Confidence Games & Other Forms of Fraud By Alex E. Ward, CPP.

Confidence Games & Other Forms of Fraud

By

Alex E. Ward, CPP

Overview

History – What is a Confidence Game?

Perception is Reality!

Investment Fraud

Empowerment Strategies

Confidence Games and other Frauds

Program Objective:

Train fraud fighters to carry the prevention message into their communities and warn others about Confidence Games and other frauds.

Perception is Reality

Confidence criminals allow you to talk about yourself

They create the perception they want you to have by using your information to meet their needs

They get you to get excited about what they want you to do and that excitement automatically takes away from your ability to logically examine their reality

What is the Reality?

Non – Traditional Costs of Fraud (Study by FINRA)

2/3 of self-reported fraud victims experienced at least on non-traditional cost of fraud to a serious degree:

Severe stress

Anxiety

Difficulty sleeping

Depression

Nearly half reported incurring indirect financial costs:

Late fees

Legal fees

Bounced checks

What is the Reality?

29 percent reported Incurring more than $1,000 in indirect costs

9 percent declared bankruptcy as a result

Nearly half of the victims blame themselves for the fraud

What is the Reality? A study by the Financial Fraud Research Center at

the Stanford Center on Longevity designed to test if the “Context” of a survey has an effect on whether respondents admit to being victims Three Distinct Contexts

Embodied within a survey about a crime

Embodied within a survey about consumer purchasing

A stand-alone neutral survey limited to questions about fraud

Respondents answering fraud questions in the crime context were less likely to report being victims of fraud

(especially prevalent in victims under 35 or over 65

Opposite effect on black respondents

What is the Reality? 2011 AARP Foundation National Fraud Victim

Study

Type: Investment Fraud Bus Opp Lottery ID Theft

Victim: male male singlefemale

Age: Over 50 Over 50 Higher higher

Income: $50 K + $50 K + $50 K – $50K -

Educ: college college High Sc High Sc

Prev: OK to lose some less less

What is the Reality? 2011 AARP Foundation National Fraud Victim Study

Other findings:

Victims 55 years of age and older were significantly less likely to acknowledge they were defrauded than victims under 55

Victims 55 years of age and older were significantly less likely to report their victimization than victims under 55.

Individuals 55 years of age or older in the general population were less upset by the prospect of losing money in the future than individuals under 55.

Common Features of Scams Scams are creative and consistently changing:

• Disaster Relief

• Green Energy

• Oil & Gas

• “China” Stocks

• Bird Flu

• Taxes

• Grandchildren in trouble

• Lottery

Common Features of ScamsNew distribution channels are constantly being created

SeminarsEmail & InternetDirect MailWord of MouthTelephoneText MessagesVoice mail (Answering

machines)

Why Are Confidence Criminals Successful? They know how to get into your head

and short circuit your ability to think logically!

They Always get to know personal things about you and make sure you believe they are like you!

They don’t let you catch your breath – they keep you off balance!

They use tried and true marketing techniques!

Frank Abignail

Spotting Persuasion Techniques

Most Frequently Used TacticsPhantom Riches: Dangling the prospect of wealth; something you want but can’t have

Source Credibility: It is better to deal with credible people or individuals in positions of authority

Social Consensus: If everybody wants it, it must be good

Reciprocity: Doing a small favor in return for a big favor

Scarcity: If something is rare or scarce, it must be more valuable

Investment Fraud

Key Risk Factors for all victims

Own high-risk investments

Relying on friends, family, co-workers for advice

Open to new investment information

Failing to check background and registration of financial professional and product

Inability to spot persuasion used by fraudsters

Investment FraudWho is Victimized?

Victim demographic trends:

► Male► Married► 55-65 years old► More financially literate► College-educated► Self-reliant► Recent change in financial or health status► Risk-takers

Investment Fraud

Preventing Investment FraudReduce your exposure to sales pitches from con men.

Look for persuasion red flags

Ask and check the registration status of the professional and the investment

ASK if they are licensed to sell the investment and if the product is registered

CHECK that they are licensed and the product is registered – SaveAndInvest.org or (888) 295-7422 or Commissioner of Securities & Insurance at 406-444-2040

Investment Fraud

Empowerment Strategies

If it sounds too good to be true – it probably is

You can’t get something for nothing no matter what anyone says

If you think you know someone who is a potential victim of fraud, do something about it

Ask too many questions

Don’t send money after a phone call

Ask for written information and then check before you buy

Ask and check

Investment Fraud

We are able to be manipulated!

Some More than others!

Questions?