MoneyMagpie

Dec 08

Scamwatch: financial fraud

Reading Time: 3 minutes
The internet, emails and mobile phones have made communication easier than ever before.  Unfortunately, they have also made financial fraud easier. Money trickery is on the rise, partly because there are so many new ways to do it.
So it’s very important, therefore, to be aware of the kind of dodgy scams out there. Knowing what to look out for is one of the best ways to protect yourself from coming a cropper. 
Here are a few of the typical methods used to take money out of your pocket without your even noticing it:

 

Identity Theft

Identity theft is big business and growing fast. No matter how it happens, the net result is that your personal information (most commonly credit card, bank details or national insurance numbers) are used to obtain further credit or purchases in your name.

It’s nasty, not so much for the loss itself (which tends to be covered by the major banks), but the time it takes to discover and the hassle while it’s sorted out.  In the meantime, you may find it harder to get loans, credit  cards or mortgages, until it’s dealt with.

To keep a check on your identity, look out for the following:

  • Items appearing on your bank or credit-card statements that you do not recognise.
  • Applying for a state benefit and being told that you already receive it.
  • Receiving bills, invoices or receipts addressed to you for goods or services you haven’t asked for.
  • Being refused a financial service, such as a credit card or loan, despite having a good credit history.
  • Receiving letters from solicitors or debt collectors for debts that aren’t yours.

Apart from shredding documents, the best way to keep an eye on things is to check your credit files on a regular basis for strange loans and credit cards that you’ve never applied for. Experian and Equifax, the main credit agencies will let you check your credit record for free. This is particularly important if you’ve recently moved as that’s when the majority of identity theft happens.

For specific advice about protecting your identity online – have a look at our article here.

Skimming

Skimming is where your credit card is double-swiped – often in restaurants or petrol stations – when you’re not watching. The magnetic strip is read and used to produce a new card or buy goods online.
The solution: Never let your credit card out of your sight in shops, restaurants or anywhere where you have to use it. In the UK, new cards are now issued with a Chip and PIN number, making it harder to use without knowing the pin.  Of course, this doesn’t apply to online purchases where only card number and expiry dates are required.

Ponzi Schemes

These fake investment schemes are named after Charles Ponzi who, in 1920, swindled almost millions of dollars from American ‘investors’. Ponzi promised to turn $100 into $150 within 45 days by trading in ‘postal coupons’.

In fact, the ‘income’ he paid to investors was simply money provided by new victims. Schemes like this work by sucking in more and more punters.

The solution: Don’t get sucked in. Avoid all schemes that offer ‘guaranteed’ returns of more than 10% a year, because these so-called guarantees are likely to be worthless.

Boiler Rooms

If you want chapter and verse on how a ‘boiler room’ works (and an excuse to get some Hollywood action) watch the film Boiler Room starring Ben Affleck and Vin Diesel.  It’s available to rent from LOVEFiLM, where you can sign up to a 30-day free trial.

Again, the nature of the threat has changed. Conventional boiler rooms are filled with smooth-talking sales people selling worthless, or non-existent shares by phone. However, much of this activity has now switched to the internet, with an estimated 30% of all spam now estimated to be flogging junk shares or services.

The solution: Don’t listen to anyone who phones or emails out of the blue to tell you about an investment – the best thing to do is to hang up immediately! Boiler rooms are renowned for their persuasive sales techniques, and even experienced, hardened investors have been taken in.

What’s more, if a boiler room salesperson thinks you may be the slightest bit interested, they will phone you repeatedly until they make a sale or sell your details to a different (but equally shoddy) operation.

Know about any more examples of financial fraud to look out for? Share them with other Mapgies in the comments below.

WHAT DO YOU THINK?

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Carol Maxwell

A career in financial planning is still lucrative despite the worldwide financial crunch. As long as money is used in our economy financial planners will be needed. You have to pay your dues to become a financial planner but once you pass the test and prove your mettle, you can expect a handsome return for your efforts.

Carol Maxwell

A career in financial planning is still lucrative despite the worldwide financial crunch. As long as money is used in our economy financial planners will be needed. You have to pay your dues to become a financial planner but once you pass the test and prove your mettle, you can expect a handsome return for your efforts.

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