7 ways to deal with Financial Fraud traps

Hey everyone,

Below is a blog piece from a friend of mine named Amy Matt. She gives us 7 different traps that criminals use with regards to financial fraud. Enjoy and as always thank you for reading!

Hi! I am Amy Matt and I am a writer who is always seeking frugal ways to cut down on budget and save more. Please visit me here for saying hello.

7 ways to deal with Financial Fraud traps

You are being targeted. Do not doubt it. If you have an identity, and if that identity is in any way tied to even the smallest amount of money you are part of an enormous market ripe for fraud. An insightful understanding is needed to protect yourself, and understand how fraud begins so you can stop it before it effects you.

Understand The Origin Of The Tactics

Do not doubt the sophistication, and effectiveness of tactics used to target and influence victims. What many consumers do not understand is that they are subject to these tactics every day because they are used by legitimate businesses in their marketing, advertising, and customer service tactics.

False Promises

Fraudsters use the shiniest, most enticing, and heavy bait they can to ensnare you. Promises of risk-free investments with huge returns are all that is needed to snag your interest. After that they draw you in with terminology you know and understand, and are able through countless hours of research to bypass nearly every retort, and address every concern.

Their tools consist of phone calls with “brokers”, hard copy, like pamphlets and letters, and digital tools like presentations, webinars, emails, and websites. They know who they are targeting, and how to address that target using images that appeal to you psychologically.

Don’t get suckered in. Take the time to think through the proposal. Is the pitch about ethereal promises like massive returns? Does it include guarantees, or lifestyle changes? If so those are your red flags. During the interaction keep in mind that ALL investments carry some risk.

Urgent! Act Today!

You may have been down this road. I recently had a problem when I went shopping for a business grant from the Federal government. I dropped some information into a few websites to see what I could get. Twenty minutes later I received a call. He took only my name, acted like he was running me through a database, and then dropped the bait.

“You qualify for a $50,000 business grant that you will never have to pay back!” (as if I did not understand a grant). He sounded excited. I was excited. “All you need to do now,” he continued, “Is send $500 for processing and law fees, we have Western Union, and you will have your grant in days.” A red flag went up. He wanted $500, and he didn’t even bother getting to know me, or my desires. He mentioned Western Union, which is a favorite vehicle for fraudsters.

“Okay,” I replied, “But I am going to have to talk to a friend of mine, and call you back.”

“You have to hurry. The time period for the granting of Federal funds ends today at 5 PM Eastern Standard Time. After that you will have to wait another year before you can qualify again.”

As I hung up the phone all I could think with a wiry grin on my face was, “What a coincidence that I’d go shopping for business grants on the last day I could qualify.” Urgency is one of their most highly effective tools.

I had recently had a conversation with a colleague from Forths Forensic Accountants in the UK about fraudulent tactics, so I was on guard . . . this time. When I didn’t call the fraudster back he rang me again, but I didn’t answer. I never heard from him again.


Credibility is attained through hard work, service, quality, consistency, and integrity. When a company tries to sell you on its credibility that is a problem. When they tout experience, or credentials – red flag. When they try to sell you on how successful they have been personally, and their great Aunt Martha, and half the Chamber of Commerce, they are reaching.

If the pitch is focused on other “savvy investors like yourself” – think twice. Do not let others do the thinking for you. Investing is a personal decision.


Scams tend to show up with more prevalence during tax season. There are phony tax payment checks. These fraudsters sell financial instruments that appear to be checks to pay a specific liability or debt. The instrument itself is called a sight draft, and it is worthless.

Beware the offer to help you achieve tax relief by following advice to deduct all your personal expenses as business expenses by setting up a bogus home-based business. Remember that a business must be legit, with profit motives, and a clear purpose before your expenses can become deductible. Otherwise you are committing tax evasion, and paying your advisor to help you break the law.

Finally watch out for the fraudulent IRS agent who shows up at your door. He will try to intimidate you to write a check in the moment. Do not do it. Ask for proper identification, a picture ID, and at least one other credential. Remember that the IRS is a bureaucracy, and acts as a bureaucracy, giving you plenty of warning if they intend to visit. Lock out the imposter, contact your local police, and then call the Treasury Inspector General’s Hotline at 1-800-366-4484.

The New Businesses

It is always desirable to get in on the ground floor of the next big thing. In January this year it became legal for marijuana to be grown, sold, and used in a number of states. Overnight, seemingly, the next big business exploded onto the scene. If you intend on touching this business be warned – scams abound.

Watch for pitches that arrive via fax, email, text message, or appear in infomercials, webinars, blog posts, or tweets. Fraudsters throw out the line with optimistic, and aggressive statements designed to create heavy demand for shares of a marijuana distribution company with little to no history of financial success. They have not had the chance to get off the ground, yet.

Because the business is new it is ripe for an investor bubble. The Internet bubble is a fine precedent to consider. New, promising, and yet only the strong survive, and thrive. The scheme is designed to make plenty of cash off an inflated share price by dumping the shares the fraudsters own, thus ruining your savings. Learn from the past.

Markets Can Be Manipulated

There are warning signs that you are dealing with a fraudster trying to scam you. Ask yourself, “Why me?” Who is this total stranger trying to sell me on a great investment opportunity? Likely someone whose sole interest is their own profit. Consider the source. Exaggerated claims are easy to make. If a company releases a large amount of press releases and promotions in a short period of time, they are likely trying to pump up the stock price. Steer clear.

You’re smart. Do your research! If you can get the names of key officials and the major stakeholders, and the name of the company you can turn up some dirt. Avoid this dirt: convictions, corporate name changes, articles of an investigative nature, or any other information that raises a red flag.

“Most unsolicited spam recommendations involve stocks that do not trade on the Nasdaq Stock Market, the New York Stock Exchange, or other registered national securities exchanges. Instead, these stocks may be quoted on an over-the-counter, or OTC, quotation platform like the FINRA-operated Over-the-Counter Bulletin Board, or OTCBB, and the platform operated by OTC Markets Group” (Financial Industry Regulatory Authority, www.fool.com, 2014).


Be disciplined. Remember that what is at stake is your future, your financial well-being, your nest egg, your retirement, and years of your time. Your capital is not worth gambling. Just like Warren Buffet did not get super wealthy making crazy bets and winning, you will not succeed taking careless moves with your money. Stay healthy financially for your own sake, and for the sake of your family.



Financial Industry Regulatory Authority (2014, January 19). Marijuana Stock Scams. Retrieved March 25, 2014, from http://www.fool.com/financial-advice/2014/01/19/marijuana-stock-scams.aspx?source=isesitlnk0000001



Share this post :


4 Responses

  1. My brother jumped on the marijuana business wagon by investing in legal companies on the stock market. He avoided any scams that way; he just didn’t want the opportunity to pass up. I feel like I could smell a scam a mile away, but maybe not. I guess there still are scams out there because they are successful with some people.

Leave a Reply

Your email address will not be published. Required fields are marked *