Vigilance and Diligence are Your First Defense Against Fraudsters and Identity Thieves

Becker Suffern McLanahan, Ltd. |

There can never be enough law enforcement to protect everyone from those who are intent on perpetrating scams or frauds. At any one time, there are thousands of operators posing as legitimate businesses or investors offering the deal of a lifetime, and they are connecting with tens of millions of people each day on the phone, over the Internet and through the mail. Senior citizens are especially vulnerable because they are disproportionately targeted.   The best thing anyone can do is to be diligent and vigilant in their own awareness of “unlikely” opportunities. The first step is to become educated as to the scams and all of their variations that have proliferated in recent years.

Ponzi Schemes

If it’s not the oldest, it is certainly the most widely used investment schemes with hundreds of variations that have been deployed by churches, businesses, community groups and investment managers. The most infamous schemer of late was Bernie Madoff, whose fraud was not that much different than the one committed by the scheme’s namesake, Charles Ponzi more than one hundred years ago. The scheme is actually fairly simple. The schemer offers a promise of high investment returns that are not available from traditional types of investment. Typically the schemer has no intention of investing the funds. Instead, as funds are collected from investors they are used to pay prior investors a dividend or interest payment based on the promised return. The schemer uses the testimonials of initial investors to attract more investors, and the dividends keep flowing. At some point, either when additional investors can’t be found, or when the schemer just decides to take the money and run, he flees. The scheme can unravel at anytime if enough investors decide they want to cash out.

Prime Bank Note Fraud

Prime bank note fraud is an investment scheme that usually originates overseas and is designed to attract foreign investors looking for exceptional returns. The schemers offer investors access to “bank guarantees” which they can purchase at a discount and then sell it at a substantial premium. They are told that these guarantees can be resold several times and generate a 2% profit on each transaction, so 10 transactions would net the investor a 20% total return.  To the investor, everything appears legitimate. The schemer uses trumped-up legal documents with official sounding international agency names, and investors are bound by non-disclosure agreements. Investors wire their money to a designated foreign bank, and the funds are then diverted to an off-shore account belonging to the schemer where it then laundered into oblivion. A little bit of due diligence by investors would uncover the fact that, while bank guarantees do exist within foreign banks, they are never sold or traded.

Bond Fraud

This scheme operates under the premise that the U.S. government maintains funds in U.S Treasury Direct Accounts that may be accessed by individuals who follow a specific process. Using sophist acted legal terminology supported by official looking documentation, schemers offer individuals a kit, for a large fee, that contains the information and the documentation a person needs to submit a claim. The schemes can live on for a while, because it can lay blame for failure on the inability of the individual to follow directions precisely.

Advance Fee Fraud Schemes

Advance fee schemes are so named because, in order for an individual to collect some sort of remuneration based on an offer received via email, direct mail or a phone call, he or she must first pay a fee. Such schemes have been used in stock investments where an investor is offered the opportunity to sell shares that have performed poorly at an above market rate. Fees are paid, but then there is no sale transaction. One of the more widely known schemes  that operate on an international scale is the Nigerian Advance Fee Fraud in which a person, claiming to be a government or business official from Nigeria, contacts individuals and businesses asking for help in transferring large amounts of money out of the country in exchange for a straight forward cut of the proceeds. The Nigerian scheme is so prevalent and notorious that the U.S. Secret Service has created a dedicated unit to combat it. There is no telling how many people have been victimized or how much money has been swindled, but the Secret Service is said to receive hundreds of calls and correspondence related to the scam each day. 

Internet Fraud

More seniors are online today than ever before which is drawing more scammers and con artists to the Internet than ever before. It’s so easy for anyone to set up a website and draw people in through pop-up offers and email links that they can be in operation one day, bilk thousands of dollars from victims and then disappear the next day. Any site that asks for credit card information, Social Security numbers, or personal information is suspect. You should never provide your Social Security number over the Internet or through email, and you should only provide credit card information on site with which you are familiar.

Charity Scams

Fraudsters know that senior citizens are a very benevolent group, so false charities have proliferated in the last decade. Seniors are approached by scammers through telemarketing, emails, and the mail. Some will even pose as legitimate charities with names that sound very similar to familiar charities.  If you are not familiar with a charity, ask for its registration number and a phone number to contact the organization. Even if you are familiar with a charity, take additional measures to determine that it is the real deal before contributing. A general rule of thumb is to avoid providing your credit card information over the phone under any circumstance.

How to Protect Yourself and Prevent Fraud

It’s up to each individual to become educated on the types of investment fraud and how to spot the warning signs. Where any of the following signs are present, you should take extra measures to investigate or simply walk away.

  • Guarantees of returns higher than the 30 year U.S. Treasury Note
  • Guarantees of a profit
  • Foreign investment opportunities
  • Mailings with P.O. Box return addresses
  • “Must act quickly” declarations
  • Refusal to stop calling or emailing after requested
  • Request for payment via cash, check or money order
  • High pressure sales tactics
  • Requests for financial account information or Social Security numbers
  • Return promises not in writing
  • Lack of transparency in the offer or the investment operation

With it being so easy for people to create official looking websites and documents, it is so important to verify everything and conduct thorough due diligence on companies or individuals offering something that even remotely appears “too good to be true”. If public records of a company or individual don’t exist, walk away. If a verifiable track record doesn’t exist, run. If you Google someone’s name, and nothing shows up in the search results, be concerned. Above all, just use your common sense.

Make these your scam and fraud prevention rules to live by:

Know your “do not call” rights. Register your phone number with the national “do-not call” registry by calling (888)382-1222 or go to  If a company continues to call after you ask them stop you can register a complaint with the same organization.

Report fraud: You can report incidences of telemarketing fraud through the NFIC at (800)876-7060 or by going to its website

Delete unsolicited emails: Chances are it’s either fraudulent or an annoyance. Either way you don’t need to read it.

Know who you’re dealing with: If you’re not familiar with a company or a charity, take a moment and look them up on the Better Business Bureau website which compiles complaints filed by individuals.

If shopping online, know the offer: You need to not only know what exactly it is you are buying, you need to know everything else, such as cancellation and return policies, warranty terms, , shipping process and costs. If it is not detailed on the website, walk away.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2021 Advisor Websites.