Financial Scams: Issue Review

Subject: Finance
Pages: 24
Words: 6520
Reading time:
23 min
Study level: Master


With the continuous technological development and the revolutionary progress of internet based communication system, life is becoming easier gradually. People are getting highest-level of benefits from the computer-based technologies, thus the prosperity in life becomes a function of technology. Besides, of the positive sides of the technology-based communication, it also has some demerits. A number of people use these technologies fraudulently for their own benefits and many people becomes the victim of its darker side. Financial scams are the most detrimental representation of this fact. Scam means earning money in an illegal way by cheating. Criminals are incessantly creating different means of scams to hijack money from public. There are different types of frauds that can take the form of telephoning, emails, mails and text messages. In United Kingdom, about 1 billion pound is stolen through scams annually. Financial scam has various dimensions like tax fraud, phishing and other types of schemes (Directgov 2009).

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Creswell & Thomas (2009) mentioned that the financial scammers produce huge return from straight-line defrauding with people and considered swindling as a high profit-generating scheme. Some scammers are encouraging to do scamming by telling their success stories. Nicholas Cosmo claimed the return is almost 48% for him annually. Daren Palmer asked for 40% annual returns. Charles Ponzi, the one of the most disparaging scammers promised a return of about 50%. The scammers are collecting millions of dollars from the investors. Financial advisers are also act like scammers but their impacts are little. The basic differences between an adviser and scammer are the legitimate power. An adviser should have a stated benchmark. When asked about the beginning market, the advisers with good intention will start with a benchmark index like S&P 500, the MSCI world index, The Russell 200, NASDAQ etc. They do this for the measurement of the performance ignoring the characteristics of the benchmark whether it is all equity, all fixed income, mixed or anything. However, to prevent the financial fraud SEC must do something and the way can be to take help from the scammers like Madoff or Stanford. This is because, people who know the scamming techniques, would also know how to prevent it (Fisher & Hoffmans 2009, pp. 49-50).

Prefect Storm for Fraud in 2008

The world has been experiencing a turmoil, which has started in 2008. It is mainly a financial crisis, which affected the whole world, largely the developed countries. Beckford (2009) argued that the continuous failure of bank and insurance companies has triggered this crisis, which arrested the credit market and persuades the government intervention. These occurrences have produced new possibilities for the criminals to utilize frauds and other financial fraud actions to cultivate financial instability (Edwards & Kantas 2009).

At Washington DC, the submission for suspicious fraud was about ten thousand in 2008 and the claims included homebuyer’s tax credit and many more. Vaughan & McKinnon (2009) argued that the fraudulent nature is stimulated by the financial crisis as the treasury department argued that the number of fake home buyers who appealed for loan were about 19,000 amounting 139 million US dollar as tax credit. The officials argued that about 74,000 tax credit claims are invalid in sense of the evidence of prior homeownership. The most dangerous fact is that, the teenage people aged bellow 18 are also involving with these sort of frauds and treasury officials identified about 500 of them including a 4 year old child. Authorities are strongly trying to thwart these sorts of fraud as it makes the turmoil situation more vulnerable. The authority is now issuing criminal fraud charges against the tax preparers. Besides, the IRS is examining more than 100,000, who will have to pay civil penalties. Authorities argued that in this financial crisis, the lack of safeguarding techniques including need of appropriate documentations are interrupting the prevention of financial frauds. However, the government rules claim that, the home buying characteristics like preferring the first time homebuyers can be effective against the fraudulent circumstances (Vaughan & McKinnon (2009).

Creation of Opportunities for Fraud by Financial Crisis

The credit crunch and fall down of the US sub-prime money market as well as recession has been seriously injured the US economy. The corresponding effect of US sub-prime mortgage market has influenced the international financial markets and spread out the liquidity trap and comparable financial dilemmas to Europe and later on Asia. Many banks and companies have collapsed due to global financial crisis and they want to recover by getting support from the government. Sometimes it creates a field of fraudulent activities, for example, to pay the salary of the directors, they asked huge amount from the government. The financial crisis created lots of unemployment, which increased their tendency to adhere with various types of fraud occupation. The Association of Certified Fraud (ACFE) examiners stated that this turmoil costs about 1 million dollar for the fraudulent occupational schemes. Javier (2009) argued that the economical effect of this financial crisis averts the government to spend less in anti fraud measures. For these reasons, the criminals are getting freedom to do deceptive activities. Besides, people, being irrespective of their money, and can be convinced to invest in various schemes rather than to save or invest it in bank. These give the chance to the criminals to inspire the people to invest with their falsified schemes (Javier 2009). Arthur Nadel held that, the return is 11 to 12 percent monthly as the beneficiary of the recession of 2008.

To Get the Point of Financial Crisis by Fraud

Fraud consists of three conditions, generally expressed as “Fraud triangle”. These are:

  • Opportunities
  • Rationalization
  • Incentive

The present economic crisis has certainly created the opportunities to accelerate fraudulent acts (Javier 2009). Rationalizations for the fraud in the crisis are the assurance of the criminals that in this crisis they are not doing any wrong rather than helping the people. Rationality, in the people’s prospect is that, they are trying to ensure the safety of their money. Incentive is the cost of the fraud, which stands as a loss for the people but earnings for the illicit (Javier 2009).

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Trends of Financial Fraud and Way of Avoidance

Major trends of comprise the financial frauds are:

  • Exploiting Channels: ENI Enterprises (2009) reported that businesspeople, who have not had well designed their business to save their monetary transactions like checks, are mainly the victims of destroyed channels by the fraudsters. The popularity of Bank office conversion and remote deposit capture is the cause for these types of threats.
  • Mortgage Fraud: the fraudsters are now massively using foreclosure and bailout scams. People, who are virtually ready to face a loss from the mortgage, easily become a victim of these types of fraud (DFC 2007).
  • Call Centre Fraud: Vaughan & McKinnon (2009) argued that fraudsters are now looking for the means, which have least resistance. They are trying to avoid the sophisticated detection systems and biometric technology like voice authentication, which is becoming a key prejudicial area for them.
  • Check Scams: Check scams are a fraud means, which is used by the fraudsters for long time. In the present downturn of the economy these type of fraud is increasing rapidly.
  • Insider Fraud: In recent years this types of frauds have amplified. Theft of valuable assets like money, merchandise, supplies, trade secrets, and valuable data are increasing with the worsening of the global financial conditions.
  • Financial Statement Fraud: To avoid sharing profit with the shareholders and to avoid the tax, many organizations have fraudulently falsified their financial statements.

First, the separation between the decision maker and the custodian is important. To do that one have to make sure that the question regarding the identity of the custodian has asked to the adviser of the decision maker. Fisher & Hoffmans (2009, pp. 49-50) argued that another important thing is to make sure the custodian is large as an institute, well known in the market and actually is a deep pocketed firm which has 24/7 internet access. Finally, for this, the assets have kept in a separate account in the name of the asset owner. On the other hand representing as too good, true, and honest is usually can be another advanced technique of fraudulent manner. To ensure that this does not occur, the asset owner must ask his manager about the benchmark and check the historical use of the benchmark. Another way is to ask the advisers for the pictures of the bad days of the benchmark. It is necessary to ask the adviser to explain the performance discrepancies from the benchmark. It has kept in mind that the possibilities to have a record close to or beating long-term equity averages can be positive every year. Consistent positive return and similar annual return is a matter of suspicion. Thirdly, avoiding flashy techniques could be another way. Fisher & Hoffmans (2009, pp. 49-50) stated that to do that one must make sure that he has better understanding on the investment goals making them very straightforward. Demanding clear explanation about the investment strategy and making sure that the strategies fit with the advisers’ claimed performance. Extra efforts have given to make clear the strategies and tactics. Fourthly, ignoring exclusivity, like marble and other things that do not count is another way. If a manager claims for exclusive strategies, one must try to avoid it, as investing minimum is enough. One should avoid the tendency to rely on only the reputation, as reputation provides no warranty.

No one should give an adviser any pass from the affinity group and the final approach should be preventing any other entity to enter fraud between the asset owner and the decision maker. To ensure that SEC registered advisers will hire by checking out the ADV form can also be helpful when the funds of funds and feeder funds have to avoid. Fisher & Hoffmans (2009, pp. 49-50) stated that it is not wise to pay the advisers at the initial stage. It would be effective to check the hired adviser through the references.

Other supplementary avoiding techniques can be:

  • Knowing the person or entity with whom the deal is occurring
  • Concentrate on the billing cycles
  • Highest possible security arrangements for the personal information
  • Avoid impossible claims
  • Appropriate and reliable paperwork

The Ponzi scheme

About Ponzi scheme

This fraudulent scheme has named after Charles Ponzi, which is a type of illegal pyramid scheme. In a pyramid scheme the initiator, make money by recruiting new participants in the program. The scheme offered high returns in a very short time without doing anything. The initiator is a fraudster who does everything possible to give a look of a legitimated body. The fresh money generated by new victims has used to satisfy the older participants. The Ponzi scheme followed this technique. The scheme has designed for the English people in the year of 1920s. This scheme persuaded the England residents to invest in a postage stamp, which was a speculation method. Its basis was the difference between the US and foreign currencies, for which the scheme had been a mean to buy mail coupons and then sell it. The offer was 40% return in just 90 days where the banks were offering only 5%. SEC (2009) argued that people usually found this scheme attractive and started to invest rapidly. In addition, using the principle of pyramid scheme, the older investors earned a return from the newer investors, which was termed as “rob-peter-to-pay-paul”. SEC (2009) stated that after continuation of the scheme for one decade, the scheme collapsed and the fraudulent nature of the scheme spread out.

Charles Ponzi

The most well known swindler in American history, Charles Ponzi was born in Parma, Italy in March 3, 1882. He was so cunning in mind and slick in speech that he motivated people quite easily. He was associated with investment fraud for his Ponzi scheme, which promised an extreme level of investment return (NW travel magazine online, 2009).

Coming to America & finding the Old Colony Foreign Exchange Company

Ponzi moved to United States from Italy in November 1903 when he was 21. In the next 14 years, he roamed from one city to another to find the simplest way to become rich. In this time, he worked as waiter, dishwasher, clerk, and Italian language translator. In 1917, he settled at Boston with a work of typing foreign mails. He worked honestly, for two years there and after that, he suddenly got the idea of the Ponzi scheme. In the mean time, he married Rose. In December 26, 1919, he established the security exchange company.

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Big Hit of Charles Ponzi

The propaganda of this firm was up to 50% return of the amount invested in just 90 days. People started to buy the Ponzi promissory notes offered by the company and the average investment was $325 ranged from $10 to $50,000.

The fall of Charles Ponzi

Ponzi played his game very smartly but the only mistake he made was the underestimation of the public sentiment and the affordability of the media. It was almost transparent to the people by the media that Ponzi is making almost 200% profits. Another mistake was the grand scale monetary dealings, which make the government concern about him. He migrated to Florida to introduce new schemes and then fled to Texas where he was arrested and sent to jail.

The Aftermath

After the end of his imprisonment, he went to Rome and became a translator of English. Here Benito Mussolini offered him a position in the Italian airline and went to Rio de Janeiro. He made his position profitable by taking share of smuggled currencies through airline carrier. He died in 1949 at the age of 67 there.

Bernie Madoff

Bernie Madoff was another fraudster in financial area. He was a financier and the Chairman of NASDAQ stock exchange.

Early Carrier and Warning Signs: – He was born in April 29, 1938. In early ages, he was a lifeguard and sprinkler installer. After several years of study, he founded Wall Street firm Bernard L. Madoff Investment securities LLC in 1960. He associated almost all of his family members with business and he figured a third market provider, which has the duty to bypass exchange specialist firm as legal (Creswell & Thomas 2009).

Zenith of Madoff Securities in 2000: – Bernie Madoff offered the biggest Ponzi schemes ever and it was $50 billion dollars. Through the access over the top lawmakers and regulators in Washington, Madoff and his family members fraudulently gave money to Securities industry and financial market Association. His Ponzi scheme became a matter of suspicion in later 1999 and SEC ignored him in 2000 (Gandel 2009).

Redflags: – After the suspicion on his company, the SEC was starting to act against him because of the information about the unusual nature of his profit generation. Scannell & Strasburg (2009) argued that in 2003, SEC opened an agency memo to focus on trading practices of Madoff. SEC inspected and found him guilty of the offence and had imprisoned him in December 11, 2008.

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The Final Weeks and Crash of Madoff Securities: – Madoff has declared guilty in the trial and after that, the Madoff securities experienced a crash. Investors, who invested with Madoff scheme, lost their money and consequently the Madoff investment scandal ends. The internal watchdogs of SEC are reporting against this Ponzi Schemes of Madoff (Lynch 2009).

The Aftermath & the Victims: – Maiello & Serchuk, (2008) stated that the Chaise Family Foundation, a charity in California, had shut down, because of the exposed assets to Madoff, as well as many other institutions. In June 2009, he was sentenced imprisonment for 150 years, which is actually a life sentence. In the sentencing trial, he begged pardon to his victims (Lenzner, 2008).

Ways of Protection from Bernie Madoff Fraud

SEC and many other organizations are seriously thinking for the redemption of the victims of Madoff fraud. The ways of protecting people from this fraud includes centralizing the investment option and avoiding the suspicious options. SEC and many other organizations are helping investors with advice and assistance to prevent the investors from becoming a victim.

Stockbroker Fraud

According to Smith & Edwards (2009), Stockbroker fraud is a type of financial swindle done by the stockbrokers. The activities which can be termed as stockbroker fraud comprises theft, lying, dishonesty, churning, unauthorized transactions, unsuitable investments which a stockbroker do for the sake of greed, incompetence and negligence or any other types of wrongdoing and common forms of stockbroker misconduct. According to the securities exchange act of 1934, section 15 a, Congress approved the existence of some self-regulatory organizations such as New York Stock Exchange and American Stock Exchange. Stockbrokers act as an intermediary between investors and these types of organizations. The deceitful activities by stockbrokers can keep pressure on the capital market and so these SROs have the primary responsibility to hamper it. Smith & Edwards (2009) said that there are many incidences of stockbroker fraud. Recently, United Kingdom Financial Service Authority censured two Dresdner Kleinwort traders for market abuse. Darren Morton was one of them who accessed illegally to the Barclays flotation rate bonds and collected inside information to sell it to the traders in the stock market. Christopher Perry bought the information from him and after that; these two men sold the entire holding of a portfolio containing $65 million of Barclays in the day when a new issue has announced. As a result, the counterparties lost almost $66,000. This is a type of stockbroker fraud though the two people did not earn any money from the incidence. Another broker who has barred by the Financial Industry regulatory Authority was Sergio M. Del Toro. He worked for an elder person aged 90 and the fraud amount to be a half of a million dollars. In between 2004 and 2006, Toro advised the elderly person to invest $511,000 in a speculative development-stage company named third dimension Inc. Later incidences provide about $76,650, which the broker gets with his wrong advising. Toro had no logical valuation methods for the stocks and thus it can be called as a stockbroker fraud.

To Spot Possible Fraud by Stockbroker

Stockbroker Fraud is an illegal means to conduct by the brokers, which consist of theft, falsifying, and churning, unauthorized transaction, and improper investments, which mainly results from greed, negligence, and incompetence by stockbrokers. There are of various means:

Flashy Tactics with Unclear Investment Strategy

In this type of strategy, the stockbrokers prevent themselves from making the investment options, outcomes, and probable risks clear to the investors and thus get monetary benefits. The stockbroker makes profit by getting commissions on every buy and sell of stocks. In the mean of churning, the stockbroker can acquire higher commission. To make it transparent, not all the record is possible and the stockbroker can take this chance to engage in excessive trading and in large amount of omission gain. Larson (2004) argued that if the stockbroker has more authority, it becomes difficult to identify the invested money and the amount of money traded.

Too Good Returns to be True or to Constant

Sometimes the stockbrokers lie to the investors about good return of an investment, which are most of the time not true. Inconsistent investment thus gives the broker the chance to enjoy the outcome of the investment. Unsuitable investment means the advice of the stockbroker for the investor in a stock, which is not suitable for the investor, and the stockbroker is well-informed about the miss match. This conduct actually depends on the situation. For example, a stockbroker may ask for investing in a high-risk stock to an older investor who does not need to do this. Many brokerage firms push some stocks and persuade the clients to buy the stocks (Larson, 2004).

Exclusivity of Investing with Stockbroker

Many times the stockbrokers expressed themselves as impressive in having appropriate approaches of investments. They expressed the opinion about a rise of a stock within a certain time and expressed opinion about buying a stock, which now has low price. However, as stock market is completely unpredictable, most of the time, these fraudulent activities never get pace. Again, the diversified portfolio that is to invest in different types of company’s stock ensures investor’s benefit. This will help when one sector collapses but the other enjoys augmentation. The profitable one offsets are loses by the collapsed one. Many broker fraudulently recommended investing in the same sector of the market, which brings the excessive risk of loss. One more form is misrepresentation. When the broker fails to inform the investor about the material fact of investing in a possible high profit bringing stock, it can be also treated misrepresentation. Many brokers suggest the investors to invest in the house stocks. This fraud has expressed as touting. In this case, the investor invests in a low value stock, which was a part of an investment scheme that would provide small or almost no profit (Larson, 2004).

Custody of Stockowners Assets in Care of Stockbroker

Many times the stockbrokers misuse their right to keep the custody of the assets of the stockowners. They mortgaged the assets or rent the assets and enjoy some extra money. In such cases, the stockowner has no idea about what the stockbroker is doing as the ultimate power of attorney that he has given to him. Again, in many cases, the broker ignores or down treats the direction or suggestion of the investor. The extreme level of this sort of fraud is to steal money from the account of the investor by formulating a false incident of loss and to invest money to cover the loss (Larson, 2004).

Ways of Protection from Stockbroker Fraud

There are some rules and regulations, which will protect the investors from the stockbroker fraud. The organizational regulators examine the security industry and when they find anyone guilty, they put fines and suspensions. For this, the stockowners have the way to claim for the recovery of their lost investment. Here the stockowner has to work with experienced attorney and the attorney has to fight for him. There are also provisions for the securities arbitration. Besides, appointing the appropriate adviser or stockbroker is also important. The stockbroker must be the person who has the same interest as the investor. On choosing the correct stockbroker, the investor must consider some factors. Firstly, the investment allocation is one of the most important decisions. To make the appropriate broker to work for the betterment of the investment the investor must identify the person who really deals with the investment. Then the allocation of investment must analyze on market views or the needs. The frequency of the portfolio allocation should also measure. Secondly, the forecasting capability of the stockbroker must assess. Thirdly, the investor must prevent his stockbroker to invest the money based on the principle of equity. Fisher & Hoffmans (2009, pp. 49-50) argued that the investor should ask the broker about the equity style, stability of the equity mix, responsible persons to make equity decisions and market assessment. Finally, the interest of the investor has to align with the interest of the stockbroker.

Identity Theft

Identity theft means using the identity of another person or entity to get some benefits. Finklea (2009) defines Identity theft as a way of transferring, using, or possessing the identification of another person without any lawful right with the intention to commit, act, or assist or to stay in association with any unlawful, illegal, or immoral thing that has opposed by public policy or that violate any Federal or other government or local law knowingly.

Problem of Identity Theft

When a fraudster uses the identity of another person, then the actual identity holder fails to attain the benefits. Thus, the fraudster can use the identity to do illegal activities and can avoid any means of punishment, as the law will victimize the actual identity holder. When the actual identity holder will need to use the identity, he or she cannot do this because of the fraudster’s misrepresentation.

Credit Card Fraud

The primary fraudulent activity of stolen identity is credit card fraud. The fraudsters may change the billing address, which will give them the chance to use it for more days as the actual cardholder cannot get any information about him. Consequently, the victim fails to receive the bills and so, the credit card bill starts to increase which will keep his account balance in pressure. These will not only affect the present credit condition of the cardholder, but also setback his/her future appeal of credit.

Bankruptcy Fraud

Bankruptcy fraud is a kind of fraud where the theft of the identity of one person becomes the cause of his bankruptcy. Many identity thieves use the identity to get money from the bank and when the identity holder claims the ownership, they show the identity accumulation and make the identity holder a victim. In many cases, the use of the identity mounts up the bankruptcy of the victim and s/he has to declare as a bankrupt.

Loan Fraud

Many fraudsters steal the identity of a person and use it to get loans from the banks. Here, the offender uses the goodwill of the victim and get the chance to avert from repaying the loan. These consequences results in the punishment of the victim while the thief enjoys any amount he needs.

Protection of Identity

According to Abagnale (2007), there are twenty different ways to get protection from identity thefts, which are in below:

  • To Check Credit Report: – One effective way of prevention of stealing identity is to monitor credit in regular basis as self-protection techniques. To protect against identity theft, a successful program was developed in 1995, known as PrivacyGuard, which is still used by largest banks’ in present day, like Bank of America, Wells Fargo, Citibank, Key Bank, J.P. Morgan Chase, U.S. Bank and also more than 7 million people in worldwide.
  • To Protect Social Security Number (SSN):- Without any confidential need, like in payroll department and bank, the Social Security Number has to protect from thieves, by not giving anyone this number in any irrational requirements.
  • To Protect Computer: – In present days, Laptop computer is a most precious tool, which has protected from the dark sides of web used by thieves. Everyone must emphasize on encrypted services rather than signal strengths that uses any unsecured wireless connections. Furthermore, on avoiding these thefts, virus protections play a useful role and updating it on regular basis is essential.
  • To Keep Tracking in Billing Cycles: – When a user has faced a missing bill, than it is certain that, thief has changed the address of user of credit card or Mortgage Company. Many people are keeping a file to gather bills of every month in swoop or batches.
  • To Examine Financial Statements: – When credit card statements arrive, the users must ensure about all the buying information. Most of the credit card users are giving less importance to calculate the purchase amount and paying the amount. Therefore, the users must check the statements of banks to find the errors and the frauds of the credit cards preventing the crimes.
  • To Guard Mail: – People have to keep a practice of picking up mail when it is delivered, or otherwise well intentioned thieves may take it away, if the mail box is not locked. If the users are living in an area where crime records are high and are going for vacations, then they should take extra safety measures in post office box.
  • To Invest in Shredder: – Shredder is an important machine, which is shredding all documents before placing them into garbage, like bills or papers, which is containing personal information, SSN, and financial account numbers.
  • To Practice Safe Shopping: – many people prefer internet shopping because of having an assortment of facilities to shop at home. However, it has the dilemma identity thieves, who can filch the credit card numbers. There are some safeguards against internet shopping, like to shop only from secure sites.
  • To Avoid Sketchy ATM: – Not all ATM are same as their looks, some of these ATM has a cord protruding from back, which has not plugged in. Some ATM also has blank screen message, which should not be in use. Only secure and real ATM of banks should be in use.
  • To Be Suspicious by Unexpected Calls/ Letters: – When any business calls or e-mails and asks for personal information, then it is obviously point of suspicions. Because, nowadays, every bank and financial operations are concerned about the privacy of users with professional calls or official emails.
  • To Put Real Passwords on Accounts: – In present days, every person has lots of passwords for bank accounts, ATM, brokerage accounts, e-mail, cell phone, work computer, home computer, and so on. For this reason, people are using short and simple combinations, which can be easily remembered and not appropriate for government secrets. Therefore, smart solution for this problem is to use one strong password for multiple applications.
  • To Keep Credit Card Closer in Shopping / Eating out: – in a store or restaurant, where sales persons can be skimming or copying credit cards, the users must be careful in handling credit card.
  • To Use Safe Checks and Use Sparingly: – Checks should always take from banks, because it has fraud protection features, like watermarks, thermo chromatic ink, light sensitive ink, and fibres. In addition, users should also encourage writing few checks, or to use credit cards in more safe and less vulnerable places.
  • To Secure Home Front and Office Front: – People should store information like Social Security Card, passport, credit card statements, tax forums and all records that are more valuable to identity thieves in non-obvious locations, rather than keeping those in desk drawers that will be easier for thieves, like electrician, dishwasher, repairman, or other guests to access in office or home.
  • To Carry Needed Things Only: – Many people are habitually taking their SSN in wallet everyday, which is not at all necessary. It is wise to keep those at home in a secure place. If the wallet is lost or stolen, then it will stand as big loss for them. People must also have to keep photocopies of those SSN.
  • To Clean Credit Cards: – If any credit card is not used in regular basis, then it is better to cancel it, because more credit cards opens more opportunities for identity thieves. Therefore, it is important to keep important cards, like business credit card, or personal credit card, in not more than two in number.
  • To Opt out: – The annoying calls from direct marketers, or junk mails and spam, which come on daily basis, can open opportunities for thieves to steal personal information from marketing lists. Therefore, unexpected offers can be opt out to safe information.
  • To Read Privacy Policies: – Everyone is getting private policies in mail all time, but they are just skipped as junk mail. However, these policies are truly worthwhile to read, as those are essential for understanding banks, financial institutions and other businesses and restricts to being available to all.
  • To Protect Deceased Relative: When any person dies, most of the thieves try to cheat most of the identifications of that person to occur any possible fraud with credit cards. Therefore, it is important to notify credit bureaus about the deceased by the relatives by providing death certificates.
  • To Place Fraud Alerts on Credit Reports: – People should contact with credit bureaus to place alerts for unwanted open account with their names, which is free services for ninety days.

Fraudulent Charities

There are many charity funds, which are false and have no connection with charity. Some of them are:

9/11 Fraudulent Charities

In the terrorist attack on the World Trade Centre in September 11, 2001, more than 2,750 people had died within a moment. As a result, many families lost their man of earnings and many lost close relatives. For their better future, many organization opened charity funds from where the affected people got monetary help. These funds have no inspective action to identify the appropriate claimers and as a result, many fraudsters asked for monetary help saying that they have lost their close ones in the attack on WTC. Shine (2006) stated that besides many fraudsters open accounts and appeal to the people for giving money to their funds, which had enjoyed by them rather than to spend on the victims.

Hurricane Katrina/Natural Disasters Charities Fraud

Whenever any natural disaster occurs, many governmental and non-governmental organizations establish funds to help the effected people. The same incidence occurred when the devastating hurricane Katrina occurred. Many websites claim money and addressing themselves as the legitimate fund holder for the help of Katrina victims. The victims had relied on their advertisement and help the Hurricane Katrina affected people by these websites. Unfortunately, most of the cases the organizations were fraud and Hurricane Katrina affected people did not get the money of the victims so these organizations also cheated with Hurricane distressed people.

Religious Charities Fraud

Religious people love to spend in the way of God. Many organizations get fraudulent benefits from these religious aspects of the people and demands money for religious proclamation. For example, many fraudsters claim that they are building a church or mosque by the name of Jesus or other religious person and for which they need money. People who love Jesus donate huge amount of money and the fraudster keep almost all of the money for themselves.

To Give Money to a Legitimate Charity

To prevent these types of frauds the most effective way is to donate to the charities because these are famous to the donor. Another way is to find legitimate literature from the donation claimer, which will ensure the accuracy of the fund. It is also effective if people avoid the door-to-door solicitors.

Reloading scams

About Re-loaders/ Double Scammers

Reloading or double scamming is one kind of fraudulent activity where the victim becomes the victim of the fraudulent activities repeatedly. According to the report of Federal Tread Commission, reloaders have used numerous methods to cheat the same victim, for example, phony and uses prize incentives are two well-known methods. In terms of promoters, double scammers demand payment urgently from the victims through credit card or asked checks by courier. However, after receiving the goods by the victim, they realize that they overpaid for the low quality goods (Worldlingo, 2009). As a result, FTC (2009) suggests the consumers to protect them by developing consciousness, such as, FTC requests to the consumers not to send money before inspection of the product. FTC (2009) further argued, consumer should ask written information and they should not believe vague phone callers who introduced themselves as member of government agency.

Phony Government Official Scam

Many websites claim that they are government organizations and have the authority to get the personal information or recover money, such as, if a victim lost money for first caller, then second caller offers him to recover money from first one as they are government officials but both callers are working for same fraudulent company. These fraudulent websites mainly operate to get personal information of people and use it for identity theft related fraud.

Foreclosure Rescue Scam

Homeowners always have the fear to lose their ownership of the home. FTC (2009) reported that many so-called foreclosures rescue companies claim they can help to protect the home and other assets and after getting all necessary information from the anxious homeowner, they become the claimer of the home. Sometimes they asked huge amount of money with money back guarantee but after giving the money, homeowners cannot locate them as they leave the place. These types of rescue scams are also occurring in many other sectors besides the assets. In addition, buyers of worthless stock frequently offer with a scheme to the bankrupt firms. Worldlingo (2009, p. 1) argued, the victims persuade to save the unique investment to donate so much per share. Thus, the Re-loaders victimize the investor with his unique money with a bad investment.

Fictitious prizes

Some re-loaders use scams to attract victims by offering some prize incentives. Worldlingo (2009, p. 1) explained that they convince the victim to continue with their merchandize buying and offer that the victim will be given a prize. After the first time buying the scammers further contact with the victim and offer another big amount as prize rather giving the prize of first claim. This fictitious sort of prizes help the scammers will large amount of sell while providing huge loss for the victim.

To Bleed Dry the Victims for Longer Period

Re-loaders or double scammers use the benefit of the feeling of insecurity of the people and victimize the people with identity crisis, information theft and in many cases, which make the victim a bankrupt. The Reloaders do not end the process by cheating one time and they continue their activities for longer period.

To End up Losing of Winners

Double scammers sometimes send a winning message through the internet to the people saying that you have won million dollars and request to confirm the message. By clicking on the message, the victim sends their confidential information without having any prizes. These consequences are losing of many valuable data for winning something. In addition, scammers may use this valuable information to cheat large amount money because they know bank details and personal details. Worldlingo (2009, p. 1) expressed that they have the opportunity to use bank details or credit card details for committing big fraudulent activities. However, offering fictitious prizes is another form of fraud, as victims never get the prize though they buy more and more things to get the prizes.

Ways of Protection from Double Scammers

Avoid any unusual offers or prizes can help to protect from the double scammers. Before clicking or going to any website proper knowledge should gather about the site can also help to prevent reloading. The federal trade commission of USA along with the other government agencies alert the people to become aware about the people who are claiming to work for different companies, consumer organizations and government agencies, which related with the money recovery against some fee (FTC 2009). In addition, people should not give bank details, personal information and they should unsubscribe the winning messages.


Fraudulent activities are getting new dimension and advance features with the development of the technology. To prevent these frauds, many actions have already taken but new threats are spreading everyday. Hacking, cyber vandalism, and many other cyber crimes keep questioning the proper functioning of advanced cyber world. In case of financial frauds, these are getting new dimensions. It is now possible to transfer money from one person’s account to another person by hacking. Thus, cyber terrorism is getting importance continuously. The government should take proper and immediate steps to protect the people from these sorts of threats. However, the citizens should also help the government by developing their consciousness and following consumer protection acts.


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