The following are some of
the most common scams that are being used today and tips to help
prevent you from being victimized.
Telemarketing Fraud:
When you send money to
people you do not know personally or give personal or financial
information to unknown callers, you increase your chances of becoming
a victim of telemarketing fraud.
Here are some warning
signs of telemarketing fraud—what a caller may tell you:
You must act 'now' or
the offer won't be good.
You've won a 'free'
gift, vacation, or prize. But you have to pay for postage and
handling or other charges.
"You must send
money, give a credit card or bank account number, or have a check
picked up by courier. You may hear this before you have had a chance
to consider the offer carefully.
You don't need to
check out the company with anyone. The callers say you do not need
to speak to anyone including your family, lawyer, accountant, local
Better Business Bureau, or consumer protection agency.
You don't need any
written information about their company or their references.
You can't afford to
miss this 'high-profit, no-risk' offer.
If you hear these or
similar "lines" from a telephone salesperson, just say "no
thank you" and hang up the telephone.
Tips for Avoiding
Telemarketing Fraud:
It's very difficult to get
your money back if you've been cheated over the telephone. Before you
buy anything by telephone, remember:
Don't buy from an
unfamiliar company. Legitimate businesses understand that you want
more information about their company and are happy to comply.
Always ask for and
wait until you receive written material about any offer or charity.
If you get brochures about costly investments, ask someone whose
financial advice you trust to review them. But, unfortunately,
beware—not everything written down is true.
Always check out
unfamiliar companies with your local consumer protection agency,
Better Business Bureau, state attorney general, the National Fraud
Information Center, or other watchdog groups. Unfortunately, not all
bad businesses can be identified through these organizations.
Obtain a
salesperson's name, business identity, telephone number, street
address, mailing address, and business license number before you
transact business. Some con artists give out false names, telephone
numbers, addresses, and business license numbers. Verify the
accuracy of these items.
Before you give money
to a charity or make an investment, find out what percentage of the
money is paid in commissions and what percentage actually goes to
the charity or investment.
Before you send
money, ask yourself a simple question. "What guarantee do I
really have that this solicitor will use my money in the manner we
agreed upon?"
Don’t pay in
advance for services. Pay services only after they are delivered.
Be wary of companies
that want to send a messenger to your home to pick up money,
claiming it is part of their service to you. In reality, they are
taking your money without leaving any trace of who they are or where
they can be reached.
Always take your time
making a decision. Legitimate companies won't pressure you to make a
snap decision.
Don't pay for a "free
prize." If a caller tells you the payment is for taxes, he or
she is violating federal law.
Before you receive
your next sales pitch, decide what your limits are—the kinds of
financial information you will and won't give out on the telephone.
Be sure to talk over
big investments offered by telephone salespeople with a trusted
friend, family member, or financial advisor. It's never rude to wait
and think about an offer.
Never respond to an
offer you don't understand thoroughly.
Never send money or
give out personal information such as credit card numbers and
expiration dates, bank account numbers, dates of birth, or social
security numbers to unfamiliar companies or unknown persons.
Be aware that your
personal information is often brokered to telemarketers through
third parties.
If you have been
victimized once, be wary of persons who call offering to help you
recover your losses for a fee paid in advance.
If you have
information about a fraud, report it to state, local, or federal law
enforcement agencies.
Nigerian Letter or
“419” Fraud
Nigerian letter frauds
combine the threat of impersonation fraud with a variation of an
advance fee scheme in which a letter mailed from Nigeria offers the
recipient the "opportunity" to share in a percentage of
millions of dollars that the author—a self-proclaimed government
official—is trying to transfer illegally out of Nigeria. The
recipient is encouraged to send information to the author, such as
blank letterhead stationery, bank name and account numbers, and other
identifying information using a fax number provided in the letter.
Some of these letters have also been received via e-mail through the
Internet. The scheme relies on convincing a willing victim, who has
demonstrated a "propensity for larceny" by responding to
the invitation, to send money to the author of the letter in Nigeria
in several installments of increasing amounts for a variety of
reasons.
Payment of taxes, bribes
to government officials, and legal fees are often described in great
detail with the promise that all expenses will be reimbursed as soon
as the funds are spirited out of Nigeria. In actuality, the millions
of dollars do not exist, and the victim eventually ends up with
nothing but loss. Once the victim stops sending money, the
perpetrators have been known to use the personal information and
checks that they received to impersonate the victim, draining bank
accounts and credit card balances. While such an invitation impresses
most law-abiding citizens as a laughable hoax, millions of dollars in
losses are caused by these schemes annually. Some victims have been
lured to Nigeria, where they have been imprisoned against their will
along with losing large sums of money. The Nigerian government is not
sympathetic to victims of these schemes, since the victim actually
conspires to remove funds from Nigeria in a manner that is contrary
to Nigerian law. The schemes themselves violate section 419 of the
Nigerian criminal code, hence the label “419 fraud.”
Tips for Avoiding
Nigerian Letter or "419" Fraud:
If you receive a
letter from Nigeria asking you to send personal or banking
information, do not reply in any manner. Send the letter to the U.S.
Secret Service, your local FBI office, or the U.S. Postal Inspection
Service. You can also register a complaint with the Federal Trade
Commission’s Complaint Assistant.
If you know someone
who is corresponding in one of these schemes, encourage that person
to contact the FBI or the U.S. Secret Service as soon as possible.
Be skeptical of
individuals representing themselves as Nigerian or foreign
government officials asking for your help in placing large sums of
money in overseas bank accounts.
Do not believe the
promise of large sums of money for your cooperation.
Guard your account
information carefully.
Identity Theft
Identity theft occurs when
someone assumes your identity to perform a fraud or other criminal
act. Criminals can get the information they need to assume your
identity from a variety of sources, including by stealing your
wallet, rifling through your trash, or by compromising your credit or
bank information. They may approach you in person, by telephone, or
on the Internet and ask you for the information.
The sources of information
about you are so numerous that you cannot prevent the theft of your
identity. But you can minimize your risk of loss by following a few
simple hints.
Tips for Avoiding
Identity Theft:
Never throw away ATM
receipts, credit statements, credit cards, or bank statements in a
usable form.
Never give your
credit card number over the telephone unless you make the call.
Reconcile your bank
account monthly, and notify your bank of discrepancies immediately.
Keep a list of
telephone numbers to call to report the loss or theft of your
wallet, credit cards, etc.
Report unauthorized
financial transactions to your bank, credit card company, and the
police as soon as you detect them.
Review a copy of your
credit report at least once each year. Notify the credit bureau in
writing of any questionable entries and follow through until they
are explained or removed.
If your identity has
been assumed, ask the credit bureau to print a statement to that
effect in your credit report.
If you know of anyone
who receives mail from credit card companies or banks in the names
of others, report it to local or federal law enforcement
authorities.
Advance Fee Schemes
An advance fee scheme
occurs when the victim pays money to someone in anticipation of
receiving something of greater value—such as a loan, contract,
investment, or gift—and then receives little or nothing in return.
The variety of advance fee
schemes is limited only by the imagination of the con artists who
offer them. They may involve the sale of products or services, the
offering of investments, lottery winnings, "found money,"
or many other "opportunities." Clever con artists will
offer to find financing arrangements for their clients who pay a
"finder's fee" in advance. They require their clients to
sign contracts in which they agree to pay the fee when they are
introduced to the financing source. Victims often learn that they are
ineligible for financing only after they have paid the "finder"
according to the contract. Such agreements may be legal unless it can
be shown that the "finder" never had the intention or the
ability to provide financing for the victims.
Tips for Avoiding
Advanced Fee Schemes:
If the offer of an
"opportunity" appears too good to be true, it probably is.
Follow common business practice. For example, legitimate business is
rarely conducted in cash on a street corner.
Know who you are
dealing with. If you have not heard of a person or company that you
intend to do business with, learn more about them. Depending on the
amount of money that you plan on spending, you may want to visit the
business location, check with the Better Business Bureau, or consult
with your bank, an attorney, or the police.
Make sure you fully
understand any business agreement that you enter into. If the terms
are complex, have them reviewed by a competent attorney.
Be wary of businesses
that operate out of post office boxes or mail drops and do not have
a street address. Also be suspicious when dealing with persons who
do not have a direct telephone line and who are never in when you
call, but always return your call later.
Be wary of business
deals that require you to sign nondisclosure or non-circumvention
agreements that are designed to prevent you from independently
verifying the bona fides of the people with whom you intend to do
business. Con artists often use non-circumvention agreements to
threaten their victims with civil suit if they report their losses
to law enforcement.
Health
Care Fraud or Health Insurance Fraud
Medical Equipment
Fraud:
Equipment manufacturers
offer "free" products to individuals. Insurers are then
charged for products that were not needed and/or may not have been
delivered.
"Rolling Lab"
Schemes:
Unnecessary and sometimes
fake tests are given to individuals at health clubs, retirement
homes, or shopping malls and billed to insurance companies or
Medicare.
Services Not Performed:
Customers or providers
bill insurers for services never rendered by changing bills or
submitting fake ones.
Medicare Fraud:
Medicare fraud can take
the form of any of the health insurance frauds described above.
Senior citizens are frequent targets of Medicare schemes, especially
by medical equipment manufacturers who offer seniors free medical
products in exchange for their Medicare numbers. Because a physician
has to sign a form certifying that equipment or testing is needed
before Medicare pays for it, con artists fake signatures or bribe
corrupt doctors to sign the forms. Once a signature is in place, the
manufacturers bill Medicare for merchandise or service that was not
needed or was not ordered.
Tips for Avoiding
Health Care Fraud or Health Insurance Fraud:
Never sign blank
insurance claim forms.
Never give blanket
authorization to a medical provider to bill for services rendered.
Ask your medical
providers what they will charge and what you will be expected to pay
out-of-pocket.
Carefully review your
insurer's explanation of the benefits statement. Call your insurer
and provider if you have questions.
Do not do business
with door-to-door or telephone salespeople who tell you that
services of medical equipment are free.
Give your
insurance/Medicare identification only to those who have provided
you with medical services.
Keep accurate records
of all health care appointments.
Know if your
physician ordered equipment for you.
Redemption / Strawman /
Bond Fraud
Proponents of this scheme
claim that the U.S. government or the Treasury Department control
bank accounts—often referred to as “U.S. Treasury Direct
Accounts”—for all U.S. citizens that can be accessed by
submitting paperwork with state and federal authorities. Individuals
promoting this scam frequently cite various discredited legal
theories and may refer to the scheme as “Redemption,” “Strawman,”
or “Acceptance for Value.” Trainers and websites will often
charge large fees for “kits” that teach individuals how to
perpetrate this scheme. They will often imply that others have had
great success in discharging debt and purchasing merchandise such as
cars and homes. Failures to implement the scheme successfully are
attributed to individuals not following instructions in a specific
order or not filing paperwork at correct times.
This scheme predominately
uses fraudulent financial documents that appear to be legitimate.
These documents are frequently referred to as “bills of exchange,”
“promissory bonds,” “indemnity bonds,” “offset bonds,”
“sight drafts,” or “comptrollers warrants.” In addition,
other official documents are used outside of their intended purpose,
like IRS forms 1099, 1099-OID, and 8300. This scheme frequently
intermingles legal and pseudo legal terminology in order to appear
lawful. Notaries may be used in an attempt to make the fraud appear
legitimate. Often, victims of the scheme are instructed to address
their paperwork to the U.S. Secretary of the Treasury.
Tips for Avoiding
Redemption/Strawman/Bond Fraud:
Be wary of
individuals or groups selling kits that they claim will inform you
on to access secret bank accounts.
Be wary of
individuals or groups proclaiming that paying federal and/or state
income tax is not necessary.
Do not believe that
the U.S. Treasury controls bank accounts for all citizens.
Be skeptical of
individuals advocating that speeding tickets, summons, bills, tax
notifications, or similar documents can be resolved by writing
“acceptance for value” on them.
If you know of anyone
advocating the use of property liens to coerce acceptance of this
scheme, contact your local FBI office.
Investment-Related
Scams
Letter of Credit Fraud
Legitimate letters of
credit are never sold or offered as investments. They are issued by
banks to ensure payment for goods shipped in connection with
international trade. Payment on a letter of credit generally requires
that the paying bank receive documentation certifying that the goods
ordered have been shipped and are en route to their intended
destination. Letters of credit frauds are often attempted against
banks by providing false documentation to show that goods were
shipped when, in fact, no goods or inferior goods were shipped.
Other letter of credit
frauds occur when con artists offer a "letter of credit" or
"bank guarantee" as an investment wherein the investor is
promised huge interest rates on the order of 100 to 300 percent
annually. Such investment "opportunities" simply do not
exist. (See Prime Bank Notes for additional information.)
Tips for Avoiding
Letter of Credit Fraud:
If an "opportunity"
appears too good to be true, it probably is.
Do not invest in
anything unless you understand the deal. Con artists rely on complex
transactions and faulty logic to "explain" fraudulent
investment schemes.
Do not invest or
attempt to "purchase" a "letter of credit." Such
investments simply do not exist.
Be wary of any
investment that offers the promise of extremely high yields.
Independently verify
the terms of any investment that you intend to make, including the
parties involved and the nature of the investment.
Prime Bank Note Fraud
International fraud
artists have invented an investment scheme that supposedly offers
extremely high yields in a relatively short period of time. In this
scheme, they claim to have access to "bank guarantees" that
they can buy at a discount and sell at a premium. By reselling the
"bank guarantees" several times, they claim to be able to
produce exceptional returns on investment. For example, if $10
million worth of "bank guarantees" can be sold at a two
percent profit on 10 separate occasions—or "traunches"—the
seller would receive a 20 percent profit. Such a scheme is often
referred to as a "roll program."
To make their schemes more
enticing, con artists often refer to the "guarantees" as
being issued by the world's "prime banks," hence the term
"prime bank guarantees." Other official sounding terms are
also used, such as "prime bank notes" and "prime bank
debentures." Legal documents associated with such schemes often
require the victim to enter into non-disclosure and non-circumvention
agreements, offer returns on investment in "a year and a day",
and claim to use forms required by the International Chamber of
Commerce (ICC). In fact, the ICC has issued a warning to all
potential investors that no such investments exist.
The purpose of these
frauds is generally to encourage the victim to send money to a
foreign bank, where it is eventually transferred to an off-shore
account in the control of the con artist. From there, the victim's
money is used for the perpetrator's personal expenses or is laundered
in an effort to make it disappear.
While foreign banks use
instruments called "bank guarantees" in the same manner
that U.S. banks use letters of credit to insure payment for goods in
international trade, such bank guarantees are never traded or sold on
any kind of market.
Tips for Avoiding Prime
Bank Note Fraud:
Think before you
invest in anything. Be wary of an investment in any scheme, referred
to as a "roll program," that offers unusually high yields
by buying and selling anything issued by "prime banks."
As with any
investment, perform due diligence. Independently verify the identity
of the people involved, the veracity of the deal, and the existence
of the security in which you plan to invest.
Be wary of business
deals that require non-disclosure or non-circumvention agreements
that are designed to prevent you from independently verifying
information about the investment.
“Ponzi’
Schemes
“Ponzi” schemes
promise high financial returns or dividends not available through
traditional investments. Instead of investing the funds of victims,
however, the con artist pays "dividends" to initial
investors using the funds of subsequent investors. The scheme
generally falls apart when the operator flees with all of the
proceeds or when a sufficient number of new investors cannot be found
to allow the continued payment of "dividends."
This type of fraud is
named after its creator—Charles Ponzi of Boston, Massachusetts. In
the early 1900s, Ponzi launched a scheme that guaranteed investors a
50 percent return on their investment in postal coupons. Although he
was able to pay his initial backers, the scheme dissolved when he was
unable to pay later investors.
Tips for Avoiding
Ponzi Schemes:
Be careful of any
investment opportunity that makes exaggerated earnings claims.
Exercise due
diligence in selecting investments and the people with whom you
invest—in other words, do your homework.
Consult an unbiased
third party—like an unconnected broker or licensed financial
advisor—before investing.
Pyramid Schemes
As in Ponzi schemes, the
money collected from newer victims of the fraud is paid to earlier
victims to provide a veneer of legitimacy. In pyramid schemes,
however, the victims themselves are induced to recruit further
victims through the payment of recruitment commissions.
More specifically, pyramid
schemes—also referred to as franchise fraud or chain referral
schemes—are marketing and investment frauds in which an individual
is offered a distributorship or franchise to market a particular
product. The real profit is earned, not by the sale of the product,
but by the sale of new distributorships. Emphasis on selling
franchises rather than the product eventually leads to a point where
the supply of potential investors is exhausted and the pyramid
collapses. At the heart of each pyramid scheme is typically a
representation that new participants can recoup their original
investments by inducing two or more prospects to make the same
investment. Promoters fail to tell prospective participants that this
is mathematically impossible for everyone to do, since some
participants drop out, while others recoup their original investments
and then drop out.
Tips for Avoiding
Pyramid Schemes:
Be wary of
"opportunities" to invest your money in franchises or
investments that require you to bring in subsequent investors to
increase your profit or recoup your initial investment.
Independently verify
the legitimacy of any franchise or investment before you invest.
Market Manipulation or
“Pump and Dump” Fraud
This scheme—commonly
referred to as a "pump and dump”—creates artificial buying
pressure for a targeted security, generally a low-trading volume
issuer in the over-the-counter securities market largely controlled
by the fraud perpetrators. This artificially increased trading volume
has the effect of artificially increasing the price of the targeted
security (i.e., the "pump"), which is rapidly sold off into
the inflated market for the security by the fraud perpetrators (i.e.,
the "dump"); resulting in illicit gains to the perpetrators
and losses to innocent third party investors. Typically, the
increased trading volume is generated by inducing unwitting investors
to purchase shares of the targeted security through false or
deceptive sales practices and/or public information releases.
A modern variation on this
scheme involves largely foreign-based computer criminals gaining
unauthorized access to the online brokerage accounts of unsuspecting
victims in the United States. These victim accounts are then utilized
to engage in coordinated online purchases of the targeted security to
affect the pump portion of a manipulation, while the fraud
perpetrators sell their preexisting holdings in the targeted
security into the inflated market to complete the dump.
Tips for Avoiding
Market Manipulation Fraud:
Don't believe the
hype.
Find out where the
stock trades.
Independently verify
claims.
Research the
opportunity.
Beware of
high-pressure pitches.
Always be skeptical.
The reason for this
post is that the above schemes and frauds are reoccurring at an
alarming rate, with different variations but the same structure, in
2011 thru 2012, I have seen over 400 variations of the above frauds,
right here in the Olympia/Tumwater area. The gist here is this:
“Criminals will try anything and everything to take what is yours
and call it theirs, to be educated gives you a better chance of not
becoming a victim!”
It is far better to be
safe with knowledge, rather than be sorry without it. -Birdy
