An old yet effective fraud scheme is sometimes called the Nigerian bank letter fraud. In it, someone from a foreign land writes or e-mails you claiming to be royalty or a government official who has been unjustly treated and who stands to get a large sum of money.
If you will help them by supplying your personal information and funds, they say they will get their money back and give you a big cut of it.
While this scheme looks obvious, it somehow traps hundreds of people every year.
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A recent set of crimes involved health care or auto warranty frauds. They take advantage of everyone’s desire to be safe and secure.
Fees are paid that supposedly will prevent you from ever paying another auto repair bill or will guarantee you immediate medical treatment with no waiting.
When it comes time to make your claim, the provider has evaporated, along with your cash.
Ponzi and pyramid schemes also rope in many people year after year. Greed propels investors to throw money at these types of offers, which can cause significant losses to victims and criminal charges against the organizers.
People invest money with the originator of the plan and those people sell to more people, and so on.
Profits are used to pay the initial people who invest, but inevitably scheme collapses and those at the bottom of the pyramid lose their money. The originator has taken off with the money and little is ever recovered.
How do you avoid such trickery? The best advice: if it sounds too good to be true, it probably is. If interest rates are three percent and this plan offers you a 20 percent return, you are probably throwing your money away.
Phrases like ‘limited time offer’ or ‘you’ve been specially selected’ are designed to push you into acting more quickly. Take time to consider and check on the person or firm offering you an investment.
Next, don’t give out personal information on the phone or by e-mail. If you didn’t make the initial contact, and the other person wants your credit card or bank account number, alarm bells should ring.
Get it in writing. Scam artists don’t want to write anything down so in the the event of a civil dispute or even criminal charges, it’s their word and memory against yours.
A written document allows you to have your lawyer or financial adviser review the plan. You can also contact the Better Business Bureau for any information. If you don’t understand the investment, you probably shouldn’t put money into it.
Even if you get something in writing, keep detailed notes of any conversations you have with people offering investments. Don’t be afraid to ask questions or admit to yourself that you really don’t understand what’s going on.
People involved in these schemes are generally smooth and convincing. Reserve your trust for people who have earned it.
Rick Danyliuk is a lawyer with McDougall Gauley LLP in Saskatoon. Contact: thelaw@producer.com
