Financial Fraud, Scams & Deceptive Fund Raising
Experts in financial fraud have identified the profile of a financial fraud victim: Male, age 55-62, married, an accredited investor (meaning they have wealth over $1 million excluding residence and mortgage and/or annual income over $200,000 individually or $300,000 including spouse in each of the last two years), have an above average understanding of financial markets and investing, previously entertained the idea of or made high risk investments and have not performed due diligence on the persons offering the investment or the investment itself. The least likely person to fall victim to financial fraud is the spouse of the individual profiled above.
In past articles, the importance of performing due diligence and diversifying investments has been stressed. If one strays from the mainstream investments that are regulated and have substantial audit and reporting requirements to alternative markets, he or she should do so with only a small portion of the total portfolio.
A common technique for a fraudster is to associate with a highly respected member of a community through a church. A fraudster will befriend such an individual try to convince them they have a really good investment opportunity. If they succeed they then look to recruit more through that first victim. Respect, exclusiveness (please don’t tell your friends about this…hoping you actually do so) and greed are psychological strategies fraudsters understand really well. Perhaps a hosted party at the home of the upstanding individual will be arranged for only select acquaintances.
If the window to invest is really short, you are discouraged from discussing the proposal with a professional (and they will present you with some seemingly convincing reasons), or returns on investments are immediate with high forecasted future returns, flee immediately.
There are many other types of fraud in addition to financial investment fraud, including internet (lottery, viruses, fake sites, attempts to secure your bank account number, etc.), solicitation by phony charities or unauthorized charities raising funds for a legitimate charity, and phone scams.
The Better Business Bureau published an article March 31, 2014 “Do you fit the Profile of a Scam Victim?” that can be found on their website at bbb.org. Here is a synopsis:
- Taking people at their word
- Afraid of being rude
- Don’t recognize high pressure tactics
- Don’t protect personal information
- Don’t read fine print
- Act impulsively
- Are worried about money
- Are embarrassed (and don’t tell anyone allowing fraudster to continue)
The Federal Trade Commission convinced a federal Judge to shut down a telemarketing fraud in March of this year that targeted senior citizens by claiming to sell fraud protection, legal protection and pharmaceutical benefit services for a cost ranging from $187 to $397. The real goal was to get bank account information from the victims. This fraud took in over $20 million between May 2011 and December 2013.
Deception, rather than fraud, is a ploy used by unscrupulous solicitors for charities. Well known and highly regarded charities have friendly, courteous personnel calling to ask for your money. So do con artists. Con artists may be calling without authorization asking for donations on behalf of a solid charity. And they may pay a really small percentage of what they raise to the charity. The rest they keep for themselves (fees and expenses). Or a con artist may establish a charity with a similar name to a well-known charity and then start soliciting funds. They fool victims into believing they are supporting a legitimate nonprofit when in reality their funds are going elsewhere. Or worse they get a victim’s credit card or banking information and really cash in.
Anytime your telephone rings and the caller is unknown to you, beware. If you believe they are from a legitimate organization or institution you deal with or are interested in, ask them for their physical location and phone number and tell them you will call back. If they refuse or make some excuse for not cooperating with that request, hang up immediately! Otherwise independently verify the validity of the call before calling back.
Barry Warner is managing partner with Alegria & Company, PS. He can be reached at: firstname.lastname@example.org