Post on 04-Jan-2016
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Consumer Fraud Consumer Fraud Fighting White Fighting White Collar CrimeCollar Crime
The clever con artist is an excellent actor,who disarms his/her victims with “niceguy/gal” approach. But behind this friendly exterior is a shrewd judge of people, who chooses his/her victims carefully. They areskilled at isolating potential victimsand breaking down their resistance to aproposal. Each conquest is part of a game, in which the con-artist must “best” another
person.
They are trusting
They are polite
They are isolated
They are more likely to have cash.
Weapons of choice
for con-artists
Using names that sound like well-known charities
Referring to Social Security, AARP, or Medicare
Promoting investments with a higher than normal rate of return
Preying on the fear of funeral and final costs to family to pressure for investment
Using your belief system as motivation to invest.
“…Last chance!”
“…I’ll take you to your bank.”
“…secret offer.”
“…invest today or you’ll miss the opportunity!”
“…return is free from taxes.”
“…Cash Only.”
“Just Trust me.”
Don’t be a “courtesy victim” Save your good manners for friends and family
NEVER provide your credit card number, bank account, or social security number until you know that the offer is legitimate.
Ask tough questions and get everything in writing.
Seek information about common scams. Stay informed. Share the information with others.
Keep a logbook and diary of all your contact with the person. Copy and file any documents that they send to you.
NEVER pay cash. Always pay by check and never make it out to an individual
Don’t seek companionship from someone whose sole interest is getting their hands on your money.
DON’T SIGN ANYTHING unless you have had sufficient time to review the documents.
Do not allow yourself to be pushed or pressured into a decision
Remember that there is never a reason to rush into investing.
Verify the identity of anyone claiming to be a government official or associated with a company.
Never buy anything that you do not fully understand.
Read the fine print
“Don’t call me, I’ll call you”
Never make a withdrawal from your account on the request of a stranger or recent acquaintance.
Always ask for his/her license
Compare the offer with products that are similar
Review your bills, credit card statements, and bank statements every month.
Always talk to your attorney or family before investing.
Person seems depressed, withdrawn, or isolated
Person never has any spending money and appears to be living well below their means
Seems to have too many household accidents
Unpaid and overdue bills that a caregiver or advisor should be paying
Unusual activity in Bank and credit card accounts
Recent Changes of the title to a house, vehicle, or bank accounts – in favor of caregiver
Power of Attorney is given when the person is incompetent or in distress.
Person accompanied everywhere by same new, usually younger, “friend”
Victim reports signing “legal” papers but does not remember or comprehend their contents.
Procrastinates going to the doctor
Appeals to the dreamer in us
Brings out the worst traits in humans, particularly feeds greed.
Professional persuader, takes control of the conversation, and builds relationships with the intended victim.
Very friendly, yet controlling.
Makes people feel inadequate or stupid it they do not believe him/her.
The Typical CriminalThe Typical Criminal
A “pyramid scheme” is an illegal multi-level marketing program where the product (if there is a product) is only of secondary importance
What is it?What is it?
Pyramid schemes promise big returns in a short amount of time for doing nothing but handing over money and recruiting other to do the same.
Money coming in from new recruits is used to pay off early investors
For each person that they recruit, they receive money, gifts, or bonuses.
The new recruit then makes an initial investment to get their right to recruit
How does it work?How does it work? Victims make an initial investment,
which gives them the right to recruit others
A vast majority of participants in a pyramid scheme lose all or a high percentage of their money.
The End ResultThe End Result A pyramid scheme is impossible to
maintain and eventually the pyramid will collapse.
The scheme gets too big and the promoter cannot raise enough money to pay earlier investors
The promoter of a pyramid scheme can get fines up to $100,000 and 10 years in jail.
Impossible to SustainImpossible to Sustain
612
5
34
6
987
1011
1312
362161,296
7,77646,656
279,9361,679,61
610,077,69660,466,176
362,797,0562,176,782,336
13,060,694,016
More than the U.S. Population
More than the World Population
More than Montana’s Population
“Ponzi Scheme” is named for Charles Ponzi, an Italian immigrant who made millions in the 1920’s.
What is it?What is it?
Ponzi schemes differ from Pyramid schemes in that they involve a single promoter/company, unlike the Pyramids hieratical structure.
“Rob Peter to pay Paul” is the principle of the scheme.
Ponzi schemes generally involve a promoter who makes false claims about how the money is invested and where the returns are coming from.
Promoter sits back and allows investors to find other victims and pure greed feeds the scam.
Promoter pays big returns to early investors using the money from later investors to help make scam seem legitimate. Statements are sent out, showing how well the company is doing. Early investors also spread the word.
How does it work?How does it work? Victims make an investment,
with the promise of a high interest return on their money
Early investors will make big gains but later investors will lose everything. Most of the time, the promoter will have already disappeared with a lot of the investments before the scam collapses.
The End ResultThe End Result Eventually, the promoter runs
out of investors. The scheme collapses as investors demand their money and there aren't new investments to pay them with.
The promoter of a Ponzi scheme can get fines up to $100,000 and 10 years in jail.
A variation of the “pyramid scheme”
What is it?What is it?
Also known by names such as: The Original Dinner Party, Friends Helping Friends, Airplane Club, the Ya-Ya Girls, Circle of Friends, Women empowering Women and Chain Letter
Variations of the Gifting club offer a product to incoming recruits in exchange for money and then the new recruit has the right to sell the products to someone else and thereby recruit another person into the scheme.
A variation has members selling a product and they turn over the profit of their first sale to the person that recruited them.
Investors recruit new people into the “club.” As new recruits are enrolled, the person at the top of the pyramid receives their “gift” and leaves the scam and so everyone moves up the pyramid and “closer to their gift”
How does it work?How does it work? Victims are told that the cash they invest
is a gift, not taxable, and that this makes the scheme legal. Some clubs require members to sign a form stating the money is an unconditional gift.
A vast majority of participants in a gifting circle never see their big payoff , instead they lose all the money that they paid into the club to enrich a few members
The End ResultThe End Result Gifting Clubs are pyramid schemes.
They must continually recruit ever-increasing numbers of new members to survive. When the club fails to recruit, it collapses. Or law enforcement ends the illegal activity
The promoter of a Gifting scheme can get fines up to $100,000 and 10 years in jail.
A scam that targets a specific group. Often the targets are religious, ethnic, or professional groups.
What is it?What is it?
The swindler takes advantage of the tight knit structure of the group.
The criminal often makes comments that convey the basic message of “you can trust me, I’m like you.”
Group leaders are the most often targeted. Criminals will ensure that the leader receives a big payoff from the scam because the leader will begin to spread the word and entice group members to become involved in the scam.
The scam may be based on dire predictions of the future and the need to prepare for an emergency or disaster.
How does it work?How does it work? Affinity fraud often works with a pyramid
scam, a gifting circle is especially prevalent.
Many groups lose membership and even become defunct after a case of affinity fraud in the group.
The End ResultThe End Result Victims of affinity fraud rarely recoup
their financial damages.
Emotional damage is often more excruciating as victims have been scammed by a person that they trusted.
The perpetrator of Affinity fraud can get fines up to $100,000 and 10 years in jail, depending on what type of fraud was committed.
Mining/Precious Metals
What is it?What is it?
Oil and Gas
Offshore Investments
Promissory Notes
The criminal avoids providing any written materials about the investment.
Swindlers will often use emotion instead of facts to sway investors.
Spot the ScamSpot the Scam Terms like “investment of a lifetime” and
“high return with low risk” are used.
People who sell investments must be licensed in the state of Montana to do so. Check their license
Usually involves a claim of finding an “old mine,” a untapped oil/gas resource,” or a “stockpile of gems,” Investors are warned that secrecy is key to the profits.
Mining/Precious MetalsMining/Precious Metals The lure of Gold, silver, precious metals,
and gems is the age-old ally of a criminal trying to persuade investors.
People perceive an investment in “tangible” things, like gold and silver as safer investing.
Huge returns on the investment Short period of turnaround and a “sure thing” investment are promised.
Investors are told that they can avoid taxes and that their money will grow faster and have a higher return.
Offshore InvestmentOffshore Investment Chronic in the internet era
Swindlers will normally employ a shell company off shore but the investments rarely stays within that shell company for very long.
Frequently comes with some type of credit card or ATM card.
Criminals will often try to persuade a legitimately licensed/registered producer or other professional to sell the notes for them.
Promissory NotesPromissory Notes Sounds Simple and Safe.
Investors are promised very high, even double digit returns.
The notes are backed up by an insurance company that is offshore.
Investor statement shows unauthorized activity
Suspicious ActivitiesSuspicious Activities
Excessive trading and/or Churning
No action is taken after talking to a manager or compliance department
Broker tells investor to make checks out to a different entity or firm
Investor is put into products not associated with broker or firm
1. Where did you get my name?
2. Can you send me written materials about this offer?
3. Explain all the risks involved in this investment.
4. What governmental agency supervises your activity?
5. Would you be willing to explain this offer to my Attorney / Accountant / Banker?
6. How long have you and your company been
in business?7. How much of this money will go to fees
and commissions?8. Where will my money be held, exactly?
9. What type of written statements does your company provide and how often will I receive them?
10. Who are your company’s principles and
can you provide references for them?
Stop by the Booth!Stop by the Booth!
www.InvestSmartMT.org1-800-603-6035
Consumer Fraud Consumer Fraud Fighting White Fighting White Collar CrimeCollar Crime
For more information or assistance, please callFor more information or assistance, please call
(406) 444-2040 or toll-free (800) 332 - 6148(406) 444-2040 or toll-free (800) 332 - 6148
State Auditor John MorrisonState Auditor John Morrison