Tag Archives: Fraud

A Healthy Dose of Skepticism for 2019

2019 is going to be a lot like 2018, and a lot like every other year in recent memory: there will be a couple new ways to become a victim of some form of scam or fraud, there will be a boatload of old, tried-and-true scams still making the rounds (some with slight variations that make them seem new), a few “latest threats” frantically shared on social networks that turn out to be hoaxes, at least one or two major data breaches (and dozens of minor ones), and a whole lot of information, both accurate and inaccurate, about all of it.

And so, as we approach the new year, my advice is to stick to one basic principle, and to always ask yourself, “Is this the way the world really works?” That little bit of skepticism can be your best friend when it comes to avoiding scams and rip-offs, as well as not being the person who spreads false information and hoaxes online.

A lot of people make health-related resolutions this time of year. But before you spend money on a dietary supplement being hawked by some A-list celebrity, ask yourself how you think that A-lister got into the shape he or she is in. Does it seem more likely that they took a pill (that’s only been on the market for a few months, mind you), or could it be the full-time nutritionist on staff, the live-in chef, the million-dollar in-home suite of workout gear, the live-in personal trainer and the fact that their entire job description, when not actively working on a project, is to stay looking as perfect as possible?

When you read a story breathlessly shared on Facebook about robbers using fake perfume samples to subdue victims in parking lots (an urban legend that’s been repeated in various forms since around 1999), take a moment to notice how unlikely the whole scenario seems in light of how quickly most criminals prefer to operate (to say nothing of how ether and chloroform actually work). Notice how many of the “I narrowly escaped this!” stories boil down to, “I saw a man in a parking lot, and then nothing happened.”

When you get an email telling you that you’ve won the Powerball Lottery, remember how lotteries actually work in the real world. You buy a ticket and wait for some ping pong balls to pop out of a big tumbler. You don’t just “have an email address and wait until you win.”

When the phone rings and the caller claims that he’s from the IRS, you didn’t pay your taxes, and that you’re going to be arrested today unless you pay up immediately by purchasing some iTunes cards at the drugstore and calling back with the information, ask yourself if any one part of the situation squares with how the IRS actually functions. (Hint: none of it).

You don’t have to become a cynic, but just remembering to think about a new claim or information before you act on it can be a powerful ally. And remember this: if someone is trying to make you afraid of some immediate (or even abstract) threat, and they tell you the only way to make the fear go away is to give them something (money, personal information, etc.), they are probably not telling the truth.

Avoiding Charity Scams

I sometimes repeat myself, and occasionally I’ll say something I’ve said before, too. But even if you’ve read or heard about charity scams before, it never hurts to have a quick reminder. It’s already November, and charitable giving comes up a lot this time of year.

I’ll keep it short: decide in advance which charitable organizations you wish to support instead of waiting for others to approach you. If you’re looking for a new cause, research before you donate.

When you already know whom you’re giving to, it makes it much easier to turn down those who call or email out of the blue because you won’t feel pressured. You can explain to callers that you’ve already done your giving for the year (and you can just ignore emails—I would hesitate to trust an out-of-the-blue request via email).

If you’re checking out a new charity, the go-to resource is CharityNavigator.org. This website tells you how much a charity spends on marketing and how much money makes it into their programs, gives executive salaries and other financial information, as well as an overall rating of the organization. No mainstream charity manages to have 0% operating expenses, but if you see one that devotes 99.5% of its revenue to salaries and marketing, with only 0.5% going toward programs, you know it’s one to avoid.

Pension Advance Schemes

If you receive monthly payments from a pension, settlement, lottery winnings, or other similar source, it’s a good idea to be aware of schemes that offer a lump sum cash payment in return for some or all of your income.

There can be good reasons for considering it. Living on a fixed income, such as Social Security plus a modest pension can make an unexpected expense (medical event, major house repair, etc.) difficult to pay for. By exchanging some of your pension payments over a certain amount of time for cash, you can cover those expenses without completely upending your life. It’s rarely an ideal situation, but it can work out.

(It can work out. It doesn’t always work out. It often doesn’t work out.)

It is extremely important to know exactly what you’re agreeing to before signing anything. No matter what language it’s dressed up in, these plans are loans. They are giving you a certain amount of money, and you’re paying back a larger sum over time.

There are a lot of companies offering this type of product, and I’m sure some of them aren’t actively trying to inflict harm. But there are tons of unscrupulous lenders offering pension advances that thrive by ripping people off.

Before jumping into a pension advance, I first would recommend looking for literally any other option. Got a credit union nearby? Start there. Ask about a personal loan.

If you really still want a pension advance, go in with the understanding that you are getting a loan, and proceed with extreme caution. What is the effective interest rate you’ll be paying? Some pension advance schemes are effectively charging a nearly 100% annual interest rate. If they deny that it’s a loan or won’t tell you a rate, walk away. Exactly how much will they take each month, and for exactly how long will you be paying them back? Get everything in writing, and the second something seems fishy, bail out and do not proceed any further.

What is Affinity Fraud?

At the beginning of Side 3 of Grand Funk Railroad’s 1970 Live Album, Mark Farner shirtlessly tells the audience this (edited for clarity):

Brothers and sisters, there people out there that look just like you, or maybe your brother…but they’re not. And when they hand you something, don’t take it. Don’t take it, okay?

Now, Mark was referring to the kind of party supplies that might circulate at a rock concert in 1970, but he also could have been talking about affinity fraud almost fifty years later.

Affinity fraud targets people who are members of a group, and uses that group identity to lure victims into the scam. Some of the most common targets are religious groups or church members, people with a shared ethnicity, or those who have served in the military. The con artist will be a member of the targeted group, or will claim to be, and attempt to recruit others to help bring in more victims.

Generally, these scams take the form of phony investments or Ponzi schemes.

There are a variety of ways to identify affinity fraud. Here are a few things to look for:

Is the person offering the investment using membership in your group as his “in?”

A shared identity can be a great way to build community, but remember that the human tendency to trust those we see as similar to ourselves can be used against us. Just because someone claims to be a member of your group doesn’t mean they are. There is no physical barrier to lying; “I’m the same as you” can be uttered by anyone, whether it’s true or not.

Are the investment materials (brochures, flyers, etc.) filled with symbols or phrases familiar to your group?

A con artist targeting members of a church might festoon his written information with symbols or scripture (some even go so far as to imply that the “opportunity” has been sent from above). On the other hand, a scammer going after veterans might use flags, ribbons or eagles. Humans are emotional, and we respond strongly to symbols, but be cautious around any kind of investment offer that seems to be hitting those symbols a little too hard.

 Are the promised returns extremely high, or is the investment presented as guaranteed or having little-to-no risk?

Real investments carry risk. There is always a non-zero chance you will lose some or all of your initial investment. An investment presented as “risk-free” or “guaranteed” is always going to turn out to be a scam, because that’s not how investing works. Any investment promising double-digit returns is to be taken with a grain of salt.

Do the returns hinge on you recruiting others into the fold?

That’s a Ponzi scheme. You will lose all of your money.

Is the broker licensed to sell investments?

Never invest through an unlicensed broker. Whatever your (or your group’s) opinion of regulations, licensing requirements, or government in general, anyone selling investments without a license to do so is breaking the law. What other laws is this person willing to break? What about the ones that make stealing illegal? And don’t fall for excuses like, “I’m not licensed because the government doesn’t want your group to have access to this amazing opportunity,” either. That’s just someone stoking your emotions to goad you into action.

The U.S. Securities and Exchange Commission has a nice PDF available for download that goes into more detail about affinity fraud and how to report it to the SEC.

(However, it doesn’t contain a single reference to Grand Funk Railroad. You gotta read my articles for those.)

The Do Not Call Registry Doesn’t Stop Scam Calls (But Sign Up Anyway)

I’ve heard it dozens of times: so-and-so signed up for the Do Not Call Registry a year ago, but they keep getting scam calls, so obviously it doesn’t work. What’s the point?

And I’ve always replied: put your phone numbers on the list anyway.

Why?

Because it’s a filter.

When you put your phone number on the Do Not Call Registry, after a few weeks, you will stop getting calls…from legitimate businesses that use cold calls as their primary sales technique (telemarketers, in other words). Companies that do not want to be shut down for breaking federal laws.

You won’t stop getting calls from scammers. They’re not referring to the registry in the first place because they don’t care. At the same time, you will already know not to even bother picking up the phone, because you know that anyone calling once your phone number is in the Registry is willfully breaking the law. You already know they’re dishonest, without hearing a word they say. All you have to do it let it ring until it stops.

Utility Scams are an Ongoing Threat

It’s been a while since I brought up Utility Scams, so now is as good a time as any for a quick recap.

Utility Scams are an example of a distraction scam, and they generally target seniors. These scammers generally work in pairs. One will knock on the door and claim to work for the local utility company. He will claim they are testing something, or fixing something, or there’s some kind of urgent situation that requires the resident to allow him inside the house to do something with the circuit breaker.

While the homeowner is busy with this person in the basement, his partner will enter the home and look around for cash, jewelry or other valuables to steal. After a few minutes of pretending to work on something, the first person will claim the job is done and leave. By the time the resident notices the robbery, the scammers are long gone.

Your utility company should always contact you in advance if there really is an issue that requires someone to enter your house. However, such scenarios are extremely unusual. If someone appears at your door claiming to represent a utility, politely ask to see an ID badge. Regardless of the response, ask them to wait a moment. Close the door and lock it, make sure any other doors are locked, and call the utility company directly if you’re still unsure, or call the police if you’ve got a bad feeling. Do not simply let a stranger into your house on his word.

It’s also not a good idea to let on that you think this person is trying to commit a crime. This is an in-person scam, and it carries risks that aren’t really present with a scam phone call from the other side of the globe. They might just run, but they might not. It’s better to pretend to play along. Most likely they’ll take off as soon as you close the door—the point of most scams is to get in and out quickly. Standing around on someone’s porch in broad daylight for more than a couple seconds isn’t going to appeal to someone who doesn’t want to be seen.

Greed and Fraud

A few weeks ago, I posted an article about the relationship between fear and fraud. Basically, if someone is trying to make you afraid, then asking for money or personal information, it is very likely that they are trying to steal from you.

There is another emotion that scammers will often prey upon: greed. That all-too-human desire to get something for nothing, and to be the one with the most.

The most obvious example I can think of is the old Lottery Scam. By stoking greed with the promise of vast, out-of-nowhere riches, the perpetrators of this scam hope you won’t notice how suspicious the hoops they’re asking you to jump through are. The promise of millions of dollars is misdirection; while you’ve got your eyes on the prize, you might not remember how unwise it is to wire a few thousand dollars to a stranger, or that “cash this check and wire the money back to me” is a weird request to begin with.

Other examples include the Car Wrap Advertising scam, the Pigeon Drop scheme (“I found money, let’s share it!”), and of course the old Nigerian 419 scam (“I’m an exiled prince; help me retrieve my fortune and I’ll share it with you,” which at this point isn’t even a “classic” scam; it’s positively an antique).

It’s the same tip as with fear: if someone is trying to spark greed, then asking for money and/or personal information, they are trying to scam you.

Avoiding Vacation Rental Scams

So you’ve found the perfect vacation rental for an amazingly low price. You contact the owner of the property and, unbelievably, the price shown on Craigslist is correct and the unit is available for the dates you need. The owner was a bit hard to reach, but he travels all over the world for business (and of course he does—who else but a successful international businessperson could afford such a house in such a location to begin with?).

Payment is arranged by wire transfer (a little unusual, you think, but again—world traveler business type, right? He probably has reasons for his preferences, and they’ve obviously served him well, right?).

You make your payment and pack for your vacation, still not quite believing the deal you’re getting. Oceanfront! And that pool…

You arrive at the property on a Sunday morning and are delighted to find it looks even better than the pictures. You ring the doorbell to be greeted by…the permanent residents of the house, who aren’t renting it out to anyone, and who are wondering why there are a bunch of weird people with suitcases at their front door.

You’ve been taken in by a classic vacation rental scam, and good luck getting your money (that you wired to a stranger) back. What could you have done differently?

First, you could have been more wary of a price that’s too good to be true. There’s no real reason for the owner of a rental property in an extremely popular location to offer a huge discount as long as that demand exists.

Now, I’m not a huge fan of Craigslist for finding vacation rentals, but I’m also not a huge fan of Craigslist in the first place due to the overall potential for fraud. I’m sure there are plenty of legitimate rental listings. However, Craigslist should not be the only place the property is listed. Check vacation rental websites in the area and make sure the property is represented elsewhere as available.

The owner being hard to reach or unresponsive is a red flag. If the entire conversation takes place via email, that’s also suspect. There should always be a phone number with a name attached to it that you can verify with a search. A legitimate business should want to be easy to find and reach. If you find yourself leaving a message every single time you call, that can be another sign of trouble.

Finally, the unusual payment method is a warning that something is not right. You should never wire money to a stranger for any reason. Some rental scammers request that you purchase gift cards and pay by relaying the card information to them. Don’t do it. You want a payment method that leaves paper trail and has some fraud protection, and you want a buffer between the transaction and your deposit (checking/savings) account. In other words, if you can’t pay with a credit card, look elsewhere.

Sign Up for Activity Alerts Everywhere You Can

Receiving and paying your bills online instead of through postal mail is a good idea. It’s not only convenient, but it also helps fight identity theft and other types of fraud (the fewer pieces of paper floating around in the world with your personal information on them, the better).

But your financial accounts may offer online features you’re not taking advantage of just yet. Most credit card providers and deposit institutions (i.e. credit unions and banks) that offer online access also offer alerts that let you know when activity has occurred on your account. Alerts can be an important tool in detecting unusual transactions or changes as early as possible.

Every financial provider is different, but many will offer alerts for new charges or withdrawals. Other options may include notifications for a change of address, phone number, email address or other contact information. Remember that identity thieves will sometimes attempt to change these details in an existing account in order to hide their activities from the victim. If you get an alert that your address has been changed (and you’re not the one who did it), it’s time to contact that institution and report the suspicious activity.

Fear and Fraud

Humans are an emotional animal. No matter how advanced our technologies or societies become, no matter how objective or logical we believe we are, primal emotions can still affect our behavior, and when someone manipulates those feelings into a heightened state, we find ourselves at risk of making mistakes.

Many types of fraud work by stoking one of our most basic emotions: fear. The assumption goes: if you can make someone afraid, they’ll believe anything you say, even if it makes no logical sense.

Here is a list of several common scams and how they use fear to trick victims into handing over money or personal information:

  • Phishing: uses the fear of losing access to money (“your debit card has been deactivated”) to trick victims into visiting a website that harvests personal information
  • Medicare scam: uses fear of losing access to health care to convince victims to reveal personal information
  • Tech Support scam: uses fear of malicious software to trick victims into handing over control of their computer
  • IRS scam: uses fear of imprisonment to get victims to load prepaid gift cards, then pass along the card information to the scammer
  • Missed Jury Duty scam: uses feat of imprisonment to obtain credit or debit card information
  • Grandparent scam: uses fear of loved ones’ safety to lure victims into wiring money or loading prepaid cards with cash
  • Lottery scam: mostly appeals to greed (another primal emotion), but also stokes fear of missing out on a once-in-a-lifetime opportunity to trick victims into falling for a counterfeit check scheme
  • Ransomware: uses fear of losing access to important files to extort payments from victims

In other words, a lot of scams operate by inciting fear.

The key is to understand that the use of fear is an extremely common (if not the most common) tactic, and to be able to recognize when someone is trying to make you afraid. This requires a certain amount of self-awareness, and I’m not really sure how one goes about developing that, other than to just slow down and take a moment whenever a stranger is presenting you with alarming information, instead of reacting immediately.

Unless they’re shouting “duck!”