My grandfather fell victim to a “boiler room” confidence scam. The “stock-broker” called him up, pitched him a stock, which he bought, a few months later, after the stock was worthless, he sent my grandpa some paperwork and said, fill out this paperwork and you’ll get your money back. Sure enough, grandpa filled out the paperwork, and a few weeks later a check arrived for the full amount of the investment he lost. The man who handled this transaction garnered immediate trust from my grandpa. A few weeks later, he called and said, I can’t work for this disreputable firm, I’m going out on my own. He then offered to “let” my grandpa invest in his newly formed brokerage firm, and my grandpa didn’t hesitate. At this point, he completely trusted this man and invested a significant amount of money.
Grandpa was so proud to be a part of this new venture and went to the “headquarters” to check in on his new investment. When he arrived at the building, there was nothing but plywood tables and phones, like a scene in a movie. The man he trusted was surprised to see grandpa, but recovered quickly and said, look up there – we’re leasing the top floor of that building, but it’s being renovated. Grandpa believed everything he said.
Sadly, a few months later, the man stopped returning his calls, and a few months after that, when my grandpa finally got ahold of someone, she said, “I’m sorry to tell you that all your money is gone. He spent it all. There is nothing left.” My grandfather was devasted by this news. He trusted that man, believed in him, and he was shocked and saddened and I’m sure he felt betrayed.
I’ll always remember that story, because my grandfather had so much pride and joy when he talked about his initial investment. He felt so fortunate to be in on the “ground floor” of what he was sure to be a wonderful investment, in an industry that he loved.
My grandfather was a smart man, hardworking, and cared for his family. He worked full time for the city and also owned and operated a fish & chips restaurant by the beach. He didn’t do anything wrong, there was no lapse in judgement or flaw in his character. He wasn’t senile, or diminished in any way. I always thought, if my grandpa could fall victim to a scam like this, then anyone could become a victim.
Over the many years since that incident, the scams continue to evolve and become more sophisticated. Recently, I came across a situation where a person was a victim of multiple scams. It broke my heart to hear what they suffered through and that’s what prompted this article.
In the wake of the Covid-19 pandemic, when the world was forced to move inside and online, internet scams have become even more prevalent. Awareness of online scams is essential to be able to protect ourselves. It’s our belief, that having as much information possible is your best defense. Here’s what we’ll cover:
- Common Online Scam Scenarios.
- Why They’re So Successful.
- Protecting Ourselves from Scams.
- Things to do if we become a Victim of a Scam.
Common Online Scam Scenarios
Here are some of the more popular scenarios that scammers are using to get their hands on our financial information and possibly our money. Let’s take a look.
Inheritance or Windfall - Transfer Tax Scheme
The transfer tax scheme is popular because cybercriminals will typically approach us with a large sum of money from what appears to be a legitimate source, usually providing us with very cleverly done, legitimate looking documents. It’s important to remember that before coming in contact with us, they likely already know a few important things, like our name, address, and phone number. Further increasing the illusion that their story might be real.
For the transfer tax scheme, you’ll be asked to pay a transfer tax on the sum you’re meant to receive, and that fee must be paid before the money is transferred to you. If someone contacts you claiming that they have a large sum of money that belongs to you, such as an investment or inheritance, and you have zero knowledge of its existence prior to this moment, then it’s most likely a scam.
The Lottery Winner Scheme
It’s vital to keep in mind that those who scam do so for a living. They are incredibly convincing.
The lottery winner scheme will involve someone contacting us, claiming to represent a recent lottery winner, who doesn’t need the money and who’d like to enrich the lives of others by donating all or a portion to us! They’ll likely have detailed information regarding recent lottery wins as well. Similar to the tax-transfer scheme, you’ll be asked to pay a transfer fee in order to receive the money.
The Romance Scam
This one breaks my heart because there is so much more involved than money. The romance scam is not always as easy to spot as some of the others. We must be careful of who we “meet” online, this includes online dating apps, chat rooms, games, and social media.
If someone is showing romantic interest and they ask us for money, hit the brakes. Even if we’ve spoken to them every day for months and we think we know them, we need to really be careful in this situation. Human beings genuinely want to see the good in everyone, which makes this such a hard one to spot.
The Grandparents Scam
The grandparents scam works like this; we’ll receive a phone call from someone who says “Grandma” or “Grandpa” in a shaky voice. When we say “Joey? - Is that you?” They’ll respond right away with “Yes, it’s me.” They’ll pretend they’re in jail or some other dire situation where they lost their phone and they’ll say they really messed up and they need some money right away to straighten things out and, please don’t tell my parents!
If this happens, hang up immediately, and call your grandchild directly. You’ll be so relieved when you hear their actual voice and realize they’re OK!
Phone Call Scams
Phone call scams are an ever-increasing problem. Typically, they’re claiming to be the IRS or an employee from our credit card or utility company. In most cases, they’ll ask us to verify our identity to prove that it’s really us on the phone, and then they’ll have our sensitive information which they can use against us after we hang up.
The FBI Scam – Following up on a Previous Scam
This one gives me chills! The FBI Scam is a common follow up to other types of scams like the Romance Scam or the Lottery Scam. Let’s say we’ve been taken in and given someone some money, but we now realize that it was a scam, and we break off all communications.
A few months later, someone will call, pretending to be with the FBI and they’ll inform us that they’ve recovered our money. At first, we’re excited and so relieved, but then they inform us the money is located in another country, and we’ll have to pay to get it back. Arghh! Insult to injury that one is!
The Success of Online Scams
These types of scams are very prevalent and extremely successful. As I mentioned before, anyone, at any age and level of intelligence can be taken in. They usually begin by establishing a relationship with us and gaining our trust.
Scammers often have legitimate looking documentation of whatever situation they’re presenting us with. This can be very convincing and appear to be rock solid. A woman I knew “loaned” money to a friend who was being taken in by an inheritance scam. She said she saw the paperwork firsthand, and she was convinced it was legitimate. Well – no – it wasn’t! Sadly – her friend never repaid the loan!
Once we realize we’ve been scammed, we might feel silly, embarrassed, or ashamed. We might fear what our friends and family will think. It can be very difficult to talk about, but it’s important to do so.
Protecting Ourselves from Scams
Here are a few things we can do to protect ourselves, if we feel that we might be involved in a scam or similar situation:
- Involve a family member - Before we give money to someone that we’ve met online, it’s a good idea to run it by a family member or a close friend and see what they think.
- Run it by a Financial Advisor – In our industry, financial advisors receive a ton of continuing education on this and similar topics. Your advisor would be more than happy to look at any of these types of situations and see if it raises any red flags.
- Watch out for Email Links - One of the common tactics for scammers is to make their email “seem” legitimate by looking like it’s from a person or business we know and trust. It might have a friend’s name as the “from” person or a recognizable businesses name embedded in the email address.
- Utilize Your Voicemail - Better to let calls from unknown numbers go directly into your voicemail. There’s no need to interact with a professional scammer. No need to let them record and manipulate your voice. If it’s a legitimate call, you’ll know when you listen to the message. If it’s a scam, block the number on your phone.
Things to do if we become a Victim of a Scam
- Cease communications - First and foremost, cease all contact with the person we suspect is a scammer.
- Change our phone number - While this process can be a pain, it’s an effective way to step away from unwanted solicitations.
- Change our email address - This is also a daunting undertaking, but it’s a good way to stop scammer communications. Consider signing up for multi-factor authentication with your email provider if that’s an option.
- Change our passwords – Do this right away if we suspect we’re involved in a scam. Even if not, it’s a good idea to change them periodically anyway!
- File a police report - Getting the proper authorities on the case as soon as possible will bring us peace of mind and will be asked for by the credit reporting agencies if something is on your credit that doesn’t belong.
- Tell a friend or family member – If it’s already happened, and we haven’t told anyone, now’s the time. We might feel some embarrassment at first but having the courage to speak up is a great step forward.
- Put a lock on our Credit Report: There are three credit reporting agencies, and it’s a good idea to let them know and put a lock in place. We can also sign up for a credit monitoring service as well.
- Tell our Accountant, Attorney or Financial Advisor – Getting a professional involved will ease the burden and help us get through this situation.
Remember, this can happen to absolutely anyone, so please don’t be embarrassed if it happens to you. Please let me know about any situations you be aware of, or anything I didn’t cover. I plan to write about this topic frequently, and hope that in some small way, helping create awareness will also help you protect yourself against fraud.