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Make Sure You Avoid These Financial Scams

Make sure you avoid these financial scams

If you’ve been a victim of financial fraud, you are not alone. Fraud is more common than you might think – if there is any financial activity or transaction involved, there is almost certainly some type of fraud involved.

According to the Federal Trade Commission’s (FTC) 2019 Consumer Sentinel Network Data Book, there have been 3.2 million consumer-reported cases of identity theft, fraudulent fraud, and phone and cellular service issues for a total of US $ 1.9 billion in fraud losses Dollars caused.

That’s almost a scam per 100 American citizens! Knowing the money scams commonly used today will help you spot the red flags of fraud.

Here are some scams you need to know about, how to spot them, and what to do if you are a victim.

1. Unemployment benefit fraud

Unemployment benefit fraud is a major problem, especially in times of economic uncertainty and unemployment. For example, tens of millions of workers turned to unemployment benefits for financial assistance following the COVID-19 pandemic.

The expected $ 600 weekly unemployment benefit – on top of state unemployment benefits – made these weekly payments a bigger target for fraud than ever before. According to the FBI, scammers filed fraudulent jobless claims with stolen identities. Fraudsters have purchased Personal Information (PII) online that was stolen due to a history of data breach, computer intrusion, email phishing schemes, and a variety of other sources.

With your information, which often requires no more than your full name, social security number and current address, a fraudster can claim unemployment benefits on your behalf and have the money transferred to their bank account.

How to avoid fraud

The first clue is a message from your state employment office. You can contact you or your employer directly for more information on unemployment entitlement. You may also notice unauthorized transactions on your bank or credit card statements related to unemployment or unsolicited requests regarding benefits.

Anytime you are contacted by an employment agency about a claim that you did not file, suspicious activity could ensue.

What to do if you are a victim

If you or your employer are contacted by the local employment office, never ignore them – be it by phone, mail or email correspondence. Do not give any information to the person who contacted you. This could be the scammer looking for more information.

Instead, do an independent online search for the employment office phone number. Contact the number provided on the official website to trace the call. Report that you have been contacted by the office about a claim that you believe is fraudulent.

Employment offices usually have departments in place to investigate fraud. Once they are involved, there is little else you need to do other than keep reporting new suspicious activity related to the false claim.

2. Income Tax Refund Scam

Income tax refund fraud has increased in recent years but has been widespread in the years when tax filing deadlines have been extended. Thieves will receive your identification information and then file a tax return with a large refund that will be deposited directly into the fraudster’s account.

Thieves can pull this off because they file at the beginning of the year like they did in February. If the registration deadlines are extended, fraudsters will have more time to prevent the theft.

How to Avoid Fraud

Unfortunately, you usually won’t become aware of this scam until you file your own income tax return and the IRS contacts you about a discrepancy. For example, you may have reported your actual information on your 1040 tax form, but the IRS will find that your return has been filed months earlier and a $ X $ refund has been paid.

Notifying them from the IRS isn’t a bad thing either – it means they noticed the discrepancy and that your best move is to get them involved as soon as possible.

What to do if you are a victim

As messy as this problem is, it’s actually one of the simpler scams out there. That’s because it has become so common that the IRS has an entire department dedicated to solving these problems. All you have to do is contact the IRS and get the process started – unless they have already contacted you in writing.

If you initiate the investigation into the discrepancy, write to them by registered mail. Due to the filing inconsistencies caused by this scam, the IRS may have a refusal of your tax return if you try to file it electronically. In that case, you can file IRS Form 14039 (Identity Theft Affidavit) with your tax return.

Remember, you will not be liable to the IRS for the funds distributed in the refund scam. You will also receive the tax refund you owe on your legitimate income tax return, although it may be delayed.

3. IRS lawsuit or arrest fraud

“This is the IRS. If you don’t pay right away, you will be sued or arrested.”

This may not be the exact wording you will see, but it is a common scam. The scammer usually communicates over the phone as a recorded message. You need to call a phone number and make an instant payment to avoid criminal prosecution.

Some people just stick to it and pay to avoid further threats or perceived problems with the IRS. It is a common fear that thieves take advantage of.

How to avoid fraud

Be aware of suspicious requests. According to the IRS, it will never:

  • Contact taxpayers via email, text, or social media to request personal or financial information – after all, that information already exists.
  • Call taxpayers threatened with lawsuits or arrests.
  • Call, email, or text to ask for taxpayers’ identity protection PINs.

If you come across any of the warning signs above, it is likely a scam.

What to do if you are a victim

The best strategy when you encounter this type of call: hang up immediately. This does not mean that the scammers will not call again or try to contact you from a different phone number. But it ends that particular conversation.

Whatever you do, do not give any information to a living person or call any phone numbers that have been provided. Scammers want to obtain personal information from you, and every conversation that takes place increases the risk that you will inadvertently provide that information.

4. Phishing scams

If you own a computer, there is a high possibility that you have been targeted by a phishing scam. In this scam, a scammer sends you an email masquerading as a financial institution or other authoritative agency. The message will ask you to provide personal information via a link in the email itself.

If you click the link, you risk exposing your computer to either a virus or malware, or ending up on a compelling, bogus website asking for sensitive information like your social security number, financial account numbers, and more.

The scammer uses the fake email to gain access to your computer or a financial account that you have.

How to avoid fraud

No matter how convincing an email might look, never click the links provided in the message. This is the most basic rule to follow, but it is not always the easiest.

Fraudsters can create near-exact replicas of correspondence or even websites of a bank or other legitimate company. One tip is the sender’s email address. If you look closely, it doesn’t come from the company’s legitimate domain name (the name after “@” in an email address).

For example, you might receive a real looking email from Charles Schwab. In this case, you can expect the sender’s email address to look something like this: “[email protected]charlesschwab.com”.

Instead, the sender’s email address is “[email protected]“or”[email protected]charleschwab.com”.

In this last example, note the misspelled domain name. These are signs that the email is spoofed. It’s even easier to spot when you’ve received a notification from a financial institution that you don’t even have an account with.

What to do if you are a victim

Don’t click links in a suspicious email. You don’t need your social security number, bank account number, or anything else about you because – if indeed legitimate – your information is already stored.

If you accidentally click a link or provide information, contact your real financial institution immediately to let them know what happened. They will freeze your account and likely give you a new account number.

You will also need to contact the three credit bureaus (Experian, Equifax and TransUnion) to request a credit freeze. This prevents fraudsters from getting new credit on your behalf. If you provided your Social Security number for a phishing scam, you may also need to get a new Social Security number issued by the Social Security Agency.

5. The Romance Fraud

Romantic scams usually happen through dating sites, but it can also happen when you meet someone in person. In this scam, thieves manipulate their victim into believing that the scammer is looking for a real relationship. They will work to earn your trust for weeks or even months, but eventually they will ask for money.

They offer what seems like a reasonable excuse that they need the money. For example, it might only be a few hundred dollars to help a family member pay a medical bill. This can be followed by requests for more money, usually in larger increments. Once the scammer is fed up with your money, the relationship mysteriously ends along with further communication.

How to avoid fraud

Anyone can be vulnerable to this type of scam, but be careful about the following:

  • The person does not reveal any specific details about their background.
  • You can never visit their residence.
  • They never meet their family or friends.
  • The person is reluctant to meet your family or friends (to avoid additional witnesses who can identify them to the cheating).
  • They find that they have more than one name.
  • They’ll ask you questions about your finances at the beginning of the relationship. The questions become more frequent and more detailed.
  • Money is requested with a promise of repayment. It is even possible for them to repay the first amount requested to gain your trust.
  • They usually have some sort of bad luck story to gain your compassion for.
  • You are confused about important details in your life even though you feel emotionally connected.

If you spot any of the details above, it’s fair to be on the alert. However, if you notice multiple issues, it can lead to some deception.

What to do if you are a victim

If you are involved in a love scam, report it to the police immediately. You can also contact a financial institution that the scammer may be aware of. For example, if you transferred money from your personal checking account to the fraudster’s bank account.

The fraudster may already have your routing number and personal account number if you wrote them a check. Contact your bank to immediately freeze your account and request a new account number.

There is no guarantee that the money you transferred to the scammer will be returned to you once the scammer disappears. To avoid this outcome, stay vigilant and watch out for warning signs when entering into a new relationship.

The bottom line

It is not always easy to spot a scam. The internet is making cheating even easier and thieves have become more creative in creating credible plans. Key elements that are usually present in a scam:

  • A request for personal information and / or
  • A request for money.

If you can look out for these two warning signs, you have a better chance of avoiding the most popular scams. For more formal and comprehensive fraud protection, you can:

By paying attention to the most obvious warning signs and using professional services for extra protection, you can avoid the worst that the scammers throw at you.


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