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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

Don't fall for fraud

Hilda, a German living in Zimbabwe whose husband apparently perished in a Spanish plane crash, wants to park $US10.5 million in my bank account so the rellies don't get their hands on it. All she needs is my full name, address, occupation, telephone numbers and marital status ... oh, and a scanned copy of my passport and driver's licence.

Major Joseph Morgan, who says he's an engineer serving in Ba'qubah, Iraq, wants to send me $US25 million via diplomatic courier. It's oil money, apparently, and I get to keep 30 per cent. He needs to see my passport and driver's licence as well – to “build trust, okay?”

Thomas Brown says I'm entitled to £15.6 million just because I have the same surname as his late client – in his words, “you are qualified by your surname identity”. I'm guessing he needs my bank account details.

Sulinna writes (in capital letters) that her breast cancer means there's “know hope for me to be a living person again”, so can she send me $US4.5 million?

Bernadette wants my help in donating $US2.5 million to charity but suggests contact by email is better than the phone “because of my brain cancer”.

The spelling mistakes, bad punctuation and mangled syntax in these emails – just a sample of those in my junk mail folder in the past two months – mark them out as particularly crude attempts at emptying my account.

However, they share a certain psychology with the much more sophisticated scams that are proliferating in the internet age. The people behind such schemes know the buttons to push and just how often they're going to hit the jackpot.

According to a report released last year by the Australian Bureau of Statistics, one in three people aged 15 and over encountered some form of scam in 2007 – perhaps receiving emails like the ones above. Five per cent of them (806,000 people) made at least an initial response and 453,100 people lost money – almost $1 billion in total, or an average of $2160 a person. The ABS says this translates to a “victimisation rate” of 2 per cent. In other words, for every 100 emails “Major Morgan” sends out, he can count on two potentially lucrative replies.

No particular group is more likely to be conned, according to the ABS study – it doesn't matter whether you're young or old, well-educated or not. “Anyone can fall for a scam,” the deputy chairman of the Australian Competition and Consumer Commission, Peter Kell, says. “There's still a view in much of the community that scammers are amateurs, that they're easy to pick, that they're a bit shabby. But these days, especially online, scammers are very clever and very professional.

“Of course you've still got the 'Nigerian letters' and the offers of miracle cures but consumers need to be aware that many scams are now part of international criminal operations with a lot of resources behind them and therefore the ability to create more sophisticated offers.”

A senior lecturer in marketing with Deakin Business School, Paul Harrison, says scammers use psychological principles such as trust and scarcity to draw us in, knowing our emotions will probably override the rational brain. “Once the pleasure centres start firing up, the rational brain really does get told to quieten down,” Harrison says.

Scammers won't necessarily ask for money or personal information straight away but will “groom” victims – finding out more about them and building a relationship, Harrison says.

In many scams, this is combined with the idea of scarcity. “If we think something is scarce, such as tickets to the Olympics, our mind will give it more weight,” he says. (Many people lost money to fake ticketing websites ahead of the Beijing Olympics.)

Harrison says the best way to resist a scam is to create some form of “psychological break” so your rational brain has a chance to kick in again. Enforce a cooling-off period and talk to friends or family about the offer. “Just by saying it out loud, it can make you think: 'That's ridiculous,'” he says.

Others suggest starting with your list of “cons” and only then considering the “pros”, because research shows that focusing on the positives first makes it harder to come up with the negatives. And turn technology against the people who are using it to fleece you by researching their background and their offer on the internet.

Remember, "what's the worst that can happen?" is not a rhetorical question. “The answer to that is you could lose everything – absolutely everything,” says the senior executive leader for consumers and retail investors with the Australian Securities and Investments Commission (ASIC), Delia Rickard.

With that in mind, here's our dirty dozen – the 12 telltale signs it's a scam.

It's out of the blue
The professionalism of many scams means they can be hard to pick. But Kell says one constant is the offer will have been unsolicited.
“If you receive an email out of the blue from your bank, the alarm bells should go off,” he says.
Harrison says unsolicited communication – phone, email, letter – is a no-go area. “Any unsolicited email should be ignored, whether it looks like it's from the bank or not. They'll get back to you if they need to.”
ASIC has a blacklist of unlicensed, overseas “cold callers” on its consumer website (fido.gov.au).

It's too good to be true
The ACCC has been hammering this message home for years but it bears repeating: if it sounds too good to be true, it probably is – whether it's an investment offer, a weight-loss product or incredibly cheap, prescription-free pharmaceuticals.
“The question consumers need to ask themselves is, if it's such a great way to make money, why aren't the operators using it themselves rather than trying to sell it to me?” Kell says.
Be sceptical about tags such as “guaranteed” and “no risk”. There are no shortcuts. There are also scams where the promoter is careful to offer believable returns, because they don't want to ring alarm bells. Whether the promises are big or small, do your homework.

You must act now
Scammers don't want you to have time to make the checks that are essential, Rickard says. That's why they tell you to “hurry, invest today”. If it's a company, the first thing ASIC would suggest checking is whether it's registered. If it's offering a financial product or service, it should have an Australian financial services licence. You can search ASIC's registers at asic.gov.au.

It's exclusive
Many scams seek to attract people by colouring the deal as open only to a privileged few. People are made to feel they've been specially chosen, Harrison says. This taps into an emotional vein among those who feel they deserve something better out of life.
In the US, jailed financier Bernie Madoff was able to relieve his followers of $50 billion by building up an aura of exclusivity around investing with him. In reality, he was running a giant Ponzi scheme, where the “returns” relied on new investors contributing funds. This exclusivity may be dressed up with a sense of “authority”. The scheme may be “managed by (unnamed) Harvard graduates”, for instance (or, in our example, by an army officer in Iraq).

You have to send money overseas
Any requirement to send money offshore is a clear warning sign, the regulators say.
“A lot of scams are run from overseas and they're in 'boiler rooms' that can be closed down and moved on quickly,” Rickard says. Once the money trail heads overseas, it's much harder to follow.
The best protection is to deal only with registered companies and licensed individuals, so you have access to a recognised dispute-resolution scheme.

It asks for personal details
These days, a scam won't necessarily involve a request for money, Kell says. Scams are also about identity theft. Rather than cold, hard cash, the scammer may be trying to get information that would help them assume your persona and pass an identity check.
Apply the “man in the street” test – if you were asked the same questions by a stranger on the street, would you answer? There are more tips at protectfinancialid.org.au and stopidtheft.com.au.

It taps into an anxiety
It's not expertise, education or income that determines whether a scam will be successful but how anxious or vulnerable the target feels, says Harrison, from Deakin.
“If someone is feeling vulnerable at a particular point in time about their financial situation, they'll sign up even though they'd normally go: 'This can't be real.'”
One example is the proliferation of illegal “early release of superannuation” schemes. People are having their super stolen after rolling it into an unregistered fund on the promise they'll gain access to the money. You can check whether a fund is “complying” via the ATO's Super Fund Look Up service at ato.gov.au.

It creates a sense of panic
In the past two months I've been told that access to my (non-existent) credit union account will be restricted if I don't update my account information within 48 hours; that my (non-existent) Abbey Bank account may be suspended unless I do the same; and that the most recent payment to my (real) internet service didn't go through, and – you guessed it – I need to confirm my billing information. These emails conveniently provided a link to click. I didn't. The Australasian Consumer Fraud Taskforce's SCAMwatch website (scamwatch.gov.au) says you should never follow a link in an email.

It's a secret
“The transaction desires absolute confidentiality and professionalism in the handling of this matter,” Mr Maxwell Stephens entreats in his email about sending “investment funds” to my bank account. Well he would say that, Harrison says, because if you spoke to someone else the first thing they'd say is the plan is ridiculous.

You feel obliged
Apart from sob stories, scammers may offer “free” gifts or discounts that leave you feeling obliged when they start seeking a greater commitment. A heavily discounted holiday in return for “just 90 minutes of your time” is a sure sign there'll be some pressure selling.

The contact details are sparse
A genuine business includes its physical address, telephone numbers and registration details on its website and in any correspondence. If there's not much more than an email address, your antennae should go up. (Major Morgan, ever the optimist, uses LuckyMail.) Ask for full contact details and check them out. You can see whether corporate HQ is in fact an ice-cream parlour by viewing the physical address on Google Maps (maps.google.com.au).

The promoter doth protest too much
Scammers may try to add credibility via testimonials and biographies of people who don't exist. But it doesn't matter how many testimonials a promoter comes up with, Rickard says, the bottom line is you should do your own research.

KEY POINTS

• Scams are proliferating in the internet age and are increasingly professional.
• Identity theft is said to be the fastest-growing crime in the world.
• The ABS recently estimated nearly half a million people lost a combined sum of almost $1 billion to personal fraud in a year.
• Research shows no age group nor income group is immune to being taken in by a scam.
• The people behind such schemes know which psychological buttons to push.

Lesley Parker
September 30, 2009
Money, The Sydney Morning Herald

 


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