Financial SCAMS General Financial Literacy Learning OBJECTIVE Strand

Financial SCAMS General Financial Literacy

Learning OBJECTIVE Strand 4: Standard 4 E: Students will understand various financial scams, and how they can be prevented.

PHISHING

WHAT IS PHISHING? Attempt to obtain sensitive information ONLINE by disguising themselves as a trustworthy entity. Sensitive information includes: usernames, passwords, along with credit card details. Reason it is called “Phishing” is people would “bait” a person in an attempt to catch them. Usually they would try to reach you by email or instant messaging.

Primary VIctims Anyone who uses the internet. Especially for shopping. Social network users are another likely target.

Phishing emails/websites Many scammers send fake emails trying to elude you into freely giving your personal information to them. They will also disguise their fake website, as a common website. SEE NEXT SLIDE FOR EXAMPLE.

Explanation/Prevention: Youtube video: https: //www. youtube. com/watch? v=R 12_y 2 Bh. Kb. E

PREVENTION: 1)Keep informed about Phishing techniques. 2)Think before clicking 3)Install an anti-phishing toolbar 4)Verify cites security 5)Check Online accounts regularly 6)Keep Browser up to date 7)Use Firewalls 8)Be wary of pop-ups 9)Never give out personal information 10)Use antivirus software

SOURCES: http: //resources. infosecinstitute. com/category/enterprise/phishing/the-phishinglandscape/phishing-targets/#gref http: //www. phishing. org/10 -ways-to-avoid-phishing-scams You. Tube. com Google Images STUDENTS: By: Randon Aneo, Micheal Kelsey, Jared Burton, Magnus Moulton

INTERNET/PHONE SCAMS

Definition TELEPHONE: ● any type of scheme in which a criminal communicates with the potential victim via the telephone. ○ Victims have difficulty distinguishing between reputable telemarketers and scam artists. INTERNET: ● the use of Internet access to defraud victims or to otherwise take advantage of them. ○ Internet crime schemes steal millions of dollars each year from victims and continue to plague the Internet through various methods.

PREVENTION- SEE PREVIOUS SCAM FOR INTERNET PHONE: 1. Make sure that the website is real and not a scam to get your information. 2. Never send cash or money grams it’s most likely a scam and you will lose your money. 3. Always ask who is calling you and what is the offer for. If they are abusive or rude report them 4. If they are speaking fast and not giving you a chance to write down the information it’s a scam. 5. If they’re calling out of service hours which are only between 8 a. m. and 9 p. m. . 6. Ask yourself why are you paying for something if it’s free? 7. If it’s a robocall hang up 8. NEVER give someone your credit/debit card information, checking account, social security, or any kind of private information.

PRIMARY VICTIMS ● A common and susceptible victim to these scams is seniors. ○ Many of them simply haven’t been exposed to the threat of scams as younger people have, especially on the internet. ○ However, a recent study shows that millennials and Gen Xers tend to think of themselves as invulnerable, which can make them more likely to fall for the scams.

REAL LIFE STORIES: PHONE: https: //www. youtube. com/watch? v=Vc. Yvb. XIb. P_c INTERNET: https: //www. youtube. com/watch? v=4 yej. Ywca. ITA

SOURCES https: //www. fbi. gov/scams-and-safety/common-fraud-schemes/internet-fraud https: //www. law. cornell. edu/wex/phone_and_telemarketing_fraud https: //www. inc. com/joseph-steinberg/warning-millennials-and-gen-xers-are-morevulnerable-to-scams-than-senior-citiz. html https: //www. consumer. ftc. gov/articles/0076 -phone-scams Sylvia Page, Christopher Salinas, Vasti Pineda, Kelly Marin

Insurance Fraud

Definition Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an insurance process. It most commonly occurs when insured individuals lie to seek more compensation for losses.

components: Know the difference● Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to receive payment for damages. ● Soft fraud, This type of fraud consists of policyholders exaggerating otherwise-legitimate claims. ○ For example, when involved in an automotive collision an insured person might claim more damage than actually occurred. ○ Far more common than hard fraud. ○ Sometimes also referred to as opportunistic fraud.

prevention: ● Be an informed consumer ○ Be aware of what insurance fraud is and what it looks like ● Aggressive criminal prosecutions (deterrent) On the other hand: ● Know your agent or broker to make sure they are trustworthy ● Always get a proof of payment ● Pay only for services you have received

Primary victims Anyone can be a victim. Virtually all insurers now use anti fraud technology, and 76 percent of respondents said that detecting claims fraud is the primary use of their anti fraud technology. That being said there is no way to confirm it to be 100% avoidable.

REAL LIFE EXAMPLE Marc Thompson burned down his house and mother to fake a suicide. His story was that his mother tried to commit suicide and burned down their house. Instead what happened was he filled the basement with gas or something, got his mom down there and lit a match. He was hoping to get 730, 000 from insurance and life insurance from his 90 yr old mother. Now he has a roof over his head and food to eat whenever. He sleeps in a bed and has a place to breathe. This place is called

Clayton daniels was already on the run from the law when he and his wife molly dreamed up the perfect disappearing act: they dug up the grave of an elderly woman named Charlotte Davis, dressed her in Clayton’s clothes, put her body in his car, set it on fire and pushes it off a cliff. Their goal: to fake Clayton's death so molly could collect on his $110, 000 life insurance policy. Unfortunately for the daniels, the insurance company insisted on a DNA test (it didn't match, naturally), investigators found that the fire had started in the driver's seat, and oh yes- Clayton had resurfaced several weeks later with dyed hair and a mustache. both his girlfriend and him got several years of jail time. Real life example

Sources ❖ https: //www. nerdwallet. com/blog/insurance-fraud-prevented/ ❖ http: //www. dfs. ny. gov/consumer/fd 5 victc. htm ❖ http: //www. bankrate. com/finance/insurance/8 -extreme-cases-of-insurance-fraud-1. aspx ❖ http: //criminal. findlaw. com/criminal-charges/insurance-fraud. html By Lillian Willis, Bug Peoples, Tori Koch, Marshall Broyles, and Allyson Katana Urry

PREDATORY LENDING

DEFINITION -lending that convinces the borrower to accept unfair loan terms.

COMPONENTS -Emphasizing payment- The Most common tactic- that is all they focus on when discussing with you -Balloon Loans- Provide borrowers with a small monthly payment for the majority of the loan. The borrower however is only making payments to cover the monthly interest. So the principal of the borrower's loan is never addressed until the last payment. -Packing- When a lender packs extra things into your loan without you knowing. Mostly used in insurance. -Excessive Points and Fees- Charge excessive points and fees on loans trying to profit from it. -Large Mortgage Broker Payment- Lenders will overpay the mortgage brokers so that the broker will be influenced to bring customers to the lender

PREVENTION 1. Ask questions. 2. Shop around. 3. Be an educated consumer. 4. Always read before you sign. 5. Avoid balloon payments. 6. Avoid prepayment penalties. 7. Know your rights. 8. Don’t hesitate to say “No”. 9. Be prepared—build your credit. 10. Be wary of targeted practices.

Primary victims ● Elderly ● People in need ○ Emergency situations ● Those who do not speak great English

EXAMPLE: https: //www. youtube. com/watch? v=xk 1 l. G 3 J 3 bv. M

SOURCES: https: //www. mortgage 101. com/article/5 -examples-predatory-lending s: //www. splcenter. org/20130227/easy-money-impossible-debt-how-predatory-lending-traps-alabama’s-poor https: //www. youtube. com/watch? v=xk 1 l. G 3 J 3 bv. M http: //blog. amerihopealliance. com/blog/are-you-a-victim-of-predatory-lending By: Torrie, Abby, and Macey

Pyramid schemes

Definition A form of investment “illegal in the US and elsewhere” in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Components Focus is on recruiting, rather than selling a genuine product.

prevention: ■ ■ ■ Look out for promises of high returns in a short period of time Examine whether a genuine product or service is being sold Ensure the emphasis isn’t on recruiting Know where and how your money is going to be invested Keep track of how the investment is doing Determine if the investment sounds “Too good to be true” Beware if you are promised high returns Don’t invest if you are told there is little to no risk Be cautious if you are told it is a once in a lifetime opportunity Analyze the prospectus Ask about the exit strategy before you invest Make small investments

Primary victims ● Investors and potential incoming investors are generally the victims. ○ The only way someone will make money is if they brought in other investors/workers

EXAMPLE: Pyramid scheme example: office http: //economicsoftheoffice. com/all/? id=21 Difference between Pyramid and Ponzi Scheme: https: //www. youtube. com/watch? v=p 6 teekj. Sp 9 I

SOURCES: https: //www. salon. com/2013/05/23/how_i_ended_up_in_a_pyramid_scheme/ https: //www. youtube. com/watch? v=p 6 teekj. Sp 9 I https: //www. fbi. gov/scams-and-safety/common-fraud-schemes/pyramid-schemes https: //www. investor. gov/investing-basics/avoiding-fraud/types-fraud/pyramid-scheme https: //www. investopedia. com/articles/investing/091115/6 -ways-avoid-investment-ponzi-scheme. asp

PONZI SCHEME

DEFINITION: The scammers promise investors high returns and little risk. However, they use the investment money from new investors to pay back the old investors, and even keep some for themselves. New investor money is used to pay earlier investors, making it appear as if the investment is successful and legitimate.

COMPONENTS: This kind of scheme usually collapses quickly due to its nature of constantly paying off and taking on debt. None of the people involved get what they signed up for and is, therefore, an unsuccessful form of investing. Look out for: ● ● Above-market return promises Illegitimate appearance Exclusivity (you can only invest if you meet this standard) Investor greed

PREVENTION: According to U. S. Securities and Exchange Commission, “The SEC sees too many investors who might have avoided trouble and losses if they had asked questions from the start and verified the answers with information from independent sources. ” Here are some questions to consider when presented with a new investment opportunity. ● Is the seller licensed? ● Is the investment registered? ● How do the risks compare with the potential rewards? ● Do I understand the investment? ● Where can I turn for help? Asking these questions before making investment decisions could help to avoid Ponzi Scheme.

PRIMARY VICTIMS A Ponzi Scheme can affect anyone who is interested in investing. It can affect: ● ● New investors Experienced investors People with any level of income People who have fallen victim to other frauds ○ Fraudsters often share details about people they have successfully targeted ■ These people are also vulnerable to fraud recovery fraud

REAL LIFE EXAMPLE: Many people were found to have lost money through the real estate business, Shiloh Management. One man invested his money in this business for five years. Through this, he had earned a large amount of money for his trust. Although it started well, the investments turned upside down $1, 970, 000. He is not the only one who lost money, another man lost $750, 000 with many other accounts as well.

SOURCES “Ponzi Schemes. ” SEC Emblem, 9 Oct. 2013, www. sec. gov/fast-answers/answersponzihtm. html. "Ponzi Scheme. " AICPA, 2001, https: //www. aicpastore. com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2014/FVSNews/Ponzi_ scheme. jsp. Anonymous. “Ponzi schemes. ” Action Fraud, 5 Aug. 2014, www. actionfraud. police. uk/fraud_protection/ponzi_schemes. "Ponzi Scheme. " Investor. com, https: //www. investor. gov/protect-your-investments/fraud/types-fraud/ponzi-scheme. By Garrett Kolling, Hannah Dunn, Mckel Peterson, and Ariana Rhodes

Affinity fraud

DEFINITION ● Affinity fraud targets specific groups of people, such as the elderly or religious communities. ○ The people involved in fraud are a member of that specific group, or pretend to be.

COMPONENTS ● Scammers will try to acquire the help of the leader of the group to spread the word about the investment scheme. ○ In this instance, the leader becomes an unwitting pawn in the fraudulent scheme. ● The fraudster will usually promote the “Ponzi” or pyramid scheme. ● The tight-knit structure of these groups is exploited through this type of fraud. ○ Victims turn to others in the group to resolve issues rather than contacting authorities or seeking legal help.

PREVENTION ➔ Check out everything - no matter how trustworthy the person seems who brings the investment opportunity to your attention. ◆ Be aware that the person telling you about the investment may have been fooled into believing that the investment is legitimate when it is not. ➔ Don't be pressured or rushed into buying an investment before you have a chance to think about - or investigate - the "opportunity. " ◆ Just because someone you know made money, or claims to have made money, doesn't mean you will, too. ➔ Be skeptical of any investment opportunity that is not in writing ◆ Fraudsters often avoid putting things in writing, but legitimate investments are usually in writing. Avoid an investment if you are told they do "not have the time to reduce to writing" the particulars about the investment. ➔ Do not fall for investments that promise spectacular profits or "guaranteed" returns. ◆ The greater the potential return from an investment, the greater your risk of losing money.

Primary victims ● Identifiable tight knit groups ○ Religious or ethnic groups ○ Language minorities ○ Elderly ○ Professional groups

REal world example Bernard Madoff’s $50 billion Ponzi scheme, which devastated big institutions and families of the American Jewish community. Madoff’s victims were not random, he targeted the wealthy jewish community and several Jewish Charitable organizations. Such crimes would not have been possible without the cultural ease and social entre Madoff enjoyed in the Jewish community. To put a name on things, this was one of the worst affinity frauds in American history, whereby people exploit their cultural connections and people’s communal identities to rip them off. In that sense, Madoff’s crimes were a warning to everyone about how in-group feelings of trust leave people vulnerable.