When it comes to money and identity theft, there are a lot of different schemes and scams out there. Some of these schemes are designed to take your money, while others are designed to sell you something that you don’t need. It’s important to be aware of these schemes so that you can avoid them. Here are some of the most common schemes and scams related to money and identity theft:
1) Pyramid schemes
Pyramid schemes are scams that promise big profits for those who get in on the ground floor. The problem is, no real product or service is being sold. The only way to make money is by convincing other people to join the scheme. Eventually, the pyramid collapses because there are not enough people to keep it going. The first wave of victims loses the most money because they have invested the most into the pyramid. By the time the scheme collapses, most people have lost everything they’ve put into it. Pyramid schemes are illegal in many countries because they are unfair and deceptive practices that usually end up harming a lot of innocent people.
So, how can you avoid becoming a victim of a pyramid scheme? The best way to avoid becoming a victim of a pyramid scheme is to educate yourself about how they work and what red flags to look out for. Here are some things to keep in mind:
- You should never have to pay anything upfront to join a business venture or receive training. Any reputable company will not charge you anything to become an employee or distributor.
- You should never be pressured into joining something on the spot without being given time to research it first. A legitimate company will not try to force you into anything before giving you all the information you need to make an informed decision.
- Be wary of anyone who tries to downplay the risk involved in investing your money. All investments come with some level of risk, so be sure to do your own research before making any decisions.
- Find out who owns the company and where they are located. It should be easy enough to find this information online if it’s a legitimate company. If not, that’s a huge red flag!
- Check with your local Better Business Bureau or Consumer Protection Agency to see if there have been any complaints filed against the company.
- Be suspicious of anyone who promises you guaranteed returns on your investment or tells you that you can make a lot of money without doing any work. If it sounds too good to be true, it probably is!
- Use your common sense! If something sounds too good to be true, it probably is. Remember, if something sounds too good to be true, it probably is!
2) Ponzi schemes
A Ponzi scheme is a type of investment fraud that involves promising investors high returns on their investment with little or no risk. The funds raised from new investors are then used to pay purported returns to earlier investors. This creates the appearance that the investment is profitable when it actually isn’t. Ponzi schemes usually involve investments in products or services that do not exist, or they may involve fake investments with little chance of making any money. For example, in 2012, Bernard Madoff was sentenced to 150 years in prison for running a $64 billion Ponzi scheme in which he promised investors huge returns on investments in fabricated hedge funds.
The best way to avoid being scammed by a Ponzi scheme is to be an informed investor. Know what you’re investing in and research the people and companies involved. Be wary of investments that promise high returns with little or no risk, as these are often too good to be true. It’s also important to remember that if something sounds too good to be true, it probably is. When in doubt, consult with a financial advisor you trust before making any major investment decisions.
3) Advance-fee scams
Advance-fee scammers typically target small businesses or individuals who are looking for ways to make some quick money. The scammer will usually contact the victim by email or social media, posing as a legitimate businessperson with a lucrative investment opportunity. They’ll use fake names, websites, and even stolen logos to make themselves seem credible. Once they’ve gained the victim’s trust, they’ll ask for a sum of money upfront to get the ball rolling on the deal—hence the name “advance-fee” scam. They might promise that this initial investment will be returned twofold, threefold, or more once the deal is complete. In reality, however, there is no deal—it’s all just a scam designed to steal victims’ money. Victims of advance-fee scams often end up losing thousands of dollars. In some cases, they may even be asked to send more money as the “deal” progresses. The scammers will string their victims along as long as they can before eventually disappearing with all of the money.
The best way to avoid being scammed by an advance-fee scammer is simply to be aware that these types of scams exist and to exercise caution when dealing with anyone you don’t know online. Remember that if something sounds too good to be true, it probably is. Be especially wary of unsolicited offers or requests for upfront payments—legitimate businesses will never require you to pay anything before you receive goods or services in return. Also, take some time to do your research before doing business with anyone online. Look up their name and company website independently of any links they provide you with in their emails or messages. If their story doesn’t check out or if they refuse to answer basic questions about their business, likely they’re not legitimate. And finally, never wire money or send cryptocurrency overseas without doing your due diligence first—these types of payment methods are notoriously difficult (if not impossible) to get back once they’ve been sent.
4) Online dating scams
Online dating scams are when scammers use dating sites and apps to trick people into giving them money or their personal information. The most common type of online dating scam is catfishing, which is when someone uses a fake profile to attract victims. Catfishers will often create fake profiles on multiple dating sites and apps, using different names and photos, to cast a wide net. They will then start conversations with their victims, building up trust over time before eventually asking for money or financial information. Another common type of online dating scam is sextortion, which is when someone uses threats or intimidation to get money or sexual favors from a victim. They will often start by gaining the victim’s trust before asking for compromising photos or videos. They may then threaten to share these photos or videos with the victim’s friends or family unless they are paid off.
The best way to avoid online dating scams is to be vigilant about the information you share on dating sites and apps. Don’t give out your personal information, like your full name, home address, or work address, until you know someone really well. Once you have been communicating with someone for a while and you feel comfortable with them, you can start sharing more information about yourself. But even then, be careful not to share anything that could be used to steal your identity or scam you, like your social security number, credit card information, or bank account information. It’s also a good idea to do a little research on the person you’re talking to before meeting them in person. A simple Google search can often reveal a lot about someone, so you can get a sense of whether or not they’re legitimate. If you do end up meeting someone in person, make sure to meet in a public place and tell a friend or family member where you’re going. This will help ensure your safety in case anything goes wrong.
Some other things you can do to protect yourself from online dating scams are:
- Use a reputable dating site or app that has security measures in place to protect users’ information.
- Do a reverse image search of anyone you meet online before meeting them in person. This will help you see if they are using stolen photos.
- Be wary of anyone who asks for money early on in a relationship. If someone you’re “dating” online starts asking for money, they’re likely a scammer.
- Trust your gut! If something feels off about someone you meet online, it probably is.
5) Nigerian Prince scams
The Nigerian Prince scam is a type of advanced fee fraud. The scammer poses as a wealthy Nigerian prince or other official and promises a large sum of money in exchange for help with transferring funds out of Nigeria. The scammer will often ask for personal information, like your bank account number, to make the transfer. Of course, there is no money to be transferred and the scammer will simply disappear with your hard-earned cash once they have your information. This type of scam is also sometimes called a “419” fraud, named after the section of the Nigerian criminal code that outlaws it.
The best way is to simply exercise caution and common sense. Be wary of unsolicited emails or social media messages promising large sums of money. Remember that if something sounds too good to be true, it probably is. And never give personal information like your bank account number to someone you don’t know and trust.
6) Employment scams
Employment scams are when someone poses as a hiring manager or recruiter to take advantage of job seekers. They will often post fake job listings on job boards or contact potential victims directly via email or social media platforms. Once they have made contact, they will try to get personal information from the victim such as their Social Security number or bank account information under the guise of completing a background check or setting up a direct deposit. They may also promise the victim a large sum of money for very little work. In reality, these scammers are just trying to steal the victim’s money or identity.
The best way to avoid an employment scam is to be vigilant and do your research. If you’re contacted by someone claiming to be a hiring manager or recruiter, make sure that you verify their identity before sharing any personal information with them. You can do this by looking up the company’s website and finding the contact information for the HR department. Then, give them a call and ask if they have any record of the person who contacted you.
7) Lottery and sweepstakes scams
Lottery and sweepstakes scams typically follow a similar pattern. The fraudster contacts the victim—usually via email or social media—and tells them that they’ve won a large sum of money. Often, the scammer will spoof the email address or social media account of a legitimate organization, like a government agency or well-known company, to make the scam seem more believable. To collect their “winnings,” victims are usually instructed to click on a link that takes them to a fake website or are asked to provide personal information, like their Social Security number or bank account number. Once the fraudster has this information, they can use it to commit identity theft or empty the victim’s bank account. In some cases, victims are even asked to pay a “processing fee” before they can collect their winnings—which, of course, they never actually receive.
Fortunately, there are some things you can do to protect yourself from these types of scams. First, if you didn’t buy a ticket, you can’t win the lottery. So if you receive an email or social media message telling you that you’ve won a cash prize, it’s almost certainly a scam. Second, legitimate organizations will never contact people out of the blue and tell them that they’ve won a contest or lottery that they didn’t enter. And finally, never click on links in emails or messages from people you don’t know, and never provide personal information like your Social Security number or bank account number unless you’re absolutely certain that it’s safe to do so.
8) Fake charities
A fake charity scam is when a scammer creates a fake charity or impersonates a real charity to collect donations from unsuspecting people. Sadly, these scams are all too common; in 2018 alone, the Federal Trade Commission (FTC) received over 2,200 complaints about fake charities. And with donation season upon us, scammers will be working overtime to take advantage of kind-hearted people looking to help others. The best way to avoid giving your money to a fake charity is to do your research before you donate. Here are a few tips:
- Be sure to verify that the charity is registered with the appropriate state agencies and complies with state laws. You can find this information on the National Association of State Charity Officials website.
- Don’t give out personal or financial information until you’ve done your research and are confident that the charity is legitimate.
- Be cautious of charities that spring up overnight in response to current events or natural disasters. This is a common tactic used by scammers.
- Remember that you can always go directly to the source. If you’re considering donating to a relief effort for a natural disaster, contact the Red Cross or another reputable organization instead of relying on links sent to you via email or social media.
- Don’t let high-pressure tactics rush you into giving. A legitimate charity will be happy to answer your questions and give you time to make a decision.
- Watch out for charities that use names or logos that look similar to well-known organizations but are slightly different. This is known as “brandjacking” and is another common tactic used by scammers.
- Be skeptical if someone contacts you unexpectedly asking for a donation. Unless you have already permitted them to contact you, it’s best not to give them any money.
9) The pigeon drop scam
Pigeon drop scams are a type of fraud in which victims are convinced to withdraw money from their bank account and give it to the criminals to receive a larger sum of money. The scammers usually target elderly people or recent immigrants who may not be familiar with banking in the United States. Pigeon drop scammers typically operate in pairs or groups. One person will approach the victim and strike up a conversation. Once they have gained the victim’s trust, the second person will join the conversation and claim to have found a large sum of money. The scammers will then offer to split the money with the victim if they can help them withdraw it from their bank account.
Once the victim agrees, one of the scammers will accompany them to their bank and wait outside while the victim withdraws the money. The other scammer will then meet up with them and pretend to count out their share of the “found” money. In reality, they are counting out a wad of newspaper or Monopoly money. The victim is then given a phone number to call when they get home so that they can arrange to receive their share of the real money. Of course, when they call the number, there is no one there to answer.
The best way to avoid falling prey to a pigeon drop scam is to be aware of how they work and what red flags to look for. If someone you don’t know approaches you and starts talking about finding a large sum of money, be suspicious. Also, be wary if they try to hurry you into making a decision or if they ask you to keep the “opportunity” a secret. It’s also important not to set aside any personal belongings, like your purse or wallet, when you go to withdraw money from your bank account. Carry everything with you so that the scammers can’t sneak off with your wallet while you’re inside. Finally, never give your bank account information to anyone unless you trust them implicitly.
Identity Theft Scams
Skimming is a type of identity theft that occurs when criminals attach devices to ATMs or credit card readers to steal people’s personal information. With this information, they can make unauthorized purchases or withdraw money from your bank account. Skimmers are typically small devices that can be attached to card readers without being noticed. They may be placed over the top of the card reader so that they blend in with the rest of the machine, or they may be placed inside the machine where they are not visible to customers. The devices work by capturing the magnetic stripe data from the cards as they are inserted into the machine. This data can then be used to clone cards and access bank accounts. There are a few things you can do to avoid skimming scams:
- Be aware of your surroundings when using an ATM or paying with a credit card. If something looks unusual about the machine, do not use it and report it to the authorities.
- Cover the keypad with your hand when entering your PIN at an ATM. This will prevent criminals from attaching cameras near the machine to capture people’s PINs.
- Monitor your bank statements and credit card statements for any unauthorized charges or withdrawals. If you see something suspicious, report it to your bank or credit card company immediately.
- Never give out your personal information (including your Social Security number, date of birth, bank account number, etc.) over the phone or online unless you are certain that you are dealing with a reputable company.
Phishing scams typically start with an email or text message. The message might look like it came from your bank, credit card company, or another organization you do business with and contain fake links or attachments. If you click on the link or open the attachment, you might download malware without realizing it. Once the malware is installed on your device, it can collect your personal information, like account numbers and passwords. Or, the message might direct you to a fake website that looks real but is designed to trick you into entering your personal information. Once the cybercriminal has your information, they can use it to commit fraud, like making unauthorized charges on your account or taking out a loan in your name.
While email is the most common way these scams are carried out, scammers also use text messages (known as “smishing”), phone calls (“vishing”), and even social media sites (“spear-phishing”). No matter how the scam starts, the goal is always to get your personal information so the criminals can commit fraud. The best way to protect yourself from phishing scams is to be vigilant about the emails and texts you open and the links you click. Here are some tips from the FTC:
- Don’t open attachments or click on links in emails or texts unless you know who sent them and why they’re sending them to you. If someone wants you to open an attachment or click on a link, call them to confirm that they actually sent it before doing anything else. Hackers often spoof legitimate email addresses, so even if an email appears to come from a familiar sender, don’t automatically assume it’s legitimate.
- Be cautious of any unsolicited messages with urgent requests for personal information—these are almost always scams. For example, if someone claiming to be from your bank asks for your account number or password via email or text message, don’t reply—it could be a scammer trying to steal your money. Call the customer service number on your bank statement instead of responding directly to see if there really is an issue with your account that needs attention.
- Don’t enter personal information on websites unless the URL starts with https:// and there is a padlock icon next to it—this means the site is secure and less likely to be a fake site set up by scammers. You should also make sure anti-virus software is installed on all devices you use to go online and that it’s kept up-to-date at all times. This will help protect against malware attacks like phishing scams.
3) Shoulder surfing
A shoulder surfing scam is a type of fraud where criminals watch victims enter their sensitive information, such as credit card numbers or bank account passwords, and then use that information to steal their money. These scams can happen anywhere that people use their sensitive information, including ATMs, gas stations, retail stores, and even online. And because all it takes is for the criminal to stand close enough to the victim to see what they’re doing, these scams can be very difficult to spot. There are a few simple steps that you can take to avoid shoulder surfing scams:
- Be aware of your surroundings. If you’re using an ATM or entering your credit card information online, make sure that there’s no one standing too close to you who could be watching what you’re doing.
- Use your body to shield your information. If someone is standing too close to you while you’re entering your information, hold up a hand or an umbrella so they can’t see what you’re doing.
- Use a privacy screen protector on your devices. This will make it more difficult for someone to see your screen without being directly in front of it.
- Trust your gut. If something feels off or if you think someone might be trying to scam you, don’t hesitate to move away from the situation or ask for help from a nearby store employee or security guard.
4) Social engineering
Social engineering is the act of manipulating people into performing actions or divulging confidential information. A social engineering scam can take many forms, but all share the same goal: to trick you into giving up something of value, like your passwords, personal information, or money. The best way to protect yourself from social engineering scams is to be aware of the techniques scammers use and to know what red flags to look for. Below are some common social engineering techniques and red flags to watch out for:
- Impersonation: Many social engineering attacks begin with an email or phone call from someone posing as a legitimate person or organization. They may claim to be from your bank, the IRS, or even a friend or family member. Be suspicious of any unsolicited contact from someone claiming to be from a company or organization, especially if they’re asking for personal information. If you’re unsure whether the person contacting you is legitimate, hang up the phone or delete the email and contact the company directly yourself using a number or email address you know is real.
- Urgency: Scammers often try to create a sense of urgency to get you to act quickly without thinking. They may say there’s a problem with your account that needs to be fixed immediately or that someone is trying to gain access to your computer. Don’t let anyone rush you off the phone or pressure you into giving away your personal information.
- Threats: Scammers may also try to scare you into giving them what they want by threatening you with jail time, loss of money, or damage to your computer. Again, don’t let anyone bully you into giving away your personal information—hang up the phone or delete the email and report it as spam if necessary.
- Freebies: Who doesn’t love free stuff? Unfortunately, scammers know this and may use offers of free gifts or prizes as bait for their schemes. Be skeptical of any offer that seems too good to be true—it probably is.
5) Trojan horses
A Trojan horse, or Trojan, is a type of malware that is disguised as legitimate software. Trojans can be used to perform a variety of malicious tasks on a victim’s computer, including stealing sensitive data, stealing login credentials, and encrypting files for ransom. The term “Trojan” comes from the story of the Trojan War, in which the Greeks used a wooden horse to sneak soldiers into Troy. In the same way, Trojans are used to sneak malicious code onto victims’ computers. There are several things you can do to avoid becoming a victim of a Trojan horse scam:
- Only download software from trusted sources. If you’re not sure whether a website is trustworthy, do some research before downloading anything from it.
- Be careful when opening email attachments. If you don’t know the sender, or if the email seems suspicious, don’t open it.
- Keep your antivirus software up to date. Antivirus software can detect and remove Trojans, so it’s important to have an up-to-date program installed on your computer.
- Don’t click on links in unsolicited emails or texts. This is one of the most common ways that Trojans are delivered to victims’ computers. If you receive an unsolicited email or text with a link, don’t click on it.
- Be cautious when using public Wi-Fi networks. Public Wi-Fi networks are often unsecured, which means that if you connect to one, you may be opening yourself up to attack. When using public Wi-Fi, only connect to networks that you trust, and be sure to use a VPN if possible.
6) Malware and spyware
Malware is short for malicious software, and it’s any software that’s designed to harm your computer or steal your personal information. Spyware is a type of malware that collects your personal data without you knowing it. Scammers use malware and spyware to collect your personal information so they can commit fraud or sell your information to other scammers. They might also use it to hijack your computer so they can use it to attack other computers or spread more malware.
Malware and spyware scams usually start with an email or pop-up message. The message might claim that there’s a problem with your computer or that you need to install software to protect yourself from a virus. It might also say that you need to update your software or provide information to verify your account. If you click on the link in the message, you’ll be taken to a website that looks legitimate but is actually a scam. The website might ask you to provide personal information, download software, or take some other action that will install malware on your computer. Once the malware is installed, the scammer can do anything they want with your computer, including accessing your personal information, taking control of your webcam, or making it part of a botnet (a network of computers that can be used to launch attacks on other computers).
The best way to avoid malware and spyware scams is to be cautious about clicking on links in email messages or pop-up messages. If you’re not sure whether a message is from a legitimate source, don’t click on any links in the message. You should also only download software from websites that you trust. And if you’re ever asked to provide personal information online, make sure you’re using a secure website before entering any information. You can tell if a website is secure if the URL starts with “https” instead of “http.” Also, look for a padlock icon next to the URL. If you see both of these things, it means the website is using encryption to protect any information you enter.
If you think you have been a victim of identity theft, you should contact the Federal Trade Commission and file a report. You should also contact your local police department and file a report. Identity theft is a serious crime, and you should take all necessary steps to protect yourself from it. Sign up for one of the credit monitoring services to keep an eye on your credit report. This will help you to catch any fraudulent activity early and stop it before it does too much damage.
Find information on common scams and frauds that can happen to you at https://www.usa.gov/common-scams-frauds. To learn more about cryptocurrency scams—and how to spot and avoid scams generally—visit ftc.gov/cryptocurrency and ftc.gov/scams. Report scams to the FTC at ReportFraud.ftc.gov.