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Avoid Investment Scams! Here's What You Should Check First

Admin BFI
13 October 2023
Avoid Investment Scams! Here's What You Should Check First

Investment is the allocation of funds for a predetermined period. Through investment, individuals hope to gain profits or returns in the future. This serves as one of the methods to secure financial stability in the years to come.


Today, with technological advancements, investments have become more accessible than ever, and they can even be managed from your mobile phone. While this convenience should provide numerous benefits to prospective investors, it has also given rise to a new problem—widespread investment scams, also known as Ponzi schemes. This phenomenon has raised significant concerns among the public, as many individuals have fallen victim to such fraudulent schemes.


An investment scam is an illegal practice in which unauthorized parties offer fake or unregistered investments, promising substantial profits in a short period. They often employ cunning and enticing tactics, such as offering unrealistic rates of return or making false promises to attract potential investors. With evolving technology, these scams have become increasingly sophisticated and challenging to identify.


One of the most detrimental consequences of investment scams is the loss of funds for investors. Those who have been promised substantial profits often entrust their money to fraudsters, only to discover that their money has vanished, and its whereabouts are unclear. This constitutes a significant financial loss and can jeopardize a person's financial well-being.


To avoid falling prey to investment scams, you need to take certain precautions. Here's what you can do to protect yourself from fraudulent investments.



1. Tips to Avoid Fraudulent Investments

1.1 Be Cautious of Attractive Offers

Not all investments with enticing offers can be considered legitimate. Therefore, it's wise to exercise caution when presented with such opportunities. It's essential to conduct a simple assessment to determine whether the offer is reasonable. Always stay vigilant if you are promised substantial returns in a short amount of time for a relatively small investment.


1.2 Verify the Entity

Every organization that conducts investments and collects funds from the public is required to obtain official permission from the relevant authorities, such as the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) under the Ministry of Finance, Bank Indonesia, or the Commodity Futures Trading Regulatory Agency (Bappepti) under the Ministry of Trade. Reliable institutions or companies are supervised by the Financial Services Authority (OJK). If you intend to invest in stocks, make sure that the company is also listed on the Indonesia Stock Exchange (BEI).


Therefore, you should always verify whether the investment being offered has the required authorization. Be cautious if the organization or company possesses only a Trading Business License (Surat Izin Usaha Perdagangan) for their investment products, as this license does not cover fund collection and investment management.


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1.3 Scrutinize the Form and Marketing Strategy

In legitimate investment products, the operation principles, profit distribution, and other aspects are clearly defined. Most companies have established operational guidelines for their products. In contrast, companies or entities conducting illegal investment schemes often lack clear guidelines on how the investment is managed. In some cases, fraudulent investments do not even have legitimate products or sales methods.


It's crucial not to transfer your funds until you have created and signed a comprehensive and detailed agreement. Before signing such an agreement, carefully examine each provision to avoid any misunderstandings. If necessary, consider involving a notary when formalizing the sales agreement.


Always remain vigilant against any coercive tactics aiming to force you into making an immediate decision or create a sense of urgency. It is advisable to conduct thorough research about the investment product, including investigating the background of the company managing it, before making a commitment to participate in the investment.


2. Avoid This Investment If…

Investing is a crucial step in managing your finances, and it is important to avoid high-risk or illegal investments. In an effort to protect yourself and your finances, there are several signs to be aware of to avoid questionable investments. Here are a few reasons why you should steer clear of certain investments:


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2.1 Promising Quick Profits

When presented with an investment that offers substantial returns in a short period, this should serve as a first warning sign. While there are legitimate investments that can yield significant profits, such investments should be subject to further investigation. To be cautious, it is advisable not to take the risk with overly promising investments. Genuine investments usually require time and patience to generate stable returns.


2.2 Unclear Products or Assets

Before making an investment, it is essential to understand the type of product or asset being offered. This includes gold, mutual funds, stocks, real estate, or other investment types. Legitimate investments always have a clear product or asset that forms the basis of your investment value. In contrast, investment scams often lack genuine products or assets. They may merely sell the "promise" of profits without a concrete basis.


2.3 Lack of Transparency

Transparency is one of the fundamental principles of legitimate investments. When you invest in a regulated company, you will typically receive periodic reports about your investment's performance. Even before investing, you will have access to the company's profile and information regarding associated risks. However, investment scams tend to avoid transparency. They may not provide sufficient or clear information about how the investment functions. This can make it difficult for investors to make informed decisions.


2.4 Relying on Recruiting New Investors

A distinctive characteristic of investment scams is their reliance on recruiting new investors, often through a Multi-Level Marketing (MLM) system. In this scheme, investors are promised substantial returns upfront and are asked to recruit other investors to generate additional profits. The profits given to early investors often come from the funds invested by newer recruits. When the influx of new investors stops, the investment becomes unsustainable, and early investors frequently lose their money. This business model has the potential to harm many people and should be avoided.


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In an effort to steer clear of dubious investments, financial education is crucial. The more you understand how real investments work, the better equipped you are to avoid investment fraud. Don't hesitate to seek financial education resources, attend seminars, or consult with a financial advisor who can provide sound guidance on your investments.


Smart investing is key to achieving your financial goals, but it's also essential to avoid offers that seem too good to be true. By maintaining vigilance against the signs of questionable investments and conducting thorough.


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