Insights

A person once opined that the existence of victims of fraud in this world indicated that humanity still possesses trust in each other. If there were no longer any victims of fraud in the world, it would imply a complete absence of trust among individuals. However, as normal human beings, it is inherent that individuals do not wish to become victims of fraud. Hence, we must be able to implement simple mitigation measures to avoid fraud.

Generally, individuals engage in investments with the expectation of gaining profit. Such investments are made voluntarily, typically formalized through a statement or an agreement that affirms the investor’s consent to invest willingly and acknowledges their understanding of the associated consequences. Although every investor aims to achieve profit, if the investor fails to realize such profit or even incurs a loss, the resulting consequences are borne solely by the investor. The losses experienced by the investor do not constitute a crime committed by the investment firm, as these losses represent a risk that the investor must assume. The risk of loss from an investment differs fundamentally from the losses incurred when one becomes a victim of fraud. The question remains: how can we differentiate between legitimate investment and fraud?

1. Conduct Background Checks on the Investment Companies and the Sales Personnel

In this current digital era, the reputation of an investment products can be rapidly created by them through websites, social media, and direct or indirect promotions. Consequently, the actual condition of both the investment products and the investment companies being offered can sometimes become distorted or difficult to assess objectively. One of the simplest actions that can be taken is to conduct a search on search engines (such as Google) to determine whether the product and the company are legal or illegal. The government, through the Financial Services Authority (OJK), commonly would announce via trusted national news outlets if a particular investment product or company is unregistered or illegal in Indonesia. However, it is important to note that an investment deemed illegal in Indonesia may not necessarily be illegal outside of the country. Therefore, potential investors should perform further, thorough investigations.

2. Recognize the Common Indicators of Fraud

It sounds too good to be true

One fundamental principle of investing is that any investment promising significant returns will inherently involve substantial risks. It is a big question when an investment promises high returns with low risk.

Guaranteed Returns

Every investment carries some level of risk. It is often claimed that no one can assure returns on an investment, except in the case of government bonds. The degree of risk linked to an investment is directly related to the expected returns. Generally, investments with lower risks yield lower returns, and higher risks lead to higher potential returns. Hence, assertions of guaranteed high returns with minimal risk should be approached with caution.

Currently, there are many readily available resources that can assist in determining the reliability of an investment. We can also examine the tactics and strategies commonly used by fraudsters through literature and film.

Numerous notable cases have been chronicled in literature, such as that of Jho Low, a Malaysian entrepreneur who became a fugitive in connection with the 1MDB scandal (Malaysian Investment Fund). Jho Low is alleged to have illegally seized approximately US$4.5 billion from 1MDB into his personal account. This case is thoroughly detailed in the book entitled Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World, authored by Bradley Hope and Tom Wright. Furthermore, Netflix has produced a film regarding Anna Delvey, a Russian-born female residing in Germany who successfully perpetrated fraud against numerous influential people in New York City.

 

Written by: R. Bayu Perdana

Translated by: Marwa H. Loekman

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