It may seem somewhat ironic, but the global financial crisis of 2008 is, in some cases, boosting the fortunes of the con artists and fraudsters who have always preyed on less sophisticated investors. And despite repeated warnings from regulators and the financial services industry itself, many Canadians who are receiving lower returns on their investments are moving their money out of traditional, regulated investments in hopes of finding bigger returns elsewhere.
“Therein lies the problem, because this presents a perfect storm for con artists,” says Patricia Bowles, director of communications and education with the B.C. Securities Commission (BCSC) in Vancouver.
To counter that storm, British Columbia has recently become the first province to launch an extensive, multi-year, fraud-awareness program. This campaign is aimed specifically at ordinary investors – particularly older people and those from B.C.’s large immigrant communities.
The BCSC’s three-year Be Fraud Aware campaign began its second year last month. (October also is Investor Education Month in B.C.) This year, the campaign is using two provincewide television commercials, three YouTube videos and a new mobile application for smartphones, which reminds investors about warning signs of fraud and provides a link for reporting a fraud immediately.
The groundbreaking campaign has its roots in a 2006 BCSC study that found that at least one in 20 Canadians have been defrauded in their lifetime. A subsequent BCSC study this past spring found that in B.C. alone, 23% of investors over 50 years of age had experienced a fraud, compared with 17% nationally.
“We also learned that the effect of investment fraud on individuals and entire communities is as serious as violent crime,” Bowles says. “Yet, the courts and authorities don’t treat them in the same way.”
Newcomer groups, in particular, often are victimized, she adds: “Historically, we have had little interaction with these communities. And we know a lot happens that is never reported to police.”
That’s why the BCSC awareness campaign has been produced in Punjabi, Mandarin and Cantonese as well as in English.
The campaign also places strong emphasis on the characteristic of many frauds that paves the way for abuses: con artists’ talent for presenting themselves as bona fide, easy to like and responsible investment professionals.
Or, as BCSC chairwoman Brenda Leong says: “We want people to see just how charismatic and charming these [con artist] people can be when they are pitching an investment.”
Thus, the TV commercials feature a suave, obviously successful fraudster who uses his powers of persuasion to con investors.
One commercial spot depicts how victims often are introduced to the fraudster through relationships of trust in their communities; the other spot uses a split screen to demonstrate the sales pitch and underlying motives of the fraudster simultaneously.
The campaign includes newspaper and radio advertising. Followup surveys from the first year show very high awareness among British Columbians.
“The campaign’s spots are catchy,” says John McCallum, president of Advocis‘ Vancouver chapter. “And while they’re great for investing consumers, I think they can only help legitimate financial advisors as well.”
Adds Bowles: “I think most advisors recognize that protecting investors from the bad guys is also a good thing for the advisors. Plus, they should recognize that our campaign is not about them; it’s about the con artists who work outside the system.”
The campaign has full support of the Vancouver chapter of the Association of Certified Fraud Examiners (ACFE). The ACFE, the world’s largest anti-fraud organization, has more than 50,000 members, including auditors, accountants, regulators and police officers, among others, in 125 countries. The ACFE’s goal is to reduce all forms of white-collar crime through prevention.
“The BCSC campaign is a great start,” says Norm Grdina, president of ACFE’s Vancouver chapter. “But it will take time to become really effective because investment crime is big worldwide, and it’s getting bigger.”
Meanwhile, Bowles says, audience recall of the campaign spots so far is 32% among the general population, 42% within B.C.’s Chinese population and a whopping 62% among the province’s Punjabi community.
More to the point, she says, the campaign has significantly increased the number of tips the BCSC receives. Year-over-year, Bowles adds, the last jump was to 147 from 78.
“The number of hits on our Fraud Aware (www.befraudaware.ca) and Invest Right (www.investright.org) websites have also increased exponentially with the campaign,” she notes. “And while I can’t disclose details, I can tell you we now have high-value tips leading to investigations that are still ongoing.”
The BCSC spent roughly $800,000 for the campaign’s inaugural year in 2011. Bowles says this year’s campaign expenditure will total approximately $2 million, largely because of new TV commercials. Another $2 million is expected to be spent in the third and final year.
So, what happens after that?
“After next year,” Bowles says, “we’ll sit back and assess whether or not the campaign becomes a permanent part of our ongoing operations. This is really a social marketing campaign, much like seatbelt or anti-smoking drives, so it has to be done all the time.
“Regardless, we’re giving ordinary people the tools to protect themselves from investment fraud,” Bowles adds, “and that’s giving us a huge bang for our buck.”
© 2012 Investment Executive. All rights reserved.