All year round, it is important to be aware of potential scams. As we become aware of scams that might affect our members, we will post alerts to our website. Please be careful as there are many scams that are occurring both by mail, email, phone and text message.
Remember: If it sounds too good to be true, it probably is. Con artists work hard to get their hands on your money and your personal and financial information.
To help reduce the risk and protect you, here is a list of potential scams and security breaches along with tips to be safer and smarter.
- Money-Making Scheme Targets Older People and Veterans
- Voicemail from an IRS Imposter?
- The IRS Doesn’t Want Your iTunes Cards
- NCUA Warns of Text Phishing Scam
- Vishing scams are on the rise!
- “Masque Attack” iOS Vulnerability
- Telephone Fraud: “Vishing” Alert
- “Spear Fishing” Hacking Alert
- Automated Phone Call Scam Targets Debit Card Accounts
- Targeted Tax Day Phishing
- Secret Shopper
- Telemarketing Fraud
- Nigerian Letter or “419” Fraud
- Advance Fee Schemes
- Health Care/Insurance Fraud
- Redemption/Strawman/Bond Fraud
- Investment-Related Scams
Money-Making Scheme Targets Older People and Veterans
If you’re just getting by, and someone offers you the chance to earn more money through a business opportunity, you might be willing to listen, right?
Unfortunately, those offers often turn out to be just another scam. The FTC announced charges against three people and multiple companies behind a telemarketing scheme that targeted older people and veterans, and took millions of dollars from people with promises they would multiply their investment.
Here’s how it played out: Doing business under names like “Titan Income,” “Wyze Money,” “Prime Cash,” and “Building Money,” telemarketers called people about an “opportunity” to participate or invest in e-commerce websites. The callers said people would earn a hefty income sharing in the revenue from the sites. They even said it was “risk-free” and promised a 100% money-back guarantee.
For a few months, the scammers made it seem like everything was going according to plan as people awaited their first earnings payment at the end of the quarter. During that time, some people who initially paid hundreds of dollars were convinced to pay thousands of dollars more to increase their return. The company even helped people move their now-huge credit card balances to new accounts with temporarily low or zero-interest balance transfers.
But it was all a lie. As soon as it was time for people to get paid, all contact stopped. There were no e-commerce earnings or investments. Anyone trying to get a refund of their investment was out of luck. Many people lost as much as $20,000.
If you’re considering putting money into a business opportunity, do some research first. By law, business opportunity promoters must give you certain information before you hand over any money.
Many of the people Building Money called were on the Do Not Call Registry (https://donotcall.gov/). If a company is ignoring the Registry, there’s a good chance it’s a scam. If you get calls like these, hang up and file a complaint with the FTC.
October 13, 2016 by Amy Hebert, Consumer Education Specialist, FTC
Voicemail from an IRS Imposter?
You get a call or voicemail from someone claiming to be from the IRS. You’re being sued and this your final notice, the caller says: “Hello. This call is officially a final notice from IRS. Internal Revenue Service. The reason of this call is to inform you that IRS is filing lawsuit against you. To get more information about this case, file, please all immediately on our department number 202-864-0169. I repeat 202-864-0169. Thank you.”
Don’t panic. And don’t return the call. It’s a scam.
Here are a few facts about the IRS to keep in mind if you get a similar call:
•If the IRS needs to contact you, they’ll do it by mail first.
•The IRS won’t demand personal information like credit card or Social Security numbers over the phone.
•The IRS won’t threaten to arrest or sue you, or demand that you pay right away. The IRS also won’t tell you to use a specific form of payment like a money transfer from MoneyGram or Western Union, a cash reload from MoneyPak or Reloadit, or a gift card from iTunes or Amazon. Scammers ask you to use those ways to pay because they’re hard to track or cancel payments.
If you or someone you know receives a call like this, report it the FTC and the Treasury Inspector General for Tax Administration (TIGTA). Include the caller’s phone number, along with any details you have. If you’re not sure whether a call is really from the IRS, you can double-check by calling the IRS directly at 1-800-829-1040. For more, check out this IRS imposter scams infographic. Share with friends and family. They may get the call next.
September 1, 2016 by Andrew Johnson, Division of Consumer and Business Education, FTC
The IRS Doesn’t Want Your iTunes Cards
If anyone tells you to buy iTunes cards to pay the IRS, qualify for a grant, get a loan or bail out a family member, say “No.” They’re trying to scam you. The only place to use an iTunes card is at the iTunes store, to buy online music, apps or books.
People have told the FTC about scammers who called and demanded iTunes cards as “payment.” Bogus “IRS agents” told people they owed back taxes and would be arrested soon, unless they bought an iTunes card and gave the code to the “agent.” Phony “government grant” officers called and promised a big payout, after the person bought an iTunes card and read the code to the “grant officer.” Other fraudsters told people their grandkids were in jail and the only way to help was — you guessed it — to buy an iTunes card and read the code over the phone. All the stories were false.
There’s a reason scammers insist on getting iTunes cards: Once you tell a scammer the code from the back of an iTunes card, he takes control of the value on the card. He can use the code or sell it. After a person redeems the code, you can’t get your money back.
If you gave someone the code from an iTunes card and you think it was a scam, call Apple Support at 1-800-275-2273 right away (you may have to spend some time on hold). Tell them what happened and ask if they can disable the card. Also, go back to the store that sold you the card and talk with their customer service staff. And if you hear from someone who wants you to send an iTunes card, please tell the FTC.
July 7, 2016 by Bridget Small Consumer Education Specialist, FTC
NCUA Warns of Text Phishing Scam
The National Credit Union Administration has received consumer calls about a suspicious text message claiming to come from the agency. The message reads: “National Credit Union Administration Alert for (recipient’s phone number). Contact 844-234-5445.” This is not a communication from NCUA. The agency does not seek personal information through internet or on the telephone. Please contact NCUA’s Consumer Assistance Center at 1-800-755-1030 between 8 a.m. and 5 pm. Eastern if you receive one of these messages. NCUA also recommends contacting your credit union and local law enforcement.
Vishing scams are on the rise!
Voice phishing (commonly referred to as vishing) is the criminal practice of using social engineering over the phone to gain access to victims’ personal and financial information (credit card number, account number, PIN number, security code number, etc.) in order to defraud them. The fraudsters can be a live person OR vishing can be done by robocall. Either way the objective is to use clever techniques to defraud unsuspecting individuals.
The sole intention of the call is to scam people out of their hard earned money, by pretending to be financial institutions, law firms, investigators, Federal agencies or debt collectors. And since fraudsters constantly vary their scams, it is important to constantly beware of text messages, emails, and telephone calls or recordings requesting confidential data.
Here are some tips to keep in mind:
- Do not trust the caller ID on your phone. Scammers use technology to change the caller ID to any number.
- Be suspicious of all unsolicited phone calls, texts and emails.
- Never respond to any telephone call or text requesting personal or financial information.
- Take caution when visiting social network sites and sharing personal information.
Be assured that Patriot, Law Firms, Investigators, Federal Agencies nor Debt Collectors will not seek personal information from consumers over the phone. If you believe someone has attempted to scam you in the manner described above, immediately contact Patriot at our Contact Center phone line, 888 777-9982.
“Masque Attack” iOS Vulnerability
The “Masque Attack” vulnerability could allow an attacker to install a malware-filled app on top of a legitimate iOS app over the internet.
This is a vulnerability in the iOS operating system rather than in any specific iOS app, and thus only Apple will be able to resolve the vulnerability. Unfortunately, we do not have an official statement from Apple regarding this vulnerability in iOS at this time. We recommend that iOS users follow these guidelines for protecting their phones:
- Don’t install apps from third-party sources other than Apple’s official App Store.
- Don’t click “Install” on a pop-up from a third-party web page, no matter what the pop-up says about the app. The pop-up can show attractive app titles crafted by the attacker.
- When opening an app, if iOS shows an alert with “Untrusted App Developer”, click on “Don’t Trust” and uninstall the app immediately.
Again, Patriot cannot resolve this issue. Only Apple can resolve this issue and they have not yet released an official statement.
Telephone Fraud: “Vishing” Alert
The National Credit Union Administration (NCUA) issued a warning on January 21 about a new telephone fraud attempt that is taking place. Known as a “vishing” scheme, the fraudulent call uses NCUA’s name in an attempt to obtain personal financial information from credit union members.
Individuals have been contacted by an automated phone call claiming to be from NCUA and notifying consumers their debit cards have been compromised. The call then asks the individual to follow prompts and provide financial data and personal identification information.
If you are contacted by this so-called “vishing” scheme, immediately contact Patriot at our Contact Center Line, 888-777-9982.
Be assured, NCUA will not seek personal information from consumers over the telephone nor does NCUA handle any day-to-day maintenance of member account information. NCUA also urges consumers to never verify or release personal financial information to unknown callers.
“Spear Fishing” Hacking Alert
The biggest risk for Target (TGT) shoppers whose personal data was recently compromised may come less from the original breach than from a wave of secondary scams seeking to pilfer far more important information.
Target’s failure to safeguard consumer information puts the company’s customers at risk of so-called “spear phishing.” The an incident, now estimated to affect as many as 110 million people, involves far more information than just credit card numbers. It also includes names, email addresses and phone numbers.
Spear phishing is a more toxic version of the generic online “phishing” scams that aim to ferret out your personal information with a phone call or email. What makes spear phishing more dangerous is that fraudsters have enough information about the target to make the contact appear legitimate.
If you are in the habit of getting electronic bill notifications and paying your bills online, a spear phishing attack with the information stolen from Target could look nearly identical to the routine communication you receive from your credit card companies and bank. Here are two examples:
Your account xxxx-xxxx-xxxx-2056 has been compromised. Please click on the link below to contact our fraud department.
Your online statement is ready to view. Please click on the link below and sign into your account.
Worse, because locations and phone numbers were also compromised, victims may have to ward off attacks from multiple fronts – email, social media and telephone. That makes it imperative that Target shoppers take these five steps to protect their accounts and identity.
- Accept the retailers’ credit monitoring offer. Target has offered to provide one year of free credit monitoring and identity theft protection to every consumer who has shopped in their stores over the past year – regardless of whether or not they are affected by the data breach. Take them up on it.
- Double-check statements. If you used a credit card at Target, make a concerted effort to go through every item on the bill and continue to do this for several months. Don’t just look for big items, said Bill Hardekopf, chief executive of credit card information site LowCards.com. In some cases, crooks charge small items to verify the card before ringing up big purchases.
- Respond, don’t react. If you are contacted by email or phone to verify your account, view a statement or report fraud, stop and think before responding. A real creditor will allow you to call back – not to a number they specify, but to the listed number for the company – to respond to an inquiry. A real email contact about your monthly statements will follow an identical format as the statements you’ve received in the past. Look for any deviation before assuming it’s legitimate. And be aware that any pressure tactic to push you to respond immediately is a red flag of fraud. Hang up on high-pressure callers. Ignore threatening emails.
- Don’t click through. Even if you think the statement you’ve received via email is legitimate, consider opening a new browser window and going to the company’s web site another way. There’s no downside to being too cautious. On the other hand, clicking on a malicious link could load your computer up with viruses and “malware” that could put your entire electronic life at risk.
- Update your security software. If you don’t have security software on your computer and phone (if you use it for banking or payments), get it. Keep it updated. Normally, if you click on a link that’s about to take you to a suspicious site, the security software will issue a warning and allow you to back out before any damage is done. Don’t ignore the warnings.
Automated Phone Call Scam Targets Debit Card Accounts
If you receive an automated, recorded call that your debit card has been suspended due to a compromise, this is a fraud. These calls are not being initiated by Patriot or any other financial institution. The recording is asking members to press 1 and enter their account number. Never respond or provide any personal information by phone or online. Patriot will never send a text, email or phone call that asks you to provide card or account information.
Here are more details about this type of scam
A credit union recently reported receiving hundreds of calls from members and nonmembers saying they received a phone call on their landline or cell phone with an automated message indicating their account may be locked or closed, or their card numbers were compromised. The victims were asked to enter their credit or debit card number.
Awareness about this type of a scam is critical to prevent your accounts from being compromised by this version of vishing (voice phishing). Again, you should never respond to these calls by providing the requested personal or financial information – no matter how urgent the message may seem. Please remember:
- Never respond to any telephone call requesting personal or financial information.
- Take caution when visiting social network sites and sharing personal information.
- If you receive this type of call, report it to the following:
- Credit union;
- Federal Trade Commission (1-877-382-4357);
- State attorney general;
- Local law enforcement; and
- Phone carrier – landline or cell phone provider.
- If you slip up and respond to such a call by providing account or card information, notify Patriot to close or block your accounts to prevent fraudulent transactions.
- And, if you slip up, and provide the requested information during the call, contact one of the three credit bureaus to place an “initial fraud alert” on their credit report.
Targeted Tax Day Phishing
National Cybersecurity and Communication Integration Center issued a bulletin providing general guidance to public and private sector organizations and individuals about email attacks—phishing and spear phishing. During the tax filing time of year, DHS, IRS, and law enforcement agencies see increased phishing activity with respect to the income tax filing deadline. The objective of these types of attacks is to lure people to click on links or an attachment within the body of an email, leading that person to execute malicious computer code on their computer. The advisory offers some preventative strategies that minimize the likelihood of an attack becoming successful. Click here to read more.
Patriot had a member deposit a check for $2,000.00 drawn on State Street Bank & Trust in Boston, MA from F.T. Management Inc. 17 Federal St. Boston, MA. At the time of the deposit, the member did not mention that she had applied online for a “Secret Shopper position”. The member visited a Patriot branch after she received the “paperwork” instructing her to deposit and cash the check at her bank. She was then to go to her local “JC Peenys” outlet and purchase item or items of her choice and to do the same at Sears and then complete a Western Union transaction (for the bulk of the funds). The form was titled “Global Survey & Management Services Inc.” There were numerous typographical errors, misspelled words and variations in font. Patriot informed the member that this was a scam and was able to avoid a bad situation on this members account. Please be on the lookout for these types of mailings.
Two members reported receiving text messages “from their credit union” to call the automated service at 240-349-0118. When the call was placed to this number, an electronic verification service recording explained that the callers credit card has been restricted and to enter their 16 digit card number in order to un-restrict their card.
You can be sure the text was not from Patriot Federal Credit Unoin. You should never provide any information to an unknown source.
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.
Here are some warning signs of telemarketing fraud—what a caller may tell you:
- “You must act ‘now’ or the offer won’t be good.”
- “You’ve won a ‘free’ gift, vacation, or prize.” But you have to pay for “postage and handling” or other charges.
- “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.
- “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.
- “You don’t need any written information about their company or their references.”
- “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 telephone.
Tips for Avoiding Telemarketing Fraud:
It’s very difficult to get your money back if you’ve been cheated over the telephone. Before you buy anything by telephone, remember:
- Don’t buy from an unfamiliar company. Legitimate businesses understand that you want more information about their company and are happy to comply.
- 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.
- 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.
- 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.
- 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.
- • 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?”
- Don’t pay in advance for services. Pay services only after they are delivered.
- Be wary of companies that want to 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.
- Always take your time making a decision. Legitimate companies won’t pressure you to make a snap decision.
- Don’t pay for a “free prize.” If a caller tells you the payment is for taxes, he or she is violating federal law.
- 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.
- Be sure to talk over big investments offered by telephone salespeople with a trusted friend, family member, or financial advisor. It’s never rude to wait and think about an offer.
- Never respond to an offer you don’t understand thoroughly.
- 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.
- Be aware that your personal information is often brokered to telemarketers through third parties.
- If you have been victimized once, be wary of persons who call offering to help you recover your losses for a fee paid in advance.
- If you have information about a fraud, report it to state, local, or federal law enforcement agencies.
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 stationery, bank name and account numbers, and other identifying information using a fax 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. 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 along with 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.”
Tips for Avoiding Nigerian Letter or “419” Fraud:
- 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, your local FBI office, or the U.S. Postal Inspection Service. You can also register a complaint with the Federal Trade Commission’s Complaint Assistant.
- 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.
- 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.
- Do not believe the promise of large sums of money for your cooperation.
- Guard your account information carefully.
Advance Fee Schemes
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 con artists 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 con artists 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.
Tips for Avoiding 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 plan on spending, 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. Also be suspicious when dealing with persons who do not have a direct telephone line and 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 non-circumvention agreements that are designed to prevent you from independently verifying the bona fides of the people with whom you intend to do business. Con artists often use non-circumvention agreements to threaten their victims with civil suit if they report their losses to law enforcement.
Health Care/Insurance Fraud
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, con artists 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.
Tips for Avoiding Health Care Fraud or 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.
Proponents of this scheme claim that the U.S. government or the Treasury Department control bank accounts—often referred to as “U.S. Treasury Direct Accounts”—for all U.S. citizens that can be accessed by submitting paperwork with state and federal authorities. Individuals promoting this scam frequently cite various discredited legal theories and may refer to the scheme as “Redemption,” “Strawman,” or “Acceptance for Value.” Trainers and websites will often charge large fees for “kits” that teach individuals how to perpetrate this scheme. They will often imply that others have had great success in discharging debt and purchasing merchandise such as cars and homes. Failures to implement the scheme successfully are attributed to individuals not following instructions in a specific order or not filing paperwork at correct times.
This scheme predominately uses fraudulent financial documents that appear to be legitimate. These documents are frequently referred to as “bills of exchange,” “promissory bonds,” “indemnity bonds,” “offset bonds,” “sight drafts,” or “comptroller warrants.” In addition, other official documents are used outside of their intended purpose, like IRS forms 1099, 1099-OID, and 8300. This scheme frequently intermingles legal and pseudo legal terminology in order to appear lawful. Notaries may be used in an attempt to make the fraud appear legitimate. Often, victims of the scheme are instructed to address their paperwork to the U.S. Secretary of the Treasury.
Tips for Avoiding Redemption/Strawman/Bond Fraud:
- Be wary of individuals or groups selling kits that they claim will inform you on to access secret bank accounts.
- Be wary of individuals or groups proclaiming that paying federal and/or state income tax is not necessary.
- Do not believe that the U.S. Treasury controls bank accounts for all citizens.
- Be skeptical of individuals advocating that speeding tickets, summons, bills, tax notifications, or similar documents can be resolved by writing “acceptance for value” on them.
- If you know of anyone advocating the use of property liens to coerce acceptance of this scheme, contact your local FBI office.
Prime Bank Note Fraud
International fraud artists have invented an investment scheme that supposedly offers extremely high yields in a relatively short period of time. In this scheme, they claim to have access to “bank guarantees” that 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 10 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, con artists 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 non-disclosure and non-circumvention 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 in the control of the con artist. 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.
Tips for Avoiding Prime Bank Note 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 non-disclosure or non-circumvention agreements that are designed to prevent you from independently verifying information about the investment.
“Ponzi” schemes promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, however, the con artist pays “dividends” to initial investors using the funds of 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.”
Tips for Avoiding Ponzi Schemes:
- Be careful of any investment opportunity that makes exaggerated earnings claims.
- Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework.
- Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing.
As in Ponzi schemes, the money collected from newer victims of the fraud is paid to earlier victims to provide a veneer of legitimacy. In pyramid schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions.
More specifically, 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 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.
Tips for Avoiding 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.
Market Manipulation or “Pump and Dump” Fraud
This scheme—commonly referred to as a “pump and dump”—creates artificial buying pressure for a targeted security, generally a low-trading volume issuer in the over-the-counter securities market largely controlled by the fraud perpetrators. This artificially increased trading volume has the effect of artificially increasing the price of the targeted security (i.e., the “pump”), which is rapidly sold off into the inflated market for the security by the fraud perpetrators (i.e., the “dump”); resulting in illicit gains to the perpetrators and losses to innocent third party investors. Typically, the increased trading volume is generated by inducing unwitting investors to purchase shares of the targeted security through false or deceptive sales practices and/or public information releases.
A modern variation on this scheme involves largely foreign-based computer criminals gaining unauthorized access to the online brokerage accounts of unsuspecting victims in the United States. These victim accounts are then utilized to engage in coordinated online purchases of the targeted security to affect the pump portion of a manipulation, while the fraud perpetrators sell their pre-existing holdings in the targeted security into the inflated market to complete the dump.
Tips for Avoiding Market Manipulation Fraud:
- Don’t believe the hype.
- Find out where the stock trades.
- Independently verify claims.
- Research the opportunity.
- Beware of high-pressure pitches.
- Always be skeptical.
For more information on common fraud schemes and ways to avoid becoming a victim, visit the FBI’s web site: https://www.fbi.gov/scams-safety/fraud/fraud.