The many ways scammers can get their hands on your money

Scams come in all shapes and sizes, but many share similar characteristics. And if you know what they are, you can save yourself from being swindled. Some of the more common characteristics of investment fraud include:

  1. The investments are promoted as guaranteed moneymakers with little or no risk.
  2. Investors are promised unrealistic returns or unusually large profits, often due to special investing expertise or a unique system that generates incredible returns.
  3. There is a sense of urgency.
  4. The investment can be quickly explained, but is often vague or difficult to understand.
  5. The promoters claim that other well-known individuals have already invested.
  6. There is a continual need for funds from new investors to keep the fraud from collapsing.
  7. The promoter encourages the investor to let his profits ride.
  8. The promoters encourage a home equity or other loan to maximize profits.
  9. The investment pitch uses glitzy graphics with lots of numbers and details.
  10. The investments are sold by people who do not look like criminals.
  11. You have to pay a fee before you can claim the prize you won. Or you’re asked to pay a fee for a credit or loan application (when you wouldn’t normally qualify for credit or a loan from well-known banks). Other suspicious fees can be related to credit repairs, job applications, scholarships, grants or searches.
  12. You are not given any written information about the investment and/or are told you do not need to check with anyone about the investment.

So now that you know the characteristics of a scam, let’s discuss the ways in which swindlers find their victims. Obviously, the internet, email and social media are major avenues for scammers. Social media is particularly troubling because fraudsters can read potential victims profiles and use that information to refine their pitches. As such, it’s important to be aware of the amount of information that’s available about you through internet searches and social media profiles.

Traditional communications such as radio, TV, phone and postal mail continue to be sources for scams, as do newspaper and magazine ads. Because regulators monitor major publications, scammers will generally promote their ads in narrowly circulated periodicals that regulators are unlikely to see, or they will advertise in major publications, but will try to hit-and-run before being investigated. Some swindlers purchase mailing lists and send mass postal service mailings to people who have a subscription to a certain investment-related publication, have previously replied to offers in the mail, or that have other desired characteristics for which the fraudster is looking.

Perhaps the most effective method for swindlers to locate victims is through referrals from those who “profit” from the scam. By paying quick, substantial returns to initial investors, these investors will recommend the investment to friends and acquaintances who then tell their friends and associates. Soon, the scammer does not need to search for new victims; they come knocking on his door.

In short, there are countless ways scammers can try to get your money, but you can avoid being a victim by “investigating before you invest”. Knowing the characteristics of a scam and the sources from which you can be targeted are important tools in defending your personal information and money.