How Cypriot investors can protect themselves from online scams

Cyprus watchdog urges investors to check offers before handing over money Cypriot investors should verify investment firms, question promises of high returns and avoid rushing into financial decisions, the Cyprus Securities and Exchange Commission (CySEC) has warned in a guide aimed at helping the public recognise investment scams and make safer financial decisions. The regulator’s retail investor guide highlights the growing risks posed by convincing online fraud, as social media, mobile applications, online advertisements, financial influencers and artificial intelligence-generated content increasingly shape how people discover and assess investment opportunities. While investing can play an important role in long-term financial planning, CySEC stresses that every investment carries risk and that having access to information is not enough unless investors can assess whether it is reliable. Evaluating market volatility and avoiding digital traps Investors do not need to know everything about financial markets, but they should understand what to check, which questions to ask and when to walk away before committing their money. One of the guide’s central messages is that investors should remain calm when markets fluctuate, rather than allowing fear, excitement or sudden price movements to dictate their decisions. Before reacting to a sharp change in the market, investors are encouraged to consider whether the reasons behind their original investment have genuinely changed, whether they are responding to new information or simply reacting emotionally, whether they understand the risks and whether they may need the money in the near future. CySEC also warns against the fear of missing out, commonly known as FOMO, which can lead people to invest because they believe everyone else is doing so. An investment does not become better simply because it is popular, the guide explains, while a rising price or widespread attention online does not mean that a product suits an investor’s objectives or that its value will continue to increase. Online information must also be checked carefully, as scammers can imitate legitimate businesses and public figures using increasingly sophisticated digital tools. Spotting red flags and verifying authorization Fake profiles may use the names, logos and contact details of genuine companies, while artificial intelligence can generate convincing images, videos, written content and voice recordings. Financial influencers, or finfluencers, may share personal opinions, experiences or promotional material about investments, but a large following does not establish their expertise or prove that an investment is reliable. Similarly, screenshots showing profits and apparently positive customer testimonials can be fabricated or manipulated. CySEC advises investors to seek information directly from official sources, search independently for a company rather than relying on links sent to them, verify the identity of the person or business involved and cross-check important claims against more than one reliable source. Investors should never disclose passwords or personal information to unverified parties or allow anyone to access their devices remotely. The regulator also identifies several warning signs of potential investment scams, including promises of guaranteed high returns with little or no risk, unsolicited approaches through telephone calls, emails, social media or messaging applications, and pressure to invest immediately. Assessing product suitability and risk tolerance Other red flags include offers described as exclusive or confidential, people claiming to represent banks, investment firms, regulators or other well-known organisations, and requests for additional payments to unlock profits or withdraw money. Investors should be particularly suspicious of platforms that continually display apparent gains but make it difficult to withdraw funds, as well as requests to move conversations to private channels or transfer money to personal accounts. Requests for passwords, bank details or remote access to a device should prompt immediate caution. The greater the pressure to decide quickly, the more time investors should take to check the offer, CySEC says. Before transferring money, investors should establish whether the company or individual offering the service is authorised to provide it, using official registers maintained by the relevant supervisory authorities. However, even this check requires care, as scammers may impersonate genuine, authorised firms by copying their names and details. Investors should also make sure they understand exactly what they are buying, including how the product works, where potential returns come from, the main risks, how much they could lose, how quickly they could sell the investment or withdraw their money, and what fees, charges and commissions apply. If an investor cannot explain in simple terms how a product works and what its main risks are, the guide advises seeking more information before proceeding. CySEC further stresses that an investment must be suitable for the individual, rather than simply appearing attractive in general. Financial literacy basics and safeguarding younger investors A legitimate investment adviser should gather information about a client’s knowledge and experience of financial products, financial circumstances, assets and commitments, investment objectives and the period for which the money can remain invested. The adviser must also consider both the level of risk the investor is willing to accept and the level of loss they can actually afford to bear. These are not necessarily the same. Someone may be prepared to take substantial risks but lack the financial means to withstand a significant loss. Any specific investment preferences or needs should also be considered, while investors are encouraged to answer questions honestly rather than adjusting their responses to make a preferred product appear suitable. If an adviser recommends an investment without first asking about the client’s financial situation, objectives, investment experience and ability to bear risk, investors should stop and seek an explanation. Before agreeing to proceed, they should ask why the investment is being recommended, how it relates to their objectives, what the main risks are, how much they could lose, why it is considered suitable and how long their money may need to remain invested. Understanding the basics of investing is another important part of protecting savings. CySEC explains that the potential for higher returns generally comes with greater risk, meaning there is no such thing as a high-return investment that is entirely risk-free. Diversification, or spreading money across different investments or asset classes, may help manage risk depending on an investor’s objectives and circumstances. The 60-second check for safer investing The period for which money can remain invested is also important, since a product that may suit a long-term goal might be inappropriate for funds needed in the near future. Investors should take account of all fees, charges and transaction costs, which affect the overall return, while understanding compounding, whereby returns can generate further returns over time. The guide also singles out younger investors, who can access financial products and follow investment trends with just a few clicks but may mistake convenience for simplicity or safety. CySEC cautions that social media is no substitute for investment advice, that a product’s popularity does not demonstrate its quality and that applications, algorithms and artificial intelligence tools cannot guarantee sound investment decisions. It recommends developing good habits early by learning the basics, understanding risk, checking who is behind an investment proposal, avoiding investments simply because others are participating and never committing money that cannot be afforded to lose. Investors should also ensure that excitement or pressure does not prevent them from carrying out independent research. To help people assess opportunities before committing funds, CySEC proposes a 60-second check covering five questions: who is offering the investment and whether their details are genuine; what exactly is being purchased and what risks it carries; how much could be lost and what charges apply; why the investor wants to participate; and where the information originated. Investors should consider whether an opportunity fits their objectives or whether they are acting out of fear of missing out, and whether the information came from a reliable official source or from a social media post, advertisement, influencer or unsolicited message. The final question is whether anyone is pressuring them to decide immediately. If so, CySEC advises stopping and checking the opportunity again before proceeding. The regulator concludes that investor protection goes beyond avoiding scams and also requires understanding risk, assessing information, recognising misinformation and making decisions without rushing. Its financial education resources include an online portal with a knowledge quiz, a register of authorised companies and individuals, investor warnings, a register of non-approved domains and an investment scam quiz. These resources are available through the CySEC Financial Education Portal, the register of authorised companies and individuals, investor warnings, the register of non-approved domains and the investment scam quiz. The investor guides form part of CySEC’s financial education programme, which aims to inform, educate and protect the public and investors. The regulator also encourages the public to follow its social media channels for updates on its initiatives and activities.