you send money to people you do not know personally or
or financial information to unknown callers, you increase
your chances of becoming a victim of telemarketing fraud.
signs -- what a caller may tell you:
must act 'now' or the offer won't be good."
won a 'free' gift, vacation, or prize." But
you have to pay for "postage and handling" or
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.
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
don't need any written information about their
company or their references."
can't afford to miss this 'high-profit, no-risk'
you hear these--or similar--"lines" from
a telephone salesperson, just say "no thank
you," and hang up the phone.
Tips to Avoid Telemarketing Fraud:
It's very difficult to get your money back if you've been cheated over the
phone. Before you buy anything by telephone, remember:
buy from an unfamiliar company. Legitimate businesses
understand that you want more information about their
company and are happy to comply.
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.
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.
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
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.
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?"
must not be asked to pay in advance for services. Pay
services only after they are delivered.
con artists will 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.
take your time making a decision. Legitimate companies
won't pressure you to make a snap decision.
pay for a "free prize." If a caller tells you
the payment is for taxes, he or she is violating federal
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.
never rude to wait and think about an offer. Be sure
to talk over big investments offered by telephone salespeople
with a trusted friend, family member, or financial advisor.
respond to an offer you don't understand thoroughly.
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.
personal information is often brokered to telemarketers
through third parties.
you have information about a fraud report it to state,
local, or federal law enforcement agencies.
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 stationary, bank name and account numbers and other
identifying information using a facsimile 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.
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 until the
victim's assets are taken in their entirety. 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, in addition to 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 to Avoid Nigerian Letter or "419" Fraud:
fraud 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,
such as the theft of your wallet, your trash, or from 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 to Avoid Impersonation/Identity Fraud:
throw away ATM receipts, credit statements, credit cards,
or bank statements in a usable form.
give your credit card number over the telephone unless you
make the call.
your bank account monthly and notify your bank of discrepancies
a list of telephone numbers to call to report the loss or
theft of your wallet, credit cards, etc.
unauthorized financial transactions to your bank, credit
card company, and the police as soon as you detect them.
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.
identity has been assumed, ask the credit bureau to print
a statement to that effect in your credit report.
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.
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 conartists 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 conartists 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
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 to Avoid the Advanced Fee Schemes:
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.
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 intend
to spend, you may want to visit the business location, check
with the Better Business Bureau, or consult with your bank,
an attorney, or the police.
sure you fully understand any business agreement that you
enter into. If the terms are complex, have them reviewed
by a competent attorney.
wary of businesses that operate out of post office
boxes or mail
drops and do not have a street address, or
of dealing with persons who do not have a direct
telephone line, who are
never "in" when you call, but always
return your call later.
of business deals that require you to sign nondisclosure
or noncircumvention agreements that are designed to prevent
you from independently verifying the bona fides of the people
with whom you intend to do business. Conartists often use
noncircumvention agreements to threaten their victims with
civil suit if they report their losses to law enforcement.
Health Insurance Frauds
manufacturers offer "free" products
to individuals. Insurers are then charged for
products that were not needed and/or may not have
Unnecessary and sometimes fake tests are given
to individuals at health clubs, retirement homes, or
shopping malls and billed to insurance companies or
or providers bill insurers for services never rendered by
changing bills or submitting
Medicare fraud can take the form of any of
the health insurance
frauds described above. Senior citizens are frequent
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, conartists
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 to Avoid the Health Insurance Fraud:
sign blank insurance claim forms.
give blanket authorization to a medical provider to bill
for services rendered.
your medical providers what they will charge and what you
will be expected to pay out-of-pocket.
review your insurer's explanation of the benefits statement.
Call your insurer and provider if you have questions.
do business with door-to-door or telephone salespeople who
tell you that services of medical equipment are free.
your insurance/Medicare identification only to those who
have provided you with medical services.
accurate records of all health care appointments.
if your physician ordered equipment for you.
of Credit Fraud
Legitimate letters of credit are never sold or offered as investments.
letters of credit 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 to Avoid Letter of Credit Fraud:
If an "opportunity" appears
too good to be true, it probably is.
invest in anything unless you understand the deal. Conartists
rely on complex transactions and faulty logic to "explain" fraudulent
not invest or attempt to "purchase" a "Letter
of Credit." Such investments simply do not
of any investment that offers the promise of extremely high
verify the terms of any investment that you intend to make,
including the parties involved and the nature of the investment.
International fraud artists have invented
an investment scheme that offers extremely
high yields in a relatively short period
of time. In this scheme,
they purport to have access to "bank guarantees" which 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 ten 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, conartists
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 nondisclosure and noncircumvention 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
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
that is in the control of the conartist. 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 to Avoid Prime Bank Note Related Fraud:
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."
with any investment perform due diligence. Independently
the identity of the people involved, the veracity
of the deal, and the existence of the security in which
wary of business deals that require nondisclosure or noncircumvention
agreements that are designed to prevent you from independently
verifying information about the investment.
is a "Ponzi" Scheme?
A Ponzi scheme is essentially an investment fraud wherein
the operator promises high financial returns or dividends
that are not available through traditional
investments. Instead of investing victims' funds, the operator pays "dividends" to
initial investors using the principle amounts "invested" by 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 scheme is named after Charles Ponzi of Boston, Massachusetts,
who operated an extremely attractive investment scheme in which he guaranteed
investors a 50 percent return on their investment in postal coupons. Although
he was able to pay his initial investors, the scheme dissolved when he was
unable to pay investors who entered the scheme later.
Tips to Avoid Ponzi Schemes:
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 there 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 to Avoid Pyramid Schemes:
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.
verify the legitimacy of any franchise or investment before