As Carol Libman said in her column on fraud prevention, March is fraud prevention month but it should really be a yearlong observance. It is no secret that fraud is the number one crime against older Canadians, though obviously people of all ages fall victim to scammers. In fact, in 2001 Canadians 60-69 were the most targeted by mass marketing fraud operations at 30%, and victims between the ages of 50 and 59 reported the highest dollar loss. In this article we will review some common types of fraud as well as list prevention methods. Since it is difficult to keep abreast of every new scam that becomes current we will conclude with a discussion on the psychology of scamming and fraud – recognizing the emotional and psychological game scammers try to play may help us to hone our defensive instincts.
The discussion on the psychological aspect to scamming will serve as a prelude to an article that will be featured in the next issue of CARP Action Online that will feature case studies and the individual stories of scam victims. CARP Action Online will report on sweetheart scams, which are quite prevalent. While most sweetheart scams are conducted over the internet, we will show that being romantically linked with a real-life con-man is perhaps one of the most dangerous ways in which one can be scammed.
Theories abound on the reasons why seniors are disproportionately targeted by scammers – they include:
- With generally more discretionary income, seniors are immediately a desirable target for fraudsters
- More Canadians are retiring early and living longer. This means that seniors are more often alone with time available for reading mail, taking phone calls, or responding to online deals or offers
- With the increase in life expectancy and the cost of living, there may be greater concern about having enough money – when an easy money-making solution is presented, it can appear very attractive
- A tendency to be more trusting as well as less mobile can make it easier for fraudsters with a friendly face or voice to strike up a conversation and access key information
Types of Fraud
Fraud can take many shapes, and fraudsters are becoming more and more sophisticated with their approach. In addition to the common scams that Carol Libman covered in her column on fraud prevention these are various other types of fraud that are common – we provide ways and solutions to defend yourselves against them:
1 Theft by Power of Attorney – Theft by Power of Attorney is when the individual you’ve assigned to take care of your finances abuses their position. Power of Attorney theft may involve stealing money from a pension, taking out a second mortgage, or using credit cards for personal purposes. Ways to protect yourself: If you need someone to perform banking activities on your behalf, speak with your bank first and discuss options other than sharing your PIN. It’s also a good idea to set up Online Banking (if you don’t have it already) so that you can monitor your transactions and accounts – it will be easy to spot the fraudulent ones.
2 Identity Theft – Identity theft occurs when someone uses your personal information – such as your name, social insurance number, credit card number – without your permission to access your money, obtain passports, apply for loans or mortgages, apply for government benefits and other crimes. Ways to protect yourself: Identity theft can happen anywhere – at your mailbox, by email, over the phone, from personal documents you’ve thrown away, or from your old computer hard drive. To prevent identity theft, don’t throw away paper bills and statements without first shredding or cutting them up. Also, don’t give out personal information unless you’re sure who you’re dealing with. It’s also a smart idea to put a lock on your outside mailbox.
3 Telephone Scams – There are many different types of schemes and scams out there, that prey especially on seniors. Telemarketing scams, fake charities and “too good to be true” offers are some of the most common – these fraudsters will ask you to send cash to collect a prize, make a pledge or process a loan. Ways to protect yourself: Never give money or your credit card information to someone you don’t know – even if they sound like they’re from an established organization. Request additional information to be sent to you, review it with friends or family, or simply hang up if the whole thing sounds fishy!
4 Credit Card Fraud – “Skimming” is one form of credit card fraud that takes place when someone makes a counterfeit copy or transcribes the numbers of your credit card. This is commonly done at restaurants where they have your card out of sight and can write down the numbers. Credit Card fraud can also take place if you’ve left your wallet or purse open where someone can easily steal your card(s). Ways to protect yourself: Recent introductions in technology will also protect you – hand-held card processing devices at restaurants mean that you don’t have to leave your card unattended, and Chip and PIN technology means you no longer have to swipe the magnetic stripe on Point of Sale devices. Just remember to protect your PIN!
5 Phishing Scams Phishing is designed to trick you into disclosing your personal or financial information. Often an unsolicited email that “appears” to be from your bank, you are asked for confidential information, claiming a computer glitch. Ways to protect yourself: It’s important to know that no bank or store will ever ask you for your password via email, so never respond to these requests. If you receive an email that has a sense of urgency requesting personal information, contact your bank to see if the email is legitimate.
6 Ponzi Schemes A Ponzi scheme attracts investors by offering guaranteed and unusually high returns, based on short-term and often complex investments. Returns, however, are paid to the initial investors from the funds of subsequent investors – there is never any actual profit earned. This scheme requires a constant stream of new investors. Ways to protect yourself: Beware of claims of guaranteed investments with above average returns. Ask to see written statements to see underlying investment details, and do a background check to see if the individual or group who approached you is licensed to sell securities.
General Fraud Prevention Techniques
In addition to the protection measures listed above, there are a few things you can do to reduce your risk of becoming a victim of fraud:
Tips and safeguards
- Keep all personal documents in a secure place. If you don’t need them, do not carry your birth certificate, passport or SIN card.
- Never tell another person your PIN or account passwords memorize your pin and be sure not to write down your online banking username or password anywhere. Use a secure computer or location to conduct online banking, do not use internet cafes for this purpose.
- Be aware of your surroundings when using the ATM – don’t let another customer distract you, even if they tell you you’ve dropped something. Take care to cover your hand when entering your PIN and keep your eyes on the your card at all times when making a withdrawal or making store purchases.
- Safely dispose of old bills and statements–shredding is best.
- Do not click on pop-up windows or respond to e-mails, open attachments or go to Website links sent by people you do not know. Your bank or credit union will not send you anything by e-mail unless you ask them to.
- Never give out your credit card, bank account, or personal information to someone over the phone, at the door, or over the Internet unless you know the person or organization you are dealing with, or you made the contact.
- Do not sign an agreement or contract to buy anything without giving yourself time to think it over. If a salesperson insists that an “offer” is “time limited” and you must decide that moment, it is probably better not to buy.
- Be suspicious if someone you don’t know asks you to send them money or a cheque, or to return money they “accidentally” sent you.
- Before hiring someone or agreeing to have work done on your home, ask for proof of identity and references and check them.
- Routinely monitor your transactions so you can quickly spot one that looks out of place and request your credit report once a year to ensure no one has stolen your identity. You can request your report through TransUnion or Equifax.
The psychology of being scammed – familiarize yourself with these concepts so you can spot a scam from a mile away
The UK government’s Office of Fair Trading partnered up with Exeter University’s psychology department to create a report exploring the psychological aspect of scams and fraud. The information was drawn from in-depth interviews from scam victims, examination of scam material, two questionnaire studies and a behavioural experiment. The report concluded that the most successful scams involve:
Appeals to trust and authority: people tend to obey authorities so scammers use, and victims fall for, cues that make the offer look like a legitimate one being made by a reliable official institution or established reputable business.
Visceral triggers: scams exploit basic human desires and needs ‚Äì such as greed, fear, avoidance of physical pain, or the desire to be liked ‚Äì in order to provoke intuitive reactions and reduce the motivation of people to process the content of the scam message deeply.
Scarcity cues. Scams are often personalised to create the impression that the offer is unique to the recipient.
Induction of behavioural commitment. Scammers ask their potential victims to make small steps of compliance to draw them in, and thereby cause victims to feel committed to continue sending money.
The disproportionate relation between the size of the alleged reward and the cost of trying to obtain it. Scam victims are led to focus on the alleged big prize or reward in comparison to the relatively small amount of money they have to send in order to obtain their windfall.
Lack of emotional control. Compared to non-victims, scam victims report being less able to regulate and resist emotions associated with scam offers. They seem to be more open to persuasion…
Scam victims often have better than average background knowledge in the area of the scam content. For example, it seems that people with experience of playing legitimate prize draws and lotteries are more likely to fall for a scam in this area than people with less knowledge and experience in this field. This also applies to those with some knowledge of investments. Such knowledge can increase rather than decrease the risk of becoming a victim.
Scam victims report that they put more cognitive effort into analysing scam content than non-victims. This contradicts the intuitive suggestion that people fall victim to scams because they invest too little cognitive energy in investigating their content, and thus overlook potential information that might betray the scam.
The report suggests we trust our gut instincts. If it seems too good to be true, it probably is.
In the next issue we will look hear the stories of real people who have been scammed and/or defrauded and explore these case studies. Stay tuned for the next issue of CARP Action Online!