek recourse when these investments fall through.

A spokesman for MAS said: "Consumers seeking investments are encouraged to deal only with entities regulated by MAS. Our regulatory regime seeks to ensure that investors receive adequate information to make well-informed investment decisions, and are dealt with fairly by product distributors."


In September last year, the MAS said that it will regulate investment schemes such as gold buybacks and collective landbanking. The proposed changes are targeted to be tabled in Parliament.

The proposed regulation covers collectively-managed investment schemes that are in substance similar to traditional regulated investment funds such as mutual funds but do not pool investors' contributions. Traditional collective investment schemes involve investors pooling their funds to invest in an asset or a group of assets, while unregulated collectively managed investment schemes require each investor to buy his or her own direct stake in the asset, such as a small plot in a large tract of land.

In typical plantation investment schemes, investors buy sub-divided plots of land on which crops are to be grown or even specific trees on a plot of land, to participate in profits arising from the future harvesting and sale of the crops or trees.

If the arrangements are such that investors do not have day-to-day control of the property, and the scheme's property is managed as a whole like a collective investment scheme, it is likely to fall under MAS' proposed regulation.

Under the proposed rules, some schemes may no longer solicit funds from the public but can do so only from investors who are deemed more sophisticated.

Schemes intended for retail investors will require MAS authorisation and be restricted to investments in securities or other assets that are liquid (for example, precious metals), or have stable income-generating ability, such as completed real estate.

A full assessment of how a scheme is operated will need to be done in order to determine if it would likely fall within the proposed MAS regulation.

This means that operators of schemes peddling illiquid assets such as land banks or agricultural products would no longer be able to market their products to retail investors. Investors who are already committed to such schemes might not be able to exit their investments easily, especially as the pool of potential buyers will shrink considerably.


The investor alert list provides a listing of unregulated persons who, based on information received by the MAS, may have been wrongly perceived as being licensed or authorised. The central bank assesses public feedback as well as documentary evidence on the entity before placing it on the list.

The list, which can be found on the MAS and MoneySense websites, acts as an early warning alert to investors. It is not exhaustive and is periodically updated. The fact that a company is not listed does not mean that it is credible.

So consumers must exercise caution when dealing with all unregulated entities, not just those listed.

The list has swelled to 229 firms, well up from the 25 recorded in mid-2004 when it was made public. The public is also encouraged to check the MAS website for the list of MAS-registered prospectuses, authorised retail investment funds and regulated financial institutions.


The consumer watchdog says investors should always exercise caution and do their own thorough research on any investment scheme, particularly those that promise high returns with seemingly low risks.

"Consumers who use the services of such entities for investing should ensure that they are regulated by the MAS and keep an eye on the investor alert list highlighted on the MAS website. Consumers who are not familiar with such collective investment should not get involved," says Mr Seah Seng Choon, executive director of the Consumers Association of Singapore (Case).

Do not get carried away by promises of high gains. Ask for brochures and documents such as sales agreements to be sent to you first so you can review them and check the legal terms. It is also prudent to find out the jurisdictions that the companies operate in.

Consider if the investment is a good fit with your financial goals and circumstances. And remember that high returns are always accompanied by higher risks.

Mr Puah warns against investing based solely on the recommendations of friends and family.

"Make sure you independently validate the claims. Check on their credentials. All authorised companies and individuals offering investment products can be traced at MAS directory," he says.

He added that the "grey and tricky" areas include landbanking and gold as there is no proper directory of such firms. However, the Accounting and Corporate Regulatory Authority (Acra) would have their records if they are based in Singapore. "Pay $5.50 at Acra and obtain information such as company registration dates and paid up capital. If they are new and unheard of, it's a big red flag. If they are from overseas and difficult to check, avoid altogether. I also register my phone number with PDPA and don't entertain cold calls at all," said Mr Puah, referring to the Do Not Call Registry under the Personal Data Protection Act.

He suggested avoiding free seminars related to such firms so as not to fall for their sales pitch.


The FAA regulates how companies and individuals provide advice on investment products to consumers.

It is administered by the MAS and covers advice on products such as unit trusts, foreign exchange and life insurance policies.

Under the FAA, no one is allowed to provide advice in relation to any investment product unless he is licensed to do so - or specifically exempted - under the Act. Anyone flouting this regulation faces heavy fines and/or jail time if convicted.

The MAS administers the FAA and may take enforcement action. Where there is an apparent breach of the law, it will refer the case to the Commercial Affairs Department (CAD), the principal white-collar crime investigation agency here, for investigation.


Regardless of whether an entity is regulated by the MAS, it is an offence to operate a fraudulent or deceptive business.

If you suspect that you have been scammed or there may be some criminal wrongdoing or fraud, you can report the matter to the CAD.

Do not get carried away by promises of high gains. Ask for brochures and documents such as sales agreements to be sent to you first so you can review them and check the legal terms.

A version of this article appeared in the print edition of The Sunday Times on February 28, 2016, with the headline 'Spot the scam'. Subscribe