Five Ways To Avoid The Top Money Scams

Five Ways To Avoid The Top Money Scams

John Wasik , 

Contributor

Oct 23, 2013 @ 05:13 PM

Americans lose some $50 billion from swindlers peddling products every year. Many of these frauds could be avoided if more of us cast a skeptical eye on how the products are being offered.

I recently received a series of emails from a reader describing one of the most convoluted and troubling stories I've heard in some time.

"My 82-year-old mother bought [Iraqi] Dinar about 6 years ago.  A friend of hers told her that their entire church had invested in the Dinar and it was going to make everyone a millionaire very soon.  She didn't buy a lot of it, but spent about $6,000.  She even got me to put in $1,000.  I have it still sitting in my little safe.  Its fun to look at but I have set my expectations fairly low on this currency ever making me a millionaire. After the stock market took most of my investment in 2008, I decided hard work tended to yield better results with my investments!

A few days ago my brother contacted my mother and told her that he had gotten an inside scoop regarding exchanging the Dinar.  He said that he was told that the US government was currently converting the dinar at an exchange rate of $8.  I questioned this as it just didn't seem to make sense.  I mean isn't the government kind of broke right now?  He is not sure either, but says that he is being told this is a definite fact.  At first she was told that she had to fly to Reno, Nevada but that has since changed and now it is to a military base in Washington DC?  So close to the capital!   When I google Dinar Scams - Reno pops up so I am inclined to think that this is just a new location for an old scam.

I have told both my brother and my mother I think this is a scam.  That they will take her passport and her identity.  They will give her back fake Dinar that will look like the real one.  They will then re-sell her Dinar and make a few thousand. But the real bonus is having her identity as well!"

There are a number of fuzzy details that make this set-up even more bizarre, but it smelled fishier than a Maine trawler, so I told her to call law enforcement authorities. She then called the FBI and enrolled her mother in an identity protection service.


"When I spoke to the FBI, they were unaware of the Iraqi Dinar scam (it was kind of like calling in to some local hotline and not terribly helpful).  But the guy I talked to said that typically after the scammers have all the identity information, they fade out of the picture as far as making good on their promise. Right now, the good news is that she is not going to travel to DC as there has been no contract presented for the Dinar purchase.  And so far, no movement on her identity.  I'm just holding my breath...."

My advice to this reader was simple: Avoid these people!

Although there are plenty of legitimate Iraqi Dinar dealers, (they are all over the Internet), if you have to go to extraordinary means to buy the currency, that's a huge red flag. No identity information should be necessary. While I can't independently verify my reader's experience, it raises a number of red flags.

How to Avoid Scams

Swindlers prey daily on the most vulnerable among us. According to a recent survey by The National Crime Prevention Council and the FINRA Foundation, those 65 and older were 34% more likely to lose money than younger Americans in their forties. All told, some eight in 10 respondents said they were solicited for a "potentially fraudulent offer."

One of the reasons that fraudsters succeed so often is that their "marks" often can't identify the red flags of swindles. Here's what they should ask:

* Focus on Rate of Return. The U.S. stock market has risen about 20 percent this year, but neither is that performance guaranteed to continue nor is it "locked in." Most insured money-market funds are earning well under 1 percent annually. If somebody promises you that you're going to do better than a federally insured vehicle -- or the stock market -- simply walk away.  A return figure like 110% is particularly suspect.

* How Will the Return Will Be Achieved. Almost no returns outside of FDIC-insured accounts and U.S. Treasury securities guarantee principal. That means the risk level for achieving above-average returns is huge or unrealistic. Complex derivatives may be involved or it could just be a classic ponzi scam (remember Bernie Madoff?)

* What is the Probability of Earning That High Return? At the very least, the seller should tell you how good your odds are. If they are overly optimistic, then walk away. The vast majority of risky investments never pan out. To achieve a high return, investors must be willing to face high risk -- and lose all of their investment.

* What Does the Seller Ask For? If they ask for bank account, Social Security or driver's license numbers, they are trying to steal your identity so that they can buy things in your name. The key is personal identification numbers. That's the tip-off to an identity scam.

* Is Something Else Offered? Many swindlers will "throw in" a free meal or trip. They're not interested in your company or educating you. They only want your money.

If there's one thing that swindlers don't like is when their potential "customers" ask a lot of questions.

That scares them, even when they offer patently false answers. But the more questions you ask, the more they will regard you or your loved one as a poor prospect, which is a good thing if you want to hold onto your money.

http://www.forbes.com/sites/johnwasik/2013/10/23/five-ways-to-avoid-the-top-money-scams/#68cbe75c4f6b

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