I recently told you about the five most common frauds, some tied to identity theft, and some not. Now a new survey shows just how widespread these frauds are, and how a startling high percentage of those interviewed who admitted being exposed to these frauds do not know the ways to spot a fraud, and to immediately differentiate it from a legitimate offer.
The Financial Industry Regulatory Authority (FINRA) says that more than eight in ten consumers have received a "potentially fraudulent offer." This was determined as the result of a newly released FINRA Education Foundation survey of nearly 2,400 U.S. adults age 40 and older.
The fact that these scams are still prevalent is not news, and while troubling is certainly not surprising. But what surprised me was that the survey exposed how many of the respondents, a startling 40 percent plus, were "unable to identify the classic 'red flags' of fraud. They were unable to immediately spot a fraudulent sales pitch from a potentially legitimate one.
The survey revealed that:
- More than 8 in 10 respondents were solicited to participate in a potentially fraudulent offer. And 11 percent of all respondents lost a significant amount of money after engaging with an offer.
- More than 4 in 10 respondents found an annual return of 110 percent for an investment appealing, and 43 percent found “fully guaranteed” investments to be appealing.
- Americans age 65 and older are more likely to be targeted by fraudsters and more likely to lose money once targeted.
We already know that fraudsters are adept at using a variety of tactics to try to get their hands on our money. The FINRA Foundation found that 64 percent of those surveyed had been invited to an "educational investment meeting that was likely a sales pitch." Additionally, the survey revealed, 67 percent of respondents said they had received an email from another country offering a large amount of money in exchange for an initial deposit or fee.
The survey also found that under-reporting of fraud is a major concern. Although 11 percent of those surveyed admitted they had lost money in a likely fraudulent activity, only 4 percent admitted to being a "victim of fraud when asked directly." This indicates "an estimated under-reporting rate of over 60 percent."
"When it comes to financial fraud, America is a nation at risk," said FINRA Foundation President Gerri Walsh. "Fraudsters are very effective at reaching and enticing vulnerable populations into turning over their money, and far too few Americans are able to detect likely fraudulent sales pitches,"
"Fraudsters are experts at identifying the Achilles’ heels of the people they’re targeting," she said. "They push you from a logical state to an emotional state, and when you’re pushed into an emotional state you want to act now and you don’t want to give up the opportunity."
The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills and tools necessary for financial success throughout life.