Avoiding Financial Fraud
Think of fraud perpetrators as predators. They do not normally just wait around passively for the victim to happen by and become ensnared in their web. Instead, they will actively seek out a victim. Sometimes contact with a potential victim is random and other times likely candidates are selected after moderate research has identified a particularly choice target.
So, in thinking of these criminals as predators, it is then your job to avoid becoming the poor unsuspecting antelope on the savannah, pounced on by the prowling lioness. Antelope tend to run into trouble by losing sight of millions of years of learned instinct – don’t stray from the herd, stay away from the tall grass, pay attention!
But what are the simple cautions we should observe in avoiding financial predators? While today’s con artists may or may not be hiding in the tall grass, the final note of caution listed above – pay attention – is just as apt a warning in our own modern day environment. Con artists relish the opportunity offered up by an unsuspecting victim.
Another caution is to maintain a healthy skepticism. Beyond simply noticing what is transpiring around you, it is important to apply logic. When confronted by an unexpected offer, ask some basic questions… “How could I win a lottery I never played?” “Why would a Nigerian or some disposed royalty contact me, of all people, to ‘help’ him in a financial transaction?” Why would I be sought out to be a “secret shopper” for a company I’ve never done business with?”
The sheer number and variety of scams in circulation is simply stunning and the Bank literally receives word of new scams on a daily basis. We cannot possibly warn you of all of them, so in our monthly newsletter, we periodically pick and choose distinctive scams to mention in hopes that you will become well versed in the types of situations to be cautions of. It is less important to know the details of every scam than to hone your “scam detection radar”.
Politicians are famous for winning voter support by appealing to emotion rather than the facts. They often “frame” an issue in emotional terms realizing that winning hearts is more profitable than winning minds. Coincidentally or not, con artists often use similar emotional hooks to bring the intended victim to view the world in terms that support their cause. If they can get the unwary to dream of how to spend that $5,000, then they have a better shot at reeling in the prize. It is important to keep logic rather than emotion or wishful thinking in control of your decision making.
Finally, avoid inviting a bad situation by controlling your environment. This advice is multi-faceted but does require active effort. Whether a thief has designs on your money or on making off with your identity, the less you give a thief to work with, the better protected you will be. Examples of controlling your environment include simple actions such as shredding sensitive documents when no longer needed, locking or closely monitoring your mailbox, keeping important information secured – even in your own home, keeping passwords and PIN numbers secret, registering with the “national Do Not Call Registry”, periodically monitoring your credit report, installing updated security software and password access on your home computer, and refusing to respond to unsolicited email.
All of these actions reduce your exposure to risk. And while criminals may be ethically challenged, they are not all lazy. Most are willing to expend some effort if the payoff is worthwhile. Your mission is to become an unattractive target. If the criminal realizes you are just too much trouble, then most are likely to pass you over.
10 Scams Targeting Bank Customers
- Government “imposter” frauds: These schemes often
start with a phone call, a letter, an email, a text message or a fax
supposedly from a government agency, requiring an upfront payment or
personal financial information, such as Social Security or bank
“They might tell you that you owe taxes or fines or that you have an unpaid debt. They might even threaten you with a lawsuit or arrest if you don’t pay,” said Michael Benardo, manager of the FDIC’s Cyber Fraud and Financial Crimes Section. “Remember that if you provide personal information it can be used to commit fraud or be sold to identity thieves. Also, federal government agencies won’t ask you to send money for prizes or unpaid loans, and they won’t ask you to wire money to pay for anything.”
- Debt collection scams: Be on the lookout for fraudsters posing as debt collectors or law enforcement officials attempting to collect a debt that you don’t really owe. Red flags include a caller who won’t provide written proof of the debt you supposedly owe or who threatens you with arrest or violence for not paying.
- Fraudulent job offers: Criminals pose online or
in classified advertisements as employers or recruiters offering
enticing opportunities, such as working from home. But if you’re
required to pay money in advance to “help secure the job” or you must
provide a great deal of personal financial information for a
“background check,” those are red flags of a potential fraud.
Another variation on this scam involves fake offers of part-time jobs as “mystery shoppers,” who are people paid to visit retail locations and then submit confidential reports about the experience. In an example of the fraudulent version, your job might be to receive a $500 check, go “undercover” to your bank, deposit the check into your account there, and then report back about the service provided. But you also would be instructed to immediately wire your new “employer” $500 out of your bank account to cover the check you just deposited. Days later, the bank will inform you that the check you deposited is counterfeit and you just lost $500 to thieves. One warning sign of this type of scam is that the potential employer requires you to have a bank account.
- “Phishing” emails: Scam artists send emails
pretending to be from banks, popular merchants or other known
entities, and they ask for personal information such as bank account
numbers, Social Security numbers, dates of birth and other valuable
details. The emails usually look legitimate because they include
graphics copied from authentic websites and messages that appear
“We have also seen emails with links to fake websites that are exact copies of real websites for FDIC-insured banks, except the web addresses are slightly different than the real ones,” said Doreen Eberley, director of the FDIC’s Division of Risk Management Supervision, which is in charge of the agency’s policies and programs related to financial crimes. “These sites are used to trick people into giving up valuable personal information that can be used to commit identity theft.”
- Mortgage foreclosure rescue scams: Today, many homeowners who are struggling financially and risk losing their homes may be vulnerable to false promises to refinance a mortgage under better terms or rates. But borrowers should always be on the lookout for scammers who falsely claim to be lenders, loan servicers, financial counselors, mortgage consultants, loan brokers or representatives of government agencies who can help avoid a mortgage foreclosure and offer a great deal at the same time. These criminals will present homeowners with what sounds like the life-saving offer they need. Instead, the homeowner is required to pay significant upfront fees or, even worse, tricked into signing documents that, in the fine print, transfer the ownership of the property to the criminal involved. Common warning signs of fraudulent mortgage assistance offers include a “guarantee” that foreclosure will be avoided and pressure to act fast.
- Lottery scams: You might be told you won a lottery (typically one that you never entered) and asked to first send money to the “lottery company” to cover certain taxes and fees. Similar examples involve bogus prize winnings and sweepstakes. “In one example, a scammer sent a letter to people using falsified FBI and FDIC letterhead telling them they won a popular, well-known lottery but that they needed to send money by wire transfer to a lottery ‘official’ in order to secure the winnings,” Benardo said. “The ‘official’ was really a crook hoping to trick people into sending money.”
- Elder frauds: Thieves sometimes target older adults to try to cheat them out of some of their life savings. For example, telemarketing scams may involve sales of bogus products and services that will never be delivered. Warning signs include unsolicited phone calls asking for a large amount of money before receiving the goods or services, and special offers for senior citizens that seem too good to be true, like an investment “guaranteeing” a very high return. To help seniors and their caregivers avoid financial exploitation, the FDIC and the Consumer Financial Protection Bureau have developed Money Smart for Older Adults, a curriculum with information and resources.
- Overpayment scams: This popular scam starts when a stranger sends a consumer or a business a check for something, such as an item being sold on the internet, but the check is for far more than the agreed-upon sales price. The scammer then tells the consumer to deposit the check and wire the difference to someone else who is supposedly owed money by the same check writer. In a few days, the check is discovered to be a counterfeit, and the depositor may be held responsible for any money wired out of the bank account. Victims may end up owing thousands of dollars to the financial institution that wired the money, and sometimes they’ve also sent the merchandise to the fraud artists, too.
- "Ransomware": This term refers to malicious software that holds a computer, smartphone or other device hostage by restricting access until a ransom is paid. The most common way ransomware and other malicious software spreads is when someone clicks on an infected email attachment or a link in an email that leads to a contaminated file or website. Malware also can spread across a network of linked computers or be passed around on a contaminated storage device, such as a thumb drive.
- Jury duty scams: A thief makes phone calls pretending to be a law enforcement official warning innocent people that they failed to appear for jury duty and threating an arrest unless a “fine” is paid immediately. And to pay up, the caller asks for debit account and PIN numbers, allowing the perpetrator to create a fake debit card and drain the account.
The Importance of Credit Reports and Credit Scores
In Frank Capra’s classic 1946 film, It’s a Wonderful Life, Building and Loan manager George Bailey (James Stewart) explains to his customers how financial systems function; illustrating that the money you save is not kept in a box, it is, for instance, invested in your neighbor’s home. While that is a simplistic and incomplete explanation, it’s an effective way of explaining the basics of financial systems. It’s also a good explanation of why responsible lending practices are so important – money lent is never abstract – it’s someone’s hard earned savings and that investment must always be protected. That’s how we community bankers see it.
Irresponsible lending and ill-considered borrowing can cause upset in financial systems, as we have seen with the sub-prime lending debacle. And while mortgage lending by third party lenders is not nearly as regulated as bank lending, the concept is much the same. One difference between sub-prime lending practices and those of responsible lenders is that responsible lenders traditionally take into consideration credit scores and refer to credit reports while making determinations of credit worthiness.
The three main Credit Bureaus: TransUnion, Equifax, and Experian maintain credit report files and credit scores on any individual who has a borrowing history. A credit report is nothing more than an ongoing history of all reported credit extended to an individual. Reports contain information such as a lender’s name, date and amount of credit extended, high and low balances, payment history and other similar information.
An individual’s credit score is a number that is symbolic of the determined credit-worthiness of the particular individual and based on calculations of lending risk extrapolated from information reported by lenders. Many aspects of financial health and habits are considered in determining a credit score: Documented outstanding debt, payment history, duration and extent of credit history, and types of outstanding debt. Examples of information that may negatively impact a credit score includes: Too many credit applications in a short period of time, and credit balances close to the credit limit.
A credit score exists to protect both the lender and the borrower by providing objective statistics from which to determine credit-worthiness. Borrowers who are responsible and have a proven track record of repayment, and deemed a safer credit risk, are rewarded a high credit score, which normally translates into preferential loan rates and terms. Borrowers who have been less responsible, have insufficient history, or too much debt receive lower scores, often resulting in less appealing rates and terms. While lenders do not typically enjoy declining credit applications, it does neither the lender nor the potential borrower any favor by permitting risky, ill-advised loans to be made.
Fortunately, consumers have access to both their credit reports and credit scores and we strongly recommend taking advantage of the free credit reports available once each year from each of the major credit bureaus. Reviewing your credit report will help you understand how lenders may see your credit-worthiness, but even more importantly, reviewing your credit report regularly can help you catch potential fraud resulting from identity theft. Request a free annual credit report by calling 1-877-322-8228 or by visiting www.AnnualCreditReport.com. Your credit score is not typically included in your credit report; however, for a small fee a consumer may request a report containing a credit score.
National Do Not Call Registry
The National Do Not Call Registry is one of the best privacy and consumer protection programs of the past decade.
This program, administered by the Federal Trade Commission, allows any private citizen to place their land line and/or cell phone on an “out of bounds” list for unsolicited commercial telephone contact.
Telephone numbers may be registered in one of two ways. You may call 1-888-382-1222 to access an automated system. While using this method, you must be calling from the number you wish to register. Alternately, you may register online at www.donotcall.gov. This method allows you to register up to three phone numbers at a time.
Once you register for this service, all commercial outbound telemarketers are required to delete your phone number from their call logs within 31 days. Your registration will not expire; however, you may choose to reverse your registration at any time. There are some limitations. For instance, only residential phone numbers are eligible for registration, and certain entities such as political and charitable organizations as well as telephone surveyors are not required to abide by your registration. In addition, businesses with which you have or had a business relationship may continue to contact you for up to 18 months after your last business transactions with them.