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Dealing with Financial Fraud: Tips for You, and for Elders You are Responsible For

By Chuck Yanikoski

There are too many kinds of scams to describe here, and new ones are constantly being invented. So let's focus mainly on general tips for preventing, identifying, and coping with fraud.

Prevention is obviously the best strategy. Here are the main ways to do it:

  • "If it sounds too good to be true, it is." This is the most common advice, because it's true.
  • Don't trust people you don't know with your money or your personal information, no matter how nice and sincere they seem.
  • Con artists will say anything. If someone wants your money, no matter what the reason, and it's not someone you know, don't give it to them until you can verify their story and their credentials.
  • Check out anyone who claims to be a financial advisor, even if she or he has impressive credentials, if an offer sounds suspiciously good.
  • If you do need to provide money or information (credit card info, Social Security Number, bank account number, tax records, etc.), be certain you know whom you are dealing with.
  • Get any offer in writing. If you can't get it in writing, walk away.
  • Be doubly suspicious of any offer that requires you to send money by wire or courier, or to send money to a foreign country.
  • Never agree to any offer for a product or service, and especially a financial product or service, until you are sure you understand it completely, including the small print.
  • For any important financial commitment, sleep on it. If you have any doubts at all, get a second opinion from someone you trust.
  • Review your credit card statements for unauthorized transactions.
  • On the telephone: the more a stranger acts friendly to you, the more suspicious you should be. As soon as the discussion veers toward money, or credit cards, or any related subject, get off the phone. And remember: just because someone says they are from your bank or credit card company, or from your church or club or company, this doesn't mean they really are. Unless you made the phone call, never give your credit card number, Social Security Number, or other personal identifying information over the phone to someone you otherwise don't know. If you find it hard to hang up on people, use an answering machine to screen calls.
  • On the computer: Never respond to spam email in any way, other than deleting it, and never open attachments to emails unless they came from someone you know and unless you already have a good idea what's in them. Never accept an offer sent to you by unsolicited email, even if it is something you really want. If you do want it, go on your own (but not by clicking an email link) to the website offering the product or service, and purchase it from there. If there isn't such a website, or a toll-free number, or some other legitimate way for you to find them, assume it is a scam - and look for someplace else to buy that product or service. Never click on a link unless you are confident it is valid. Some links don't go where they say they go, and clicking them can open up your computer to invasion.
  • It generally is safe to give your credit card information over the internet to legitimate businesses, especially if it is a "secure" site. But do not respond to emails, especially those purporting to be from banks, other financial institutions, or popular auction or retail sites, if they are asking you for personal or financial information.
  • Don't fall for investment tips you find on the internet - especially on blogs, bulletin boards, online investment newsletters, or in your email. Con artists buy stock in small companies, then tout them to other people, like you, who also buy them and drive up the price. Then the con artist sells, and you and everyone else who bought it loses out as the artificial price boom ends and the price drops.
  • The most common in-person frauds are door-to-door sales, often for home improvements, but sometimes for random goods. Not all such offers are fraudulent of course, but many are, so you should always ask for a business card or phone number, and tell them you will call them back (after you check around to see if their terms are reasonable).
  • Some con artists will try to get to know you, or perhaps a group of people including you, looking for the right opportunity. This is called "affinity fraud." It is harder to be properly suspicious with someone you have known for a while, and who perhaps has shown a lot of interest in you and really seems to care. So what do you do? Always be business-like about business matters - even (especially!) with a close friend or family member. All financial transactions should be documented. Agreements should be expressed in writing, and signed by both parties, with copies provided to both parties. Cash transactions should be accompanied by signed receipts.
  • Even if your best friend made a killing "investing" with someone, it doesn't mean you will. So-called Ponzi Schemes are set up to work just that way, and you are almost sure to lose your money if you contribute to them. Remember Bernie Madoff - and that even smart, sophisticated people were taken in.
  • Home care workers are generally honest, but then again, it's a great opportunity for someone who is not honest. If you need to bring someone new into your home, pay to have a background check done. And it is best if they are bonded, or if they work for a company that will make good on any theft or other problems.

If you suspect you are being scammed:

  • Check on the person or company involved, using independent means.
  • Inquire with the Better Business Bureau, your state Attorney General's Office, the local police, and/or your state's consumer protection agency.
  • Newspapers and television stations often have consumer fraud reporters or investigative units - they might already know about the scam, or might be interested in doing a story on it.

If you have been scammed or your identity has been stolen:

  • Admit to yourself that you've been tricked. This can be hard, but chances are you were up against a professional, so you don't need to be all that embarrassed.
  • Immediately contact your credit card company, bank, and/or other financial providers that carry accounts of yours that might be affected.
  • Contact the agencies mentioned above.
  • If you suspect (or know) that your credit rating has been affected, you are entitled to a free credit report, and can notify all credit bureaus of the fraud with a single phone call to any one of them.

Check out: http://www.fraud.org/ for a wealth of good information, especially about telemarketing and internet fraud.