Q: This question came from Dave in Bozeman:
My 72-year-old mother was almost a victim to a foreign inheritance scam. She could hardly believe her luck when an attorney in London emailed her, claiming to be relieved to have finally located her, because he was administering the will of someone who was distantly related to her and very wealthy. He said the deceased had left her a vast amount of money. After exchanging a few emails, he eventually called her at 4 in the morning asking her if she was “ready to receive the money?” He instructed her to go to Western Union and wire him $350 for the transfer fee. Fortunately she balked because she just didn’t have the money. When she told me about the incident, I had to convince her that this was a scam and she was lucky she didn’t lose any money. After she finally believed me, she was ashamed of herself. How can people protect themselves these days from unscrupulous scam artists?
A: Your mother shouldn’t be ashamed, because she is hardly alone. An estimated 10 to 15 percent of the U.S. population falls for one kind of scam or another each year, according to FTC research. Studies show that the average fraud victim is between 55 and 65 years old.
The U.S. Federal Trade Commission estimates that foreign-based inheritance and lottery fraud alone bilks Americans out of literally billions of dollars a year. Moreover, the FTC estimates that more than 90 percent of lottery scams go unreported because the victims are too ashamed to file a complaint.
Elderly people are often the target of scams because they tend to be more vulnerable. Con artists know that they are generally on fixed incomes and the offer of money makes for pretty good “bait” to lure them into a scam.
To spot and avoid scams of all types, including fraudulent lotteries, “business opportunities” and Ponzi schemes, here are 10 tips from Doug Shadel, a leading expert and author on fraudulent schemes and Senior State Director of AARP Washington:
1. If anybody ever asks you to pay a fee to collect a “prize” you have won, they are trying to scam you.
2. If anybody ever invites you to play a foreign-based lottery – or tells you that you have won such a lottery – they are trying to scam you. How do we know this? Because foreign lotteries are illegal in the U.S.
3. Fraudsters will try to get you whipped into an emotional state of excitement. It doesn’t matter if the emotion is thrill, grief, guilt or anger – getting you into the emotional state is the goal. When you are in that state, you literally cannot access the rational part of your brain.
4. Do not engage in personal conversation with people attempting to sell you an investment opportunity or “process your winnings.” They will collect personal details they can use to push you into the emotional state they need you in.
5. With investment opportunities, make sure the person trying to sell you the investment product is properly licensed and registered. In the State of Montana, you can call the Commissioner of Insurance and Securities at 1-800-332-6148 to make sure the agent is properly licensed and the product is properly registered. Also, the Financial Industry Regulatory Authority (FINRA) offers a Broker Check Database at BrokerCheck.FINRA.org.
Finally, beware of investments sold by friends or members of an affinity group to which you belong.
6. Before investing, investigate and fully understand what the company does to earn the return it is promising. If you don’t know how the company makes its money, it may be a Ponzi scheme.
7. All that glitters is not gold. Never buy coins (or other investment opportunities) from a telemarketer, and never put an excessive amount of your investments in one type of vehicle – like gold.
8. Even if you meet these salespeople in person and find yourself impressed with their offices and marketing materials, it could still be a scam. If you’re bilking people out of millions of dollars, you can afford to put a pretty glossy façade on it all.
9. Learn more about how scam artists work their black magic. Read “Outsmarting the Scam Artists: How to Protect Yourself from the Most Clever Cons,” a book by AARP’s Washington State director, Doug Shadel.
10. Log onto the AARP Consumer Protection Resource Center for the latest scams and schemes at http://www.aarp.org/money/scams-fraud/
The old adage still applies today: If it sounds too good to be true, it probably is.