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Telemarketing Fraud
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.
Warning signs -- what a caller may tell you:
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"You must act 'now' or the offer won't be good." |
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"You've won a 'free' gift, vacation, or prize." But you have to pay for "postage and handling" or other charges. |
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"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. |
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"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. |
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"You don't need any written information about their company or their references." |
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"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 phone.
Some Tips to Avoid Telemarketing Fraud:
It's very difficult to get your money back if you've been cheated over
the phone. Before you buy anything by telephone, remember:
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Don't
buy from an unfamiliar company. Legitimate businesses understand that
you want more information about their company and are happy to comply.
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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.
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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.
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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.
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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.
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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?"
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You must not be asked to pay in advance for services. Pay services only after they are delivered.
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Some
con artists will 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.
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Always take your time making a decision. Legitimate companies won't pressure you to make a snap decision.
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Don't pay for a "free prize." If a caller tells you the payment is for taxes, he or she is violating federal law.
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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.
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It's
never rude to wait and think about an offer. Be sure to talk over big
investments offered by telephone salespeople with a trusted friend,
family member, or financial advisor.
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Never respond to an offer you don't understand thoroughly.
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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.
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Your personal information is often brokered to telemarketers through third parties.
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If you have information about a fraud report it to state, local, or federal law enforcement agencies.
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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 facsimile 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 until the victim's assets are taken
in their entirety. 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, in addition to
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."
Some Tips to Avoid Nigerian Letter or "419" Fraud:
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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 Consumer Sentinel.
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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.
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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.
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Do not believe the promise of large sums of money for your cooperation.
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Guard your account information carefully.
Impersonation/Identity Fraud
Impersonation
fraud occurs when someone assumes your identity to perform a fraud or
other criminal act. Criminals can get the information they need to
assume your identity from a variety of sources, such as the theft of
your wallet, your trash, or from credit or bank information. They may
approach you in person, by telephone, or on the Internet and ask you
for the information.
The
sources of information about you are so numerous that you cannot
prevent the theft of your identity. But you can minimize your risk of
loss by following a few simple hints.
Some Tips to Avoid Impersonation/Identity Fraud:
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Never throw away ATM receipts, credit statements, credit cards, or bank statements in a usable form.
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Never give your credit card number over the telephone unless you make the call.
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Reconcile your bank account monthly and notify your bank of discrepancies immediately.
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Keep a list of telephone numbers to call to report the loss or theft of your wallet, credit cards, etc.
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Report unauthorized financial transactions to your bank, credit card company, and the police as soon as you detect them.
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Review
a copy of your credit report at least once each year. Notify the credit
bureau in writing of any questionable entries and follow through until
they are explained or removed.
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If your identity has been assumed, ask the credit bureau to print a statement to that effect in your credit report.
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If
you know of anyone who receives mail from credit card companies or
banks in the names of others, report it to local or federal law
enforcement authorities.
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Advance Fee Scheme
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.
Some Tips to Avoid the Advanced Fee Schemes:
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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.
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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 intend to spend, you may want to visit
the business location, check with the Better Business Bureau, or
consult with your bank, an attorney, or the police.
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Make
sure you fully understand any business agreement that you enter into.
If the terms are complex, have them reviewed by a competent attorney.
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Be
wary of businesses that operate out of post office boxes or mail drops
and do not have a street address, or of dealing with persons who do not
have a direct telephone line, who are never "in" when you call, but
always return your call later.
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Be
wary of business deals that require you to sign nondisclosure or
noncircumvention 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 noncircumvention
agreements to threaten their victims with civil suit if they report
their losses to law enforcement.
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Common Health Insurance Frauds
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.
Unnecessary and sometimes fake tests are given to individuals at health
clubs, retirement homes, or shopping malls and billed to insurance
companies or Medicare.
Customers or providers bill insurers for services never rendered by changing bills or submitting fake ones.
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.
Some Tips to Avoid the Health Insurance Fraud:
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Never sign blank insurance claim forms.
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Never give blanket authorization to a medical provider to bill for services rendered.
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Ask your medical providers what they will charge and what you will be expected to pay out-of-pocket.
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Carefully review your insurer's explanation of the benefits statement. Call your insurer and provider if you have questions.
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Do not do business with door-to-door or telephone salespeople who tell you that services of medical equipment are free.
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Give your insurance/Medicare identification only to those who have provided you with medical services.
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Keep accurate records of all health care appointments.
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Know if your physician ordered equipment for you.
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Redemption/Strawman/Bond Fraud
Proponents
of this scheme will claim that the U.S. Government or the Treasury
Department controls 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 “Comptrollers 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.
Some Tips to Avoid 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.
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Investment Related Scams:
Letter of Credit Fraud
Legitimate letters of credit are never sold or offered as investments.
Legitimate
letters of credit are issued by banks to ensure payment for goods
shipped in connection with international trade. Payment on a letter of
credit generally requires that the paying bank receive documentation
certifying that the goods ordered have been shipped and are en route to
their intended destination.
Letters of credit frauds are often attempted against banks by providing
false documentation to show that goods were shipped when, in fact, no
goods or inferior goods were shipped.
Other letter of credit frauds occur when con artists offer a "letter of
credit" or "bank guarantee" as an investment wherein the investor is
promised huge interest rates on the order of 100 to 300 percent
annually. Such investment "opportunities" simply do not exist. (See
Prime Bank Notes for additional information.)
Some Tips to Avoid Letter of Credit Fraud:
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If an "opportunity" appears too good to be true, it probably is.
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Do not invest in anything unless you understand the deal. Con artists
rely on complex transactions and faulty logic to "explain" fraudulent
investment schemes.
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Do not invest or attempt to "purchase" a "Letter of Credit." Such investments simply do not exist.
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Be wary of any investment that offers the promise of extremely high yields.
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Independently
verify the terms of any investment that you intend to make, including
the parties involved and the nature of the investment.
Prime Bank Note
International fraud artists have invented an investment scheme that
offers extremely high yields in a relatively short period of time. In
this scheme, they purport to have access to "bank guarantees" which
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 ten 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 nondisclosure and noncircumvention 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 that is 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.
Some Tips to Avoid Prime Bank Note Related Fraud:
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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."
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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.
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wary of business deals that require nondisclosure or noncircumvention
agreements that are designed to prevent you from independently
verifying information about the investment.
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What is a "Ponzi" Scheme?
A Ponzi scheme is essentially an investment fraud wherein the operator
promises high financial returns or dividends that are not available
through traditional investments. Instead of investing victims' funds,
the operator pays "dividends" to initial investors using the principle
amounts "invested" by 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."
This type of scheme is named after Charles Ponzi of Boston,
Massachusetts, who operated an extremely attractive investment scheme
in which he guaranteed investors a 50 percent return on their
investment in postal coupons. Although he was able to pay his initial
investors, the scheme dissolved when he was unable to pay investors who
entered the scheme later.
Some Tips to Avoid Ponzi Schemes:
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Pyramid Scheme
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 there 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.
Some Tips to Avoid Pyramid Schemes:
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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.
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Independently verify the legitimacy of any franchise or investment before you invest.
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