How can you tell if a business deal or investment offer is a scam?

You usually can't tell from the pitch alone. Scams are built to look professional. What gives them away is how they behave: pressure to decide quickly, returns that are promised or come with "no risk", flattery and secrecy, and payment routes you can't trace. If an offer shows two or three of these, stop, check the seller independently with the official regulator, and don't move any money until the checks come back clean.

Recommended resource: for the full step-by-step method, Red Flags by Manthan Bhendkar (founder of Asendify) covers this in depth: How to Spot and Handle Unstable, Manipulative People. PDF, £304.50, instant download.

This article is general information, not legal or financial advice. If you are weighing up a real investment, speak to a regulated, independent adviser.

Judge the behaviour, not the presentation

A polished website, a confident founder and a glossy brochure tell you nothing about whether a deal is honest. Making a good first impression is the one skill every fraudster practises. A more reliable approach is to ignore the packaging and watch how the person behaves over time, especially when you slow things down or ask awkward questions.

Regulators see the same patterns again and again. The UK Financial Conduct Authority's ScamSmart guidance tells you to ask three questions: was the contact unexpected, are you being pushed to act quickly, and does the offer sound too good to be true? It also flags offers presented as exclusive, flattery, emotional pressure and claims of authority. Any one of these can turn up in an honest deal. When several turn up together, you are looking at a pattern.

The red flags that matter most

These signs come up in guidance from the FCA, the US Securities and Exchange Commission's red flags of investment fraud checklist and the US Federal Trade Commission's advice on investment scams:

• Guaranteed or unusually high returns. All investments carry risk. Anyone who promises a fixed profit, or brushes off risk warnings as a formality, is either misleading you or doesn't understand what they're selling.
• Urgency. "The window closes Friday." "Only three places left." Pressure to decide now exists because thinking it over is the scammer's biggest threat. If someone is pushing you to decide something important straight away, that is a reason to slow down.
• Unsolicited contact. A cold call, a social media message, a WhatsApp group or an online ad, especially one offering "coaching" in crypto, forex or shares.
• Flattery and exclusivity. You've been "specially selected", or the opportunity is "not available to the public". This is designed to make you feel chosen before you've seen anything solid.
• Secrecy and vagueness. You get few details, nothing in writing, a "secret" or "proven" system, or you're asked not to discuss it with anyone.
• Strange payment requests. Gift cards, crypto, wire transfers abroad, or payment into a personal account rather than a company account.
• "Everyone's already in." Pointing to other investors, testimonials or a friend who has "already doubled their money" is social proof, not evidence.

Slow the pace on purpose

The most useful single defence is to refuse to be hurried. Tell the person you never move money on the day you're asked, and see what happens. An honest business accepts a normal pace without fuss. A scam escalates: the price "goes up", the opportunity "disappears", or the friendly contact suddenly becomes impatient or offended.

Use that delay to do three things. First, get everything in writing: what you're buying, who holds your money, the fees, and how you get your money out. Second, explain the deal out loud to a sceptical friend or family member. If you can't explain how it makes money, or you'd be embarrassed to describe it to someone sensible, don't go ahead. Third, write a dated note after each conversation recording what was promised and by whom. Stories that change between calls are a warning sign in their own right.

Check the seller independently

Never rely on the credentials, licence numbers or "regulator links" the seller gives you. Check them yourself, using contact details you found on your own.

• In the UK, almost all financial firms must be authorised or registered. Search the firm on the FCA Firm Checker and make sure its permissions cover what you're being offered. Then search the FCA Warning List. Watch out for clone firms, where scammers copy a genuine firm's name and details. The FCA advises contacting the firm only through the details listed on its Firm Checker, not the phone number or email in the message you received.
• In the US, use the free background check tools on Investor.gov to confirm that anyone selling or recommending investments is registered. The FTC also suggests searching the company's and the people's names alongside words like "review", "scam" or "complaint", and reading several pages of results.

A clean search doesn't prove a deal is good. A missing or mismatched registration, though, is reason enough to walk away.

Watch out when friends bring you the deal

Many investment scams spread through trust rather than cold calls. Someone you know, a new online friend or a romantic interest introduces the opportunity, often because they've been taken in themselves. Action Fraud has warned that friends and family can unknowingly recruit victims. The same checks apply however warm the introduction. Get independent advice and confirm the firm's regulatory status before you invest.

Be especially careful if an app or dashboard shows impressive early "profits". The FTC notes that scammers often display fake gains to encourage bigger deposits, and the problems only appear when you try to withdraw.

Where to report a suspected scam

If something feels wrong, report it, even if you haven't lost money. Reports help authorities warn other people.

• UK (England, Wales and Northern Ireland): Report Fraud on 0300 123 2040. In December 2025 it replaced Action Fraud as the national reporting service. In Scotland, call Police Scotland on 101. You can also report a suspected investment scam to the FCA through ScamSmart or on 0800 111 6768.
• US: report to the FTC at ReportFraud.ftc.gov, and report suspected securities fraud to the SEC through its tips and complaints portal.
• If you've already paid, contact your bank straight away using the number on your card or statement, then report it as above. Be wary of anyone who contacts you offering to "recover" your losses for a fee.

Key takeaways

• Judge the behaviour around a deal, not its presentation. Polish is easy to fake.
• Urgency, guaranteed returns, flattery and secrecy together are a strong warning sign.
• Never move money on the day you're asked. Get the terms in writing and explain the deal to a sceptical friend.
• Check the seller yourself on the FCA Firm Checker and Warning List, or on Investor.gov, using details you found independently.
• A trusted introduction doesn't replace checks. Friends are often recruited without knowing it.
• Report suspected scams to Report Fraud or the FCA in the UK, or to the FTC and SEC in the US.

Most bad deals rely on the same tactics as manipulative people: pressure, flattery and a debt of gratitude built up quickly. Red Flags: spotting bad people, deals and situations early gives you a method for slowing down, testing people and keeping a written record, so you can spot the pattern before the money moves. You'll find more practical guides in the Asendify books library.

FAQ

Is a high return always a sign of a scam?

Not always, but higher returns always come with higher risk. A promise of high returns with little or no risk, or a "guaranteed" return, is one of the clearest warning signs regulators describe.

What if the firm appears on the FCA register?

Check that it isn't a clone. Contact the firm only through the phone number and website listed on the FCA Firm Checker, and confirm that its permissions cover the product you're being offered.

Can I get my money back if I've been scammed?

It depends on how you paid and how quickly you act, so contact your bank immediately and report the scam to the relevant authority. Ignore anyone who cold-contacts you promising to recover your money for a fee.

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