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Scams: Telemarketing Fraud | Nigerian
Letter or "419" Fraud | Impersonation/Identity
Fraud | Advance Fee Scheme | Health
Insurance Fraud
Investment Related Scams: Letter of Credit
Fraud | Prime Bank Note | "Ponzi"
Scheme | Pyramid Scheme
Internet Scams: Please view a separate
webpage to learn more about how the Internet is used to commit fraud,
and tips to protect yourself on the world-wide web.
Telemarketing Fraud
When you send money to people you do not know personally or give personal
or financial information to unknown callers, you increase your chances
of becoming a victim of telemarketing fraud.
Warning signs -- what a caller may tell you:
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"You must act 'now' or the offer won't be good."
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"You've won a 'free' gift, vacation, or prize."
But you have to pay for "postage and handling" or other
charges.
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"You must send money, give a credit card or
bank account number, or have a check picked up by courier."
You may hear this before you have had a chance to consider the offer
carefully.
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"You don't need to check out the company with
anyone." The callers say you do not need to speak to anyone
including your family, lawyer, accountant, local Better Business
Bureau, or consumer protection agency.
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"You don't need any written information about
their company or their references."
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"You can't afford to miss this 'high-profit,
no-risk' offer."
If you hear these--or similar--"lines" from
a telephone salesperson, just say "no thank you," and hang
up the phone.
Some Tips to Avoid Telemarketing Fraud:
It's very difficult to get your money back if you've been cheated over
the phone. Before you buy anything by telephone, remember:
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Don't buy from an unfamiliar company. Legitimate
businesses understand that you want more information about their
company and are happy to comply.
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Always ask for and wait until you receive written
material about any offer or charity. If you get brochures about
costly investments, ask someone whose financial advice you trust
to review them. But, unfortunately, beware -- not everything written
down is true.
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Always check out unfamiliar companies with your
local consumer protection agency, Better Business Bureau, state
Attorney General, the National Fraud Information Center, or other
watchdog groups. Unfortunately, not all bad businesses can be identified
through these organizations.
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Obtain a salesperson's name, business identity,
telephone number, street address, mailing address, and business
license number before you transact business. Some con artists give
out false names, telephone numbers, addresses, and business license
numbers. Verify the accuracy of these items.
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Before you give money to a charity or make an investment,
find out what percentage of the money is paid in commissions and
what percentage actually goes to the charity or investment.
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Before you send money, ask yourself a simple question.
"What guarantee do I really have that this solicitor will use
my money in the manner we agreed upon?"
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You must not be asked to pay in advance for services.
Pay services only after they are delivered.
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Some con artists will send a messenger to your home
to pick up money, claiming it is part of their service to you. In
reality, they are taking your money without leaving any trace of
who they are or where they can be reached.
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Always take your time making a decision. Legitimate
companies won't pressure you to make a snap decision.
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Don't pay for a "free prize." If a caller
tells you the payment is for taxes, he or she is violating federal
law.
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Before you receive your next sales pitch, decide
what your limits are -- the kinds of financial information you will
and won't give out on the telephone.
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It's never rude to wait and think about an offer.
Be sure to talk over big investments offered by telephone salespeople
with a trusted friend, family member, or financial advisor.
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Never respond to an offer you don't understand thoroughly.
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Never send money or give out personal information
such as credit card numbers and expiration dates, bank account numbers,
dates of birth, or social security numbers to unfamiliar companies
or unknown persons.
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Your personal information is often brokered to telemarketers
through third parties.
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If you have information about a fraud report it
to state, local, or federal law enforcement agencies.
What is a Nigerian Letter or "419"
Fraud?
Nigerian letter frauds combine the threat of impersonation fraud with
a variation of an advance fee scheme in which a letter, mailed from
Nigeria, offers the recipient the "opportunity" to share
in a percentage of millions of dollars that the author, a self-proclaimed
government official, is trying to transfer illegally out of Nigeria.
The recipient is encouraged to send information to the author, such
as blank letterhead stationary, bank name and account numbers and
other identifying information using a facsimile number provided in
the letter. Some of these letters have also been received via E-mail
through the Internet. The scheme relies on convincing a willing victim,
who has demonstrated a "propensity for larceny" by responding
to the invitation, to send money to the author of the letter in Nigeria
in several installments of increasing amounts for a variety of reasons.
Payment of taxes, bribes to government officials, and legal fees
are often described in great detail with the promise that all expenses
will be reimbursed as soon as the funds are spirited out of Nigeria.
In actuality, the millions of dollars do not exist and the victim
eventually ends up with nothing but loss. Once the victim stops sending
money, the perpetrators have been known to use the personal information
and checks that they received to impersonate the victim, draining
bank accounts and credit card balances until the victim's assets are
taken in their entirety. While such an invitation impresses most law-abiding
citizens as a laughable hoax, millions of dollars in losses are caused
by these schemes annually. Some victims have been lured to Nigeria,
where they have been imprisoned against their will, in addition to
losing large sums of money. The Nigerian government is not sympathetic
to victims of these schemes, since the victim actually conspires to
remove funds from Nigeria in a manner that is contrary to Nigerian
law. The schemes themselves violate section 419 of the Nigerian criminal
code, hence the label "419 fraud."
Some Tips to Avoid Nigerian Letter or "419" Fraud:
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If you receive a letter from Nigeria asking you to send personal
or banking information, do not reply in any manner. Send the letter
to the U.S. Secret Service or the FBI.
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If you know someone who is corresponding in one of
these schemes, encourage that person to contact the FBI or the U.S.
Secret Service as soon as possible.
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Be skeptical of individuals representing themselves
as Nigerian or foreign government officials asking for your help in
placing large sums of money in overseas bank accounts.
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Do not believe the promise of large sums of money
for your cooperation.
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Guard your account information carefully.
What Is Impersonation/Identity Fraud?
Impersonation fraud occurs when someone assumes your identity to perform
a fraud or other criminal act. Criminals can get the information they
need to assume your identity from a variety of sources, such as the theft
of your wallet, your trash, or from credit or bank information. They may
approach you in person, by telephone, or on the Internet and ask you for
the information.
The sources of information about you are so numerous that you cannot prevent
the theft of your identity. But you can minimize your risk of loss by
following a few simple hints.
Some Tips to Avoid Impersonation/Identity Fraud:
- Never throw away ATM receipts, credit statements, credit cards, or
bank statements in a usable form.
- Never give your credit card number over the telephone unless you make
the call.
- Reconcile your bank account monthly and notify your bank of discrepancies
immediately.
- Keep a list of telephone numbers to call to report the loss or theft
of your wallet, credit cards, etc.
- Report unauthorized financial transactions to your bank, credit card
company, and the police as soon as you detect them.
- Review a copy of your credit report at least once each year. Notify
the credit bureau in writing of any questionable entries and follow
through until they are explained or removed.
- If your identity has been assumed, ask the credit bureau to print
a statement to that effect in your credit report.
- If you know of anyone who receives mail from credit card companies
or banks in the names of others, report it to local or federal law enforcement
authorities.
What is an Advance Fee Scheme?
An advance fee scheme occurs when the victim pays money to someone in
anticipation of receiving something of greater value, such as a loan,
contract, investment, or gift, and then receives little or nothing in
return.
The variety of advance fee schemes is limited only by the imagination
of the conartists who offer them. They may involve the sale of products
or services, the offering of investments, lottery winnings, "found
money," or many other "opportunities." Clever conartists
will offer to find financing arrangements for their clients who pay a
"finder's fee" in advance. They require their clients to sign
contracts in which they agree to pay the fee when they are introduced
to the financing source. Victims often learn that they are ineligible
for financing only after they have paid the "finder" according
to the contract. Such agreements may be legal unless it can be shown that
the "finder" never had the intention or the ability to provide
financing for the victims.
Some Tips to Avoid the Advanced Fee Schemes:
- If the offer of an "opportunity" appears too good to be
true, it probably is. Follow common business practice. For example,
legitimate business is rarely conducted in cash on a street corner.
- Know who you are dealing with. If you have not heard of a person
or company that you intend to do business with, learn more about them.
Depending on the amount of money that you intend to spend, you may want
to visit the business location, check with the Better Business Bureau,
or consult with your bank, an attorney, or the police.
- Make sure you fully understand any business agreement that you enter
into. If the terms are complex, have them reviewed by a competent attorney.
- Be wary of businesses that operate out of post office boxes or mail
drops and do not have a street address, or of dealing with persons who
do not have a direct telephone line, who are never "in" when
you call, but always return your call later.
- Be wary of business deals that require you to sign nondisclosure
or noncircumvention agreements that are designed to prevent you from
independently verifying the bona fides of the people with whom you intend
to do business. Conartists often use noncircumvention agreements to
threaten their victims with civil suit if they report their losses to
law enforcement.
Common Health Insurance Frauds:
Medical Equipment Fraud: Equipment manufacturers offer "free"
products to individuals. Insurers are then charged for products that were
not needed and/or may not have been delivered.
"Rolling Lab" Schemes: Unnecessary and sometimes fake tests
are given to individuals at health clubs, retirement homes, or shopping
malls and billed to insurance companies or Medicare.
Services Not Performed: Customers or providers bill insurers for services
never rendered by changing bills or submitting fake ones.
Medicare Fraud: Medicare fraud can take the form of any of the health
insurance frauds described above. Senior citizens are frequent targets
of Medicare schemes, especially by medical equipment manufacturers who
offer seniors free medical products in exchange for their Medicare numbers.
Because a physician has to sign a form certifying that equipment or testing
is needed before Medicare pays for it, conartists fake signatures or bribe
corrupt doctors to sign the forms. Once a signature is in place, the manufacturers
bill Medicare for merchandise or service that was not needed or was not
ordered.
Some Tips to Avoid the Health Insurance Fraud:
- Never sign blank insurance claim forms.
- Never give blanket authorization to a medical provider to bill for
services rendered.
- Ask your medical providers what they will charge and what you will
be expected to pay out-of-pocket.
- Carefully review your insurer's explanation of the benefits statement.
Call your insurer and provider if you have questions.
- Do not do business with door-to-door or telephone salespeople who
tell you that services of medical equipment are free.
- Give your insurance/Medicare identification only to those who have
provided you with medical services.
- Keep accurate records of all health care appointments.
- Know if your physician ordered equipment for you.
What is a Letter of Credit Fraud?
Legitimate letters of credit are never sold or offered as investments.
Legitimate letters of credit are issued by banks to ensure payment for
goods shipped in connection with international trade. Payment on a letter
of credit generally requires that the paying bank receive documentation
certifying that the goods ordered have been shipped and are en route to
their intended destination.
Letters of credit frauds are often attempted against banks by providing
false documentation to show that goods were shipped when, in fact, no
goods or inferior goods were shipped.
Other letter of credit frauds occur when con artists offer a "letter
of credit" or "bank guarantee" as an investment wherein
the investor is promised huge interest rates on the order of 100 to 300
percent annually. Such investment "opportunities" simply do
not exist. (See Prime Bank Notes for additional information.)
Some Tips to Avoid Letter of Credit Fraud:
- If an "opportunity" appears too good to be true, it probably
is.
- Do not invest in anything unless you understand the deal. Conartists
rely on complex transactions and faulty logic to "explain"
fraudulent investment schemes.
- Do not invest or attempt to "purchase" a "Letter of
Credit." Such investments simply do not exist.
- Be wary of any investment that offers the promise of extremely high
yields.
- Independently verify the terms of any investment that you intend
to make, including the parties involved and the nature of the investment.
What is a Prime Bank Note?
International fraud artists have invented an investment scheme that offers
extremely high yields in a relatively short period of time. In this scheme,
they purport to have access to "bank guarantees" which they
can buy at a discount and sell at a premium. By reselling the "bank
guarantees" several times, they claim to be able to produce exceptional
returns on investment. For example, if $10 million worth of "bank
guarantees" can be sold at a two percent profit on ten separate occasions,
or "traunches," the seller would receive a 20 percent profit.
Such a scheme is often referred to as a "roll program." To make
their schemes more enticing, conartists often refer to the "guarantees"
as being issued by the world's "Prime Banks," hence the term
"Prime Bank Guarantees." Other official sounding terms are also
used such as "Prime Bank Notes" and "Prime Bank Debentures."
Legal documents associated with such schemes often require the victim
to enter into nondisclosure and noncircumvention agreements, offer returns
on investment in "a year and a day", and claim to use forms
required by the International Chamber of Commerce (ICC). In fact, the
ICC has issued a warning to all potential investors that no such investments
exist.
The purpose of these frauds is generally to encourage the victim to send
money to a foreign bank where it is eventually transferred to an off-shore
account that is in the control of the conartist. From there, the victim's
money is used for the perpetrator's personal expenses or is laundered
in an effort to make it disappear.
While foreign banks use instruments called "bank guarantees"
in the same manner that U.S. banks use letters of credit to insure payment
for goods in international trade, such bank guarantees are never traded
or sold on any kind of market.
Some Tips to Avoid Prime Bank Note Related Fraud:
- Think before you invest in anything. Be wary of an investment in
any scheme, referred to as a "roll program," that offers unusually
high yields by buying and selling anything issued by "Prime Banks."
- As with any investment perform due diligence. Independently verify
the identity of the people involved, the veracity of the deal, and the
existence of the security in which you plan to invest.
- Be wary of business deals that require nondisclosure or noncircumvention
agreements that are designed to prevent you from independently verifying
information about the investment.
What is a "Ponzi" Scheme?
A Ponzi scheme is essentially an investment fraud wherein the operator
promises high financial returns or dividends that are not available through
traditional investments. Instead of investing victims' funds, the operator
pays "dividends" to initial investors using the principle amounts
"invested" by subsequent investors. The scheme generally falls
apart when the operator flees with all of the proceeds, or when a sufficient
number of new investors cannot be found to allow the continued payment
of "dividends."
This type of scheme is named after Charles Ponzi of Boston, Massachusetts,
who operated an extremely attractive investment scheme in which he guaranteed
investors a 50 percent return on their investment in postal coupons. Although
he was able to pay his initial investors, the scheme dissolved when he
was unable to pay investors who entered the scheme later.
Some Tips to Avoid Ponzi Schemes:
- As with all investments, exercise due diligence in selecting investments
and the people with whom you invest.
- Make sure you fully understand the investment before you invest your
money.
What is a Pyramid Scheme?
Pyramid schemes, also referred to as franchise fraud, or chain referral
schemes, are marketing and investment frauds in which an individual is
offered a distributorship or franchise to market a particular product.
The real profit is earned, not by the sale of the product, but by the
sale of new distributorships. Emphasis on selling franchises rather than
the product eventually leads to a point where the supply of potential
investors is exhausted and the pyramid collapses. At the heart of each
pyramid scheme there is typically a representation that new participants
can recoup their original investments by inducing two or more prospects
to make the same investment. Promoters fail to tell prospective participants
that this is mathematically impossible for everyone to do, since some
participants drop out, while others recoup their original investments
and then drop out.
Some Tips to Avoid Pyramid Schemes:
- Be wary of "opportunities" to invest your money in franchises
or investments that require you to bring in subsequent investors to
increase your profit or recoup your initial investment.
- Independently verify the legitimacy of any franchise or investment
before you invest.
Related Links: Telemarketing
Victim Call Center | Better
Business Bureaus | Consumer
Protection - Investments
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