PRIMER ON FRAUD PREVENTION – Lesson #2

If you are following this Primer, you have learned the following tricks to avoid fraud:

(1) Is the deal too good to be true? If so, walk away.

(2) Are you being pressured to act now? If so, walk away.

(3) Are you being asked to make an advance payment? If so, the warning lights are going off. Are you being told the payment must precede the benefit? If so, walk away.

(4) Are you required to pay by: cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is untraceable and irreversible? If so, walk away.

(5) Finally, when in doubt, walk away.

Advance Fee Schemes

Today we will focus on a traditional “oldie, but nasty” scam, the “Advance Fee Scheme”.

The Setup

The scheme usually starts with a story. Someone tells you that they are in a dilemma, and they need your help. They are in a situation in which they control a massive sum of money in a foreign country, but cannot personally access the funds for some official reason beyond their control. That is where you come in. They need to send the funds to you as a third party. Once you have the funds, you will be permitted to retain a large percentage of the money, sending the difference to them, or to some other third party.

The Proof

The story always includes a substantial amount of impressive documentation, signed by important and highly placed people, sealed with official seals, on government letterhead, with bank statements showing massive bank balances, contracts, promissory notes, letters from major corporations, bills of lading, trade agreements, wire transfers, and irrevocable letters of credit. Of course, all the documents are fraudulent.

The Hook

You will be notified that all of the money has been wired to you, but that it got held up at a major bank, usually in New York. There is a snag that must be overcome to have the money released to you. There is a small transfer fee, or duty, or an import tax that must be paid in order to obtain final release of the funds. In addition, they need additional information from you for tax reporting and identification purposes, such as account numbers, routing numbers, social security numbers, date of birth, or your mother’s maiden name. The bank, after all, must forward appropriate forms to you.

The Sting

Having given over all of your personal information, and having paid whatever sums were required to have the vast sums of fictitious money released to you, you have just become another victim. The thieves are long gone, with your money in their pockets, and a smile on their faces.

How can I avoid the scam?

The only way to avoid the scam is to see it for what it is long before the thieves set the hook. Apply the rules shown above.

(1) Is the deal too good to be true? The first notice will invariably attempt to suck you in by the huge pot of gold at the end of the rainbow. It is always too good to be true.

(2) Are you being pressured to act now? Usually, the pressure to act does not occur until the alleged funds are in transit to you. If hundreds of millions of dollars are waiting for you, and the only thing holding them up is your $80,000 check, if the thieves do not pressure you, you will undoubtedly impose pressure on yourself to get the deal done.

(3) Are you being asked to make an advance payment? There will always be money you must pay, or the deal goes away. The smarter crooks will save the hook for the very end.

(4) Are you required to pay by: cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is untraceable and irreversible? Thieves will invariably require that money be sent in irrevocable and untraceable form. They, in turn, will hide behind national boundaries, preferably with countries that have no trade agreements with the United States. Your efforts to undo what was done will always be futile.

(5) When in doubt, walk away. Reasons for doubt always exist in the first communication. When you receive such offers, do not respond.

For those prudent enough to follow this counsel, congratulations. You win!

Copyright © Gregory D. Lucas 2014

PRIMER ON FRAUD PREVENTION – Lesson #1

From time to time, the world provides sharp reminders that life can be ugly. For every fulfilled longing to achieve the American dream, there is at least one leech devising ways to strip the dream away. We cannot stop the world from producing scam artists. They hide under every rock. But with a little information, and a fair degree of discernment, one can at least make their work a lot more difficult and a lot less fruitful.

As technology becomes more sophisticated, scam artists invariably find ways to keep pace. But there are commonalities that are dead giveaways of an impending scam. Knowing the signals is always the first step to uncovering the fraud.

At birth, we were each given an implanted piece of equipment with batteries that last a lifetime. The best fraud detector on earth is the human gut. It has infinitesimal sensitivity, and is almost always accurate – provided the bearer learns to use it. Like a fine piano, it is usually in tune. The problem, of course, is that its use requires frequent disciplined practice, and the bearer must learn to correctly interpret the output.

The gut usually discerns if something is wrong. If it feels wrong, it probably is wrong. Every scam artist understands that, and knows that to be successful, they must overcome those natural defenses. They know that there is one certain way to insure that our internal equipment will never work: they persuade us turn it off. For that reason, every scam is designed to overwhelm us with data suggesting that the opportunity is so vastly greater than the risk that we stop listening to the gut.

How do they do that?

They start by overpowering us with deals that are too good to be true; with empty promises and guarantees supported by vapor, all tied to the requirement that we act now, without stopping to think, without seeking a second opinion, without passing go, and without collecting $200. The time pressure to act, and the risk of losing the “prize”, keeps us emotionally vested in the process. They cap the fraud off with the illusion that we are the ones in ultimate control.

By focusing on the enormity of the opportunity, while distracting us from the steady flashing warning signals, we persuade ourselves to short-circuit the gut; to turn it off.

The solution? Learn to listen. Tune out the opportunity. Tune out the arbitrary deadlines. If a deal is genuine, there is always time to get it right; to perform due diligence; and to get good counsel. If the deal is false, no crook will hang around long enough to learn the outcome of the due diligence.

Consider the plight of the wary bass. If it doesn’t bite something, it goes hungry. If it bites the wrong thing, it will find a nasty hook in the bait. The prudent bass will slow down, study all the angles, and determine the full nature of the bait. Then, only if the bait is right, the bass will test its authenticity.

The sly fisherman, who understands that instinctive caution, draws the bait away, such that if the bass does not act now, the opportunity is lost. (There is a reason it is called a “lure”.) The bass has a choice: let the target of opportunity pass, and live to swim another day, or strike fast without thinking before the bait is gone.

Like the bass, a primal urge induces us to strike fast. Every thief, and every marketer, understands that. And like the experienced fisherman, they draw the bait away to trigger the strike response. The bait is everywhere. “For a limited time, and a limited time only.” “For 2 days only.” “Sale ends today!” “While supplies last.” “First come, first served.” Some of those come from legitimate businesspeople selling needed goods and services. Some do not.

How can you tell one from the other?

First, ask yourself if the deal is too good to be true. If it is, let it go. If it is legitimate, another will pass by this afternoon. You will never regret the fraud that did not suck you in.

Second, evaluate the pressure you feel to act now. The greater the pressure, the more likely it is that a bottom-dwelling scum sucker is dangling it before you. Legitimate business opportunities virtually always provide the opportunity to conduct reasonable due diligence. If you must act now or lose the deal, lose the deal. You are no worse off by letting a good deal get away. You will be far worse off if you bite the thief’s hook.

Third, ask if you must make an advance payment of any kind. If so, walk away. Consider this, if you buy a bag of plums from your grocer, you pay and receive the benefit in the same exchange. Although thieves offer to do the same, you will not learn that the plums are paper maché until the deal is done and the thief is long gone.

Fourth, evaluate how you are asked to pay. There are certain clues that an offer may be fraudulent. If you are required to pay by cash, postal money order, wire transfer, Green Dot MoneyPaks, or any other method that is largely untraceable and irreversible, don’t bite. Let some other unfortunate bass take the bait.

You do not have to lose. Listen to the warning signals. If something feels wrong, it most assuredly is wrong. The simple corollary is that if something feels wrong, the opportunity is non-existent. If there is no opportunity, there is no reason to consider the scam. Result? You win.

I hate it when the bad guy wins. Don’t let the victim be you.

Copyright © Gregory D. Lucas 2014