Fraud, Scams, and Your Financial Plan
Hi everyone! Welcome back to Melissa Making Cents!
As a comprehensive financial planner, I try to keep up to date with scams that might impact my clients and loved ones finances. It seems the more technology progresses, the more complicated financial fraud becomes. Phone calls, emails and pop ups are just the tip of the iceberg, and like it or not... this type of fraud can happen to even the most careful investor. Trust me, when I say there is nothing that will derail your financial plan than an unfortunate fraud event.
Recently, I received a surprising phone call from an HR person at my financial firm. She asked me why I had filed for unemployment. We were both confused because I had answered my work phone in my work office -- I was definitely not unemployed! (or at least someone forgot to tell me to stop coming in!) It turns out that someone filed a fraudulent unemployment report on my behalf. This was my first time being the victim of a fraudulent event, and let me tell you, it took a lot of time and effort to set the record straight!
Over time, the complexity of scams and fraud have grown along with technology. During COVID-19 in particular, there’s been an uptick in new scams. Many people believe that only older or more gullible people become victims of a scam. But the truth is, scams and fraud can happen to anyone at any age! Today I am going to share some of the most common types of scams and fraud to watch out for, and how you can protect yourself, your family, and your finances.
Be on the lookout for these types of financial scams.
Scammers love parting people from their money. And they’ve gotten pretty good at it, too! There are many different types of scams out there, targeting people of different age groups and life situations. Something they all have in common is to provoke an emotional response, such as love, fear, or greed. That’s why the most important way to combat scams is to take a step back and think through the situation rationally. Here are a few of the most common scams and how you can handle each one:
Social Security Scams
In a Social Security scam, a perpetrator will call or email you to say there is a problem with your Social Security number or account. They may try to extort money from you by threatening arrest or other legal action unless you pay a fine -- often through a wire transfer, Western Union, or by mailing cash. The Social Security Administration website explicitly states that Social Security only sends emails or text messages if you have opted in to receive them, and that SSA employees are forbidden from threatening you, suspending your Social Security number, or demanding immediate payment. If you receive a phone call with any of these red flags, the SSA website has a form that enables you to report suspected scammers.
One of scammers’ biggest tactics is to tug at the heartstrings, which makes the “grandparent scam” so popular. In this scenario, scammers will call pretending to be your grandchild. Often, scammers won’t even need to know your grandchild’s name in advance; they may try to bait you into giving them the information they need by asking, “Hi Grandma, do you know who this is?” Then the scammer will ask for money to help them out of a bad situation (overdraft on bank account, money for college textbooks, etc.), and beg you not to tell their parents. Even if your initial response is to help, slow down and don’t say “yes” right away. Get out of the call and check in with the family (including the grandchild’s parents) to make sure everything is okay. In all likelihood, they will be confused about the situation and you will have avoided a scam.
Perhaps, if it is your grandchild, and they really do need help... It might be a great time to have a money conversations with them about budgeting and developing a healthy money mindset. But.. I digress..
In this scam targeting people over the age of 65, scammers pretend to be a Medicare representative. Often, they will call with questions or special offers in order to trick you into sharing personal information such as your Medicare Number. Then they’ll commit Medicare fraud by billing fake medical services to your insurance. According to the Medicare website, Medicare will never call to sell you anything, ask for your Medicare Number or other personal information unless you’ve previously given them permission, or offer to enroll you over the phone unless you called first.
“Love Interest” Scam
Also called a “romance scam,” this one tends to be much more involved than other scams. A romance scam occurs when a scammer develops a fake romantic relationship with a victim they meet online, often through social media or a dating website. After gaining your love and trust, the scammer will ask for money (often through Western Union)-- perhaps for a surprise medical bill, or an unpaid debt, or even a plane ticket to visit you. They may ghost you entirely after receiving the money, or they might keep asking for more and more until there’s nothing left. In order to hide their true identity, these scammers will often avoid speaking with victims on the phone or through video chat. As a rule, never send money to someone you don’t actually know.
Email Phishing Scam
Anyone with an email address is subject to becoming a victim of this scam. I constantly get emails from “Netflix” telling me that there is a problem with my account, and that I need to click on a link to sign into my account and update my information. This tactic is known as “phishing,” in which scammers pose as legitimate companies. Their goal is to trick you into clicking an email link and sharing your personal information on a website that looks like the legitimate company, but is really a sham. Then the scammer steals the information you enter (name, credit card number, etc.) and accesses your accounts. This is why I advise my clients not to click any links in emails they receive, especially if they’re unsure of the recipient.
“Nigerian Prince” Scam
I seem to get these each week, too! My poor rich uncle, whom I've never met in another country, had died for the 75th time this year! The attorney working his case will gladly send me my millions in inheritance if I would only provide my banking account information.
Also known as a 419 scam, the “Nigerian Prince” scam involves a scammer from another country emailing you with a request to help them deposit money into a U.S. bank. Some may claim to be related to you, share a sad story in order to earn your sympathy, or say that they are royalty and can offer a financial reward for your assistance. The scammer will usually claim that if you let them use your bank account to deposit the money, they will let you keep a percentage of it. But don’t be fooled by the promise of a get-rich-quick scheme. Once you’ve given over your banking information -- well, your hard-earned cash is about to disappear! I recommend sending these emails right to your junk folder, or creating a spam filter so you don’t see them in your inbox in the first place.
Learn how to identify some of the common hallmarks of financial fraud.
As you can see, scams can take place through email, mail, phone calls, or even in person. Each medium has its own telltale sign that you are being targeted for fraud. Here are a few to take notice of:
Recognizing Email Fraud
In emails, look for poor grammar, a hostile tone, or awkward sentence structure. This is especially true if you suspect a phishing scam from companies like “Netflix.” One way to detect fraud is to hover over the name of the sender to see who it actually came from. If the email sender is “firstname.lastname@example.org,” you can be confident that it’s a scam! If it’s from an email address you recognize and have received many emails from before, it’s most likely legitimate. If you’re still unsure, simply avoid clicking any email links and log into your account on your own instead.
If you’ve received a suspicious email from a friend or family member, remember that their account may have been hacked. Avoid clicking any links on those emails too, and call them if the email asked for money or personal information.
And if you receive any email with the words “Nigerian prince” -- hit DELETE!
Identifying Phone Call Fraud
Phone calls can be stressful because it’s a direct interaction with another person, but you can’t see who they are. Don’t try to “guess” who is calling. That will give the caller information, as in the Grandparent Scam. Instead, ask for the person’s name and where they’re calling from. If they can’t produce a satisfactory answer, they’re likely a scammer.
In addition, pay attention to any background noise. Crying babies, static, and other loud noises are tactics that scammers use to confuse you. If the connection is bad or you can’t concentrate on what the speaker is saying, just hang up.
As previously mentioned, scammers often use scare tactics via phone calls to trick victims into giving their personal information or sending money. Remember that many government agencies, like the IRS, will never call you! Government agencies also have rules against threatening people, asking for money over the phone, or demanding personal information. So if a “government representative” is calling and pressuring you to send them money for a “fine” or a “debt,” hang up and contact the agency directly instead.
Identifying Door-to-Door Scams
There is one lesson I'm really trying to emphasize with my daughter at the moment. Don't open the door to strangers! She smiles and asks if mommy, daddy or GiGi opens the door to strangers, to which I reply no. She then smiles and says our Jack Russell Sully doesn't open the door to strangers either, but it's more because he doesn't have thumbs. (Honestly he would likely let anyone in if they gave him a treat!)
If someone shows up at your door offering to sell you a product or save you money by “lowering your energy bill,” don’t let them inside or give them any of your personal information. Just say you’re not interested and close the door. If they are a legitimate company, they will likely leave behind a brochure that you can review on your own (and fact-check on sites like the Better Business Bureau!).
If someone rings your doorbell claiming to be a representative from a government agency, ask to see their ID badge. If they cannot produce one, they are most likely a scammer. If you are ever unsure if a “government representative” is legitimate, call the agency they claim to be from or visit its website in order to verify the rep’s identity. Never feel guilty or rude about prioritizing your safety!
Never, under any circumstances, share personal information or send money to recipients you don’t know.
Suppose you receive an email or phone call, and you’re not sure if it’s real or a scam. To err on the side of caution, do not share your personal information like your name, address, and social security number. Instead, go to the website of any organization contacting you (without clicking any links from an email) and reach out to them to confirm if they need to speak with you. And if you receive a communication from a “family member” asking for money, give them a phone call directly to double check that you aren’t being scammed.
In addition, never send money via Western Union or a wire transfer out from your bank unless you absolutely know where it's going and who it’s going to. Another telltale sign of a scam is if the scammer asks for payments through gift cards or prepaid cards. These are impossible to track, and you’ll have no way to recover your money.
A financial professional can help protect clients from scams.
One of the advantages of working with a financial professional is that this relationship adds an extra layer of protection. It also gives you someone to turn to if you suspect you might be a target for a scam.
As a CERTIFIED FINANCIAL PLANNER™, I love getting to know my clients. When I help you create comprehensive plans, I also get to know your voice and general activity. Knowing my customers means that I am able to detect unusual activity or requests from your accounts, and that I always do my due diligence if I suspect you might be a victim. For example, if you send me a request by email, I’m going to call you to follow up or verify any changes or distribution requests. As an additional protective measure against scams, our firm limits wire requests. Wire requests can either go to the client’s bank, or occasionally to a title company in the event of a closing. All wire requests require a client’s signature, and confirmation of wire instructions.
So basically... I'm a financial superhero!
Until next time...this is Melissa Making Cents!
Melissa Anne Cox CERTIFIED FINANCIAL PLANNER™ is also a College Planning and Student Loan Advisor, and Financial Coach in Dallas, Texas.