Avoiding Common Scams and Frauds
Every year millions of Americans lose hundreds of millions of dollars to scams, cons, and frauds — some so clever it's easy to understand why victims could fall for them, and some so obviously and even hilariously fraudulent it's hard to understand who in their right mind would even give them a second look.
The world is now awash with scams and frauds of all kinds, offline and online, whose sole purpose is the redistribution of wealth; yours to the scammers.
And you don't have to be wealthy to be a target. In fact most scams don't target the wealthy because it's easier to commit a massive fraud involving millions of users and only small amounts of money. These frauds are often easier to hide from the victim and there's the belief that small losses won't attract the interest of law enforcement.
So why do scams work? There are two main reasons:
- Because the scammers are often clever, well funded and well organized, and simply smarter than their victims.
- Because busy victims don't slow down enough to read the warning signs.
Common scams to watch out for:
Phishing Scams
Phishing scams are probably the most common and therefore something to always be vigilant for. Phishing is simply the use of bogus emails, web sites, and even phone calls designed to trick users into believing the communication is from a bank, credit card company, or other legitimate organization.
The goal is usually to trick the victim into either handing over a password or other sensitive information, or clicking on a link that will download or activate some malicious software.
According to a number of studies, a stunning 8 billion phishing emails are sent out worldwide every month, tricking an estimated 3 million victims out of more than $3 billion dollars. In fact, over the past five years an estimated 57 million Americans have reported receiving some kind of phishing email. And as the economy sinks, phishing only increases. A major security firm that monitors phishing activity around the world reported an average of around 400 phishing attacks a day for the first three months of 2008.
By the end of 2008, when the economy began spiraling downwards, daily phishing attacks had spiraled upwards by more than 400% with some days seeing as many as 1,300 separate phishing attacks.
In addition to phishing emails there are also an estimated 30,000 phishing web sites online at any given time, most just sitting in wait for unwary users to stumble upon them.
Most of the following scams want either your money or your personal information so they can clone your identity and steal someone else's money, or both.
Bank Failures, Mergers and Takeovers
Typically this scam will come in the form of either an email or an automated phone message, advising you that because your bank has been taken over or merged (as a result of the recent and widely publicized economic difficulties) you'll need to confirm your bank account details in order to access your bank account.
Check Overpayment Scams
This scam is most often used in online auctions and works as follows: a potential buyer replies to your ad and offers to pay you by check. At the last minute they use some kind of excuse to offer to write the check for greater than the amount actually owed and ask that you mail them back the difference. Then of course their check bounces and you're out the entire amount.
Stimulus Scams
Everyone wants a free check from the government, especially if it's your money in the first place, right? Many of these scams look like they're from the IRS, and will request personal information, bank account information, and even your Social Security number in order to expedite payment of your own personal hand-signed stimulus check. Other similar scams will use email attachments disguised as rebate request forms that instead hide malicious software that will be installed on your computer.
Voter Registration Scams
Voter registration scams follow the same pattern as IRS scams. You'll receive either an email or automated phone message, often around the time of an election, stating that there is a problem with your voter registration and in order to fix the problem and allow you to register, you'll need to provide your Social Security number as a means of identification.
Charity and Catastrophe Scams
These will typically appear around the Christmas holidays or major natural disasters like floods and hurricanes. They're usually begging emails or phone calls from fake charities looking for donations.
Whenever there's a natural catastrophe, like in the case of the 2004 tsunami in the Indian Ocean or the Katrina Hurricane in 2005, the event is often followed by spam emails claiming to contain links to graphic videos or photos of the event but instead contain links to malicious web sites or downloads.
Nigerian 419 Scams
You're probably one of the millions of internet users to receive one of those often comical pleas from Nigeria and other faraway countries offering you a share of the vast fortune of some recently deceased diplomat, government official, or businessman. All you have to do is either pretend to be a long lost relative or allow the sender to deposit their money in your back account for a generous share or fee.
Oh and you'll also have to pay some paltry "advance fees" like taxes, bribes, paperwork, or legal costs. This scam is commonly called the Nigerian 419 scam, named after the Nigerian penal code that covers this criminal activity that has turned many poor Nigerians into instant millionaires. In one recent prosecution, a Nigerian con man made more than $1.4 million in less than a year simply by spamming millions of users around the world with his crudely worded begging letters.
It's been estimated that Nigerian 419 scams earned criminals more than $5 billion — up to 1996!(5) So you can bet these scammers have made even more than that since then. Personally I know of an elderly gentleman who lost more than $1 million of his life savings to this scam, and despite warnings continued to hand over money to the scammers in the belief that eventually he would hit the jackpot.
Lottery Scams
You get that surprise email telling you that your email address has been plucked randomly from some state or national lottery, and asks you to either provide identification information in order to process your winnings, or requests an upfront payment for taxes in order to send you your jackpot.
Work At Home Scams
These scams vary from high-priced kits to help you sell goods that no-one really wants, to offers to make $1,500 a week processing payments or accepting deliveries, part time, at home. In the latter scam, the thieves will simply be using you and your home address to ship goods bought with stolen credit cards. Or they'll use your bank account to process payments for stolen goods or other illegal activities. Not the kind of work experience you want on your resume!
IRS Scams
IRS tax scams usually appear at tax time, either in the form of emails or phone calls, asking for personal information in order to release or speed up a tax repayment. But they can also come in the form of requests to verify your Social Security number because your last tax return was not received, or that a check sent to you was returned to the IRS. And of course all these scams come with different labels, including stock scams, foreclosure assistance, credit repair, package forwarding, auctions, and political donations. They all use the same tactics and usually amount to the same thing. So unless you're absolutely certain you can trust the originator, steer clear.
Skimming and Skimmers
Skimming is probably one of the most dangerous scams you'll face, because it involves everyday transactions with people you trust and places you expect to be safe. Skimming uses card swiping technology to make unauthorized copies of your credit or ATM cards, and the most common places they're used are in restaurants, stores, ATM machines and gas stations. In restaurant skimming, a waiter uses a miniature hand-held credit card reader to make a quick copy of your credit card information when you're not looking. The stolen information is then sold to others or used to make purchases using your card information.
In one high profile case, a network of dishonest waiters in restaurants around New York were paid to skim credit card numbers from restaurant patrons and sell them to a crime gang. That gang then purchased more than $3 million worth of goods across ten states. In store skimming, the debit or credit card reader at the checkout is simply replaced with a reader the thieves have control of. So not only are you paying for your groceries, you're also handing your credit card information to thieves.
Thieves in Las Vegas stole millions of dollars in store skimming, while another gang stole more than $250,000 by installing skimming devices in a number of well-known California supermarkets. And customers of one gas station in California lost more than $200,000 when thieves placed their own skimming devices over the card readers at a number of gas pumps. Authorities believe that much of that stolen money was funneled to terrorists. Thieves are also targeting ATM machines, covering the existing card reader with their own card swiper, and in some cases installing a miniature camera that will record the PIN you enter.
What To Do To Avoid Skimming
Skimming is one of those crimes that's very hard to avoid, but there are some precautions you can take:
- Pay cash when you're in strange places. I know it can be awkward but paying cash is the easiest way to avoid identity theft.
- Be vigilant, especially in restaurants, stores, and gas stations. Always take a second look at any card reader and don't use your card if the reader looks unusual, out of place, or damaged.
- Check your credit card and bank statements regularly and carefully. Skimming often goes undetected because the thieves make numerous but small payments on your card in the hope of avoiding detection.
How to Avoid Being Scammed
- Trust, then verify — if it looks too good to be true, it probably is. So just ignore. If it looks legitimate, double-check before you respond or make any commitments.
- Never pay any fees in advance, based on a promise that once the fee is paid some kind of payment will be released to you.
- Ignore "you won the lottery" emails. Sorry to break it to you but you probably didn't. Lottery operators won't confirm a win by email anyway.
- If the offer is obviously a scam and you think you can either outsmart the scammers or make money by joining in, forget it. You're just wasting your time, your money, and possibly your freedom.
- Don't submit your password, username, Social Security number, or any other personal information in response to an email or phone call. Especially if the caller claims to be from your bank or credit card company.
- If you get a call from the courts claiming you missed jury duty and are going to be arrested, or from the government claiming you're not registered to vote, just hang up.
- Ignore offers to participate in secret shopping, paid surveys, or free trials. Most are scams that start by enlisting your trust as a first step to your wallet.
- Avoid work-at-home offers — most are scams, and you'll either end up with worthless sales kits that won't make you a dime, or the scammers will get their hands on your personal information or credit card number they can then sell to others.
- The IRS will never call or email you looking for personal information or to confirm your Social Security number.
- Don't download free security software or conduct security scans from security companies you don't recognize.
- You're probably not related to a dead diplomat from Nigeria.
- Don't assume that because the person sending the email or making the phone call knows something about you (like your name, address, or employment) that they're legitimate.
Your personal information is already out there and it's only a matter of time before someone figures out how to use it against you.
