Today it seems that you can’t turn on the television or open a newspaper without hearing a warning about a fraud alert after dozens of unsuspecting victims have already been hurt. The Bernie Madoff case is one of the most blatant of these schemes, but there are thousands of similar frauds and scams occurring daily. Even if you think you would never fall for one of these deals, you shouldn’t become so complacent that you fail to recognize the warning signs. Law enforcement agencies such as the FBI publicize tips of which you and your family should be aware.
The type of fraud with which Madoff made his billions is known as a Ponzi scheme. This scam promises to pay out unusually high dividends or returns on investments. However, it pays early investors with the money invested by later victims. Eventually the scheme collapses when there aren’t enough new investments coming in to pay the dividends promised. You can avoid falling for a Ponzi scheme by carefully and thoroughly checking potential investments. Even if you think you know and trust the people who are doing the investing, it’s a good idea to run the idea by an unbiased third-party financial advisor. This is known in the business world as due diligence.
Health care fraud scams are another type of rip-off that are often aimed at senior citizens. Medicare scams occur when a company promises to provide a medical procedure or a piece of medical equipment to a victim at little or no cost. One simply has to give the company his or her Medicare number. The company then fraudulently bills Medicare for the procedure or equipment, which the victim usually doesn’t receive, using paperwork with a forged doctor’s signature or one from a doctor who has signed it illegally. The best way to avoid Medicare fraud is to refuse to give your number to a company until the procedure has been performed or the equipment is received.
Identity theft targets everyone today, even if you think you’d never be a victim. Research has shown that the affluent as well as women are often more likely to suffer one of the most common types of fraud scams. You may think that an identity thief must have to work hard to get banking or other financial information, but in many cases, the victim willingly shares it with him. The news is full of stories about websites that mimic your bank and ask you to confirm your account information or scammers who “fall in love” with you through an Internet dating site then ask you to send them money. You can avoid these types of scams by carefully checking your financial records on a regular basis and refusing to deal with people who approach you online asking for your financial information.
Companies can also be victims of fraud. It is just as important for business organizations to avoid common frauds and scams. Large enterprises can be slower to recognize when fraud has occurred because of the sheer scope of their accounting ledgers. Losing money to a fraudster is just one potential threat to businesses. Your organization may unknowingly go into business with perpetrators of fraudulent crimes, which can make you an accessory to those criminal activities. Individuals and organizations should hire anti-fraud consultants to conduct extensive due diligence research on potential new business deals and investments.
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