How to Protect Yourself from Financial Scams?

Frauds and financial scams have become common place and there are few days when you don’t hear about a fraud, scam or a cheating case. We become victims of numerous crimes ranging from small thefts to large white collar scams (like the Satyam case). Even the intelligent and educated have fallen into these traps and have been ruined. So be aware!

Have you ever received emails and postal mails saying that you have won an “an astronomical bumper prize” and to collect that winning money, you just need to “pay a small fee” to process the winning amount? Beware these are financial scams. Any body can fall in this trap of financial scams.

Similarly there are products like fixed deposits offering over 20% interest p.a., trading or investment tips, multi-level marketing, pyramid schemes, etc.

Many innocent people have lost huge amount of savings or sometimes their life savings by getting trapped in fraudulent schemes.

Questions

The key questions that you might be thinking of are:-

What to do if I’m trapped in to one of these financial scams?
How can I safeguard myself from these financial scams?

I’m Cheated. What next?

If you are already trapped or duped by someone or some entity, the only remedy is to approach your nearest police station and file a complaint.

You cannot be sure if you will get relief, but atleast if you take the step, then the message spreads and the people around you will be more alert and vigilant. You will also be saving hundreds of other people from suffering loss and make them aware of financial scams.

Important

In case your transaction in the bank or credit card is not processed and you discover the fraud then you can block the card over phone using phone banking facility.

This timely action will block the money from moving to the fraudster’s account. One the money moves to the fraudster’s account then the process of getting it back can be lengthy and complex. Probably you may lose it forever.

Share your Grievances

Most people who get cheated feel so bad or disappointed that they try to hide the financial scams incident(s) from their family or friends. Some people feel that their image or status symbol or stature will come down if others come to know about how they were cheated.

Due to this most people hide this fact and this works well for fraudsters. One can easily be duped by financial scammers who would usually fool consumers who are unaware that it is not legal to charge a fee for obtaining a loan.

When you share your bad experience you also educate other people and help spreading awareness. You help hundreds or thousands of people from doing the same mistakes.

So spread the message about financial scams without hesitation. Spreading more awareness will result in plugging such crimes because as more and more people become aware the fraudster will not be able to cheat more people. Although you cannot put an absolute end to this you can definitely help minimize the crime and damage.

How to prevent getting in to financial scams?

There are several strategies used by fraudsters to tempt people using the bait of an irresistible offer that no one would want to miss. Once a person gets trapped by giving his or her personal information or by paying for a product/service/scheme the fraudsters disappears with the money.

If one follows a few guidelines the changes of getting cheated can be minimized or even eliminated.

1. Do your research before signing up or making purchase

The first step is to be aware and do your homework before you buy a product or service. You need to know how the product or scheme works, its benefits, risks, etc so that you don’t have nasty surprises later on.

There was a scam where a Relationship Manger of Citibank duped his clients. You can read about this at NewsOneIndia

2. Beware of sharing personal information

When you share personal information there is a high risk of becoming a victim of ‘identity theft’. In short someone can use your identity to sneak in to your account, access personal information or even withdraw or spend money. Personal information it includes a wide gamut of things like

Usernames, Passwords
Bank A/c details
Credit Card details
ATM PIN
Other Personal Information

Although you cannot be smart enough to conceal all personal information the above details have to be safeguarded. Remember that there are several fraudulent websites and hackers who are eagerly waiting for you to punch your credit card info. Fortunately, this is lesser today as most banks require 2-3 layers of authentication before you complete any transaction.

Lottery scam

These are the typical mails which tell you that you won ‘X’ million and later instruct you to pay a service fee to claim the bumper price. This is a scam!

Routing Illegal transactions

Some fraudsters use your bank account for routing high value illegal transactions. If you allow these to happen, chances of getting arrested or going behind bars cannot be ruled out.

Phishing

This is another trick on the internet where hackers create a website that exactly looks like your bank’s home page.

They mail says that the bank is undergoing some technology upgrade and requires you to confirm your account details to update its client database.

Further, the mail will instruct you to click on a link and give your user name, password and other details. Once you follow the instructions the fraudster gets access to your account, uses it and goes scot free.

3. Spend time on documentation and procedures

Most people find it too boring to spend time on filling forms or documents. They either rely on the Sales Executive to do it for them. Invariably the customer just signs the forms and the Sales Executive walks away saying that he will take care and fill all the details. Don’t do this!

If you are short of time just fill up the important details and leave the rest to the Executive. This will ensure that atleast the critical information is known to you.

I don’t understand why people try to save a few minutes acting as if they are going to miss a million dollar deal by saving that time. Instead they end up with wrong product, wrong features, loss of thousands of bucks if account is misused.

Similarly signing blank documents or blank cheques is a strict No-No.

4. Review your statements

Its important to check your bank account statements, credit card statements, etc. Today this is much easier sine you have online access. If you are getting monthly statements please review it once to see if all the transactions are in order and are in line with your budgeted expenses.

If you find any suspicious transactions or purchases which you have not made, please report the same to the bank ASAP. Quick action can eliminate or minimize your loss.

Even if you don’t suspect any frauds/financial scams, you have to do this to check your budget and spending pattern.

5. Don’t get Tempted by Super Normal Returns

You need to have common sense as well as some financial knowledge to know if a particular product or scheme is genuine or fraud. Here the basic logic is high returns come with high risk. When you lower the risk the expected return will also come down, and when you seek greater returns be prepared to take risks.

If some special offers a fixed deposit with 24% returns per year, probably its something fishy. Stay away however attractive it may be.

Even if you miss you only miss an opportunity, but once you invest you will not only lose returns but also lose your principal (which is your hard earned money).

This is not hypothetical but real because several finance companies have offered high-interest bearing deposits and ambiguous schemes and vanished.

The question you must ask is “What business does the company do?”, “How do they make money or profits or returns?”. If they offer you 24% returns then obviously they must be making much more returns in the region of 28% or higher, if it were a legitimate business.

If they have the ability to earn more than 24% then they should be easily able to get bank or finance options.

The Lesson – Financial Scams

To cut the long story short, lets put our lessons in a lighter humorous way. Why would someone tell you that you have won a lottery when you have not bought one in the first place? (Or) Why would a company attract deposits (or borrow) from you at 24% p.a.? Similarly, there are dozens of get rich quick schemes launched every now and then with special offers.

Don’t get fooled by their limited-time offers or claims that you will lose the next billion dollar opportunity. These are all financial scams and another dirty trick to make you pay in advance and vanish as soon as the money is received.

At the end of the day, the lesson is to stick to your basics and what you are good at rather than trying to speculate or gamble in lotteries, online business, etc.

Genuine ways of investing are rather boring and yield returns overtime, which is true even in other aspects of life. So have patience and do your karma (duties) and the returns or fruits will follow.