If you think you’re impervious to financial scams, think again. Fraudsters are an ever-present threat, stealing your personal information and exploiting your weaknesses to get access to your money and account information.
In 2017, cybercrime impacted the lives of more than 143 million Americans, costing them $19.4 billion, according to the Norton Cyber Security Insights Report.
“If you are connected to the internet, you are the next-door neighbor of cybercriminals,” says Alan Brill, senior managing director in the Cyber Security and Investigations practice at Kroll, a company that helps organizations prevent and respond to cybersecurity risks.
So, whether you’re looking to recognize and dodge investing scams, money-transfer scams, online dating scams or credit card scams, here’s what to know about avoiding financial fraud.
What are money scams?
Money scams take all shapes and forms. Typically, a fraudster will bully, cajole or charm you into forking over money or valuable personally identifiable information by impersonating a person you know or an institution you trust.
The scammer may pretend to be a bank representative in a phone call and ask for your checking account login. He or she might impersonate a tax collector – and threaten to throw you in jail unless you pay up. The fraudster may even take the guise of a charity and scam you into donating funds to a bogus organization. The con artists tend to thrive on uncertainty and panic, experts say. And they’ll take advantage of your weaknesses.
One of the most famous financial scams is the “Nigerian prince scam,” in which a trickster would reach out via letter, fax or email, claiming to be a member of a Nigerian royal family and requesting help – and offering a cash reward for – transferring millions of dollars out of the country. Depending on the version of the scam, the impersonator would ask for the victim’s personal information, including banking info and Social Security number, or he’d ask for money to help pay taxes and fees. Once the victim gave the scammer what he needed, the fraudster would disappear with the money or account information.
Today, the Nigerian prince may be replaced with a “bank representative,” “mortgage broker” or “investment company.” But the fraudster will still rely on similar techniques to trick consumers out of their money.
What are some common scams? While financial scams run the gamut, here are some common frauds to know about.
- Tax scams. There are myriad ways to take advantage of unsuspecting taxpayers, from pretending to be a representative of the Internal Revenue Service to filing a tax return – and collecting a tax refund – in someone else’s name. Some fraudsters will file a W-2 employment form in another person’s name, using the victim’s Social Security number and other personal information. They’ll work under that name, have their income forwarded to their own bank accounts, then stick the unsuspecting victim with the tax bill.
- IRS scams. A criminal will call you, claiming to be an IRS official, and say you owe back taxes. He or she will threaten to sue or arrest you if you don’t pay fast. Take note: IRS officials will almost always first contact you by mail, not phone, and will never insist that you immediately pay them with a wire transfer, gift card or credit card. Those are red flags that you’re dealing with a scammer.
- Bank scams. There are lots of types of bank scams. Fraudsters will email you from an address that looks like your bank’s email address and ask for your login and password. Or they might impersonate bank representatives over the phone and charm their way into learning your account information. Once they have it, they can sell it to the highest bidder or use it themselves. Or they might pose as a contest organizer, send you a fake check, tell you to deposit it and wire some of the money back. Because the check is fake, you’ll lose the money you wired and earn nothing from the check.
- Investing scams. There are lots of different investing scams. One example is a “pump and dump” scam where a stock price is falsely inflated, and scammers encourage investors to buy stock quickly. After that, they “dump” the stock by selling their own holdings. Another is a “Ponzi scheme” where, instead of investing their clients’ money, fraudsters pay current clients with the money collected from new investors – and often keep some for themselves.
- Credit card scams. A credit card scam could involve a caller posing as a representative from your card’s fraud department, who tells you that a suspicious charge was made on your account, then asks you to verify the security code on the back of your card. They can take that info, along with your name and credit card number, and make purchases on your card. Another scam, called “skimming,” involves placing an electronic device over a regular ATM that steals your card information when you use the machine.
- Money-transfer scams. A dishonest person may convince you to wire money to him in order to collect a prize or inherit money from a rich stranger. The prize and inheritance are fake, and the scammer keeps your money.
- Online dating scams. Scam artists may prey on the emotions of online lovebirds with whom they get into fake relationships, convincing their victims to send money directly to them for a bogus surgery or other invented emergency.
- Real estate scams. A scammer may impersonate your mortgage broker or another business involved in a home purchase to convince you to wire your down payment to the wrong address – then they walk away with your money. Or maybe a sketchy moving company holds your belongings hostage until you pony up more money than you agreed to pay initially. Scammers may even woo potential renters online, convincing them to wire a security deposit and first month’s rent on an apartment that isn’t actually for rent.
- Email scams. Bad actors may use your email to conduct a “phishing” scam, posing as a familiar financial institution and sending you fake links that ask for your personally identifiable information. They may even include links or files that contain malware, which can hurt your computer’s security and give crooks access to your digital files.
- Charity scams. After a natural disaster or national tragedy, bad guys will set up fake charities to take advantage of other people’s good intentions. Before you donate to a charity, double-check the website you’ve been directed to in case it’s pretending to be an organization it’s not. If you aren’t familiar with the organization, look it up with the Better Business Bureau’s Wise Giving Alliance, Charity Navigator or CharityWatch.
- Senior scams. Elderly people can be especially susceptible to financial scams, and tricksters may use any of these strategies to swindle them out of their money. They may target senior citizens by impersonating grandchildren over the phone or email, asking for money, then running off with the funds.
- Ransomware. In this scam, fraudsters gain access to a victim’s computer, often by sending a malicious link or attachment masquerading as a trusted resource. After they get hold of the computer, cybercriminals may lock the files and hold them hostage until the victim pays a fee.
How can you protect yourself from financial scams? Here are several common-sense steps consumers can take to ensure that they aren’t taken for a ride by a scammer.
- Think before you click a link or download an attachment. Think very carefully before you click on any link or download any attachment in an email or on a website, experts say, even if it’s from someone you know. Scammers and hackers hijack email addresses to send bad links, then use them to install malware on your computer or trick you into giving up valuable personal information. If an email seems sketchy, think twice before interacting with it. Be extra careful, too, before conducting financial transactions over a public Wi-Fi network, which makes it more vulnerable to fraudsters.
- Slow down and breathe. Scammers thrive on your panic and fear, experts say. “They are what we call social engineers; their job is to talk you out of your information,” says Eva Velasquez, president and CEO of the Identity Theft Resource Center. If you get a call from a debt collector, say, threatening to arrest you unless you send money immediately, take a breath and slow down. Remember, debt collectors aren’t allowed to threaten to arrest you. Once you let the panic subside, you might notice that there are other suspicious aspects about the interaction and realize you’re dealing with a con artist.
- Run it by someone else. Sometimes, avoiding a scam simply requires a close friend or family member pointing out that a company or person you’re dealing with seems suspicious. If you’re unsure of a financial transaction or the validity of an email, reach out to someone you trust. That person may be able to see that you’re dealing with a thief, even when you can’t.
- Do your homework. Protecting yourself is often as simple as taking an extra moment to research a company, double-check an email address or check online reviews. You might find complaints about a moving company with the Better Business Bureau, which is good information to have before hiring them. “It’s that taking a step back and doing something as quick as an internet search on a name of a person or a company,” Brill says.
- Put your phone number on the National Do Not Call Registry. Add your number to the Federal Trade Commission’s National Do Not Call Registry. This should stop legitimate telemarketers from calling your phone and encourage you to treat unsolicited calls with a bit more wariness.
- Guard your personal information. Scammers aren’t just out to get your cash. They want your Social Security number, address, email and other personal information, which is as valuable to them as cash. So, be very wary before handing your info to someone who calls, texts or emails. “Never authenticate yourself to anyone who contacts you,” says Adam Levin, chairman and founder of CyberScout, a provider of identity and data defense services, and author of “Swiped: How to Protect Yourself in a World Full of Scammers, Phishers, and Identity Thieves.” Instead, hang up and call them back on their customer service number that you find online or on the back of your credit card. There are few reasons to give out your Social Security number, and the verification number of the back of your credit card should only be used when making a purchase online or over the phone.
What to do if you’re scammed?
If you are the victim of a scam, don’t let embarrassment prevent you from reporting the crime to the authorities. If your identity has been stolen, call the companies where the fraud occurred and let them know that someone has taken your identity. Ask them to place a fraud alert on your accounts, then change your login and passwords. Some financial accounts, such as your credit card, are required to limit your financial liability if your information is stolen. If you’re worried about this identity theft impacting your credit health, contact the credit-reporting bureaus to correct any false information and ask for a fraud alert or a freeze on your account. Depending on the type of identity theft, you may also need to alert authorities about your misused Social Security number and replace it at your local SSA office or stop debt collectors calling you about a debt you don’t owe.
Depending on the type of scam, you may want to report it to one or more official organizations that deal with specific categories of lawbreaking. Most financial scam reports can go to the Federal Trade Commission, through its Complaint Assistant. You can report IRS impostors to the Treasury Inspector General for Tax Administration. Investing scam complaints may go through the Securities and Exchange Commission or your own state’s securities regulator. Report fake check scams to the U.S. Postal Inspection Service. You may even file a report through your local police department. Conduct a quick online search if you’re unsure of where to report the type of scam you’ve experienced.
