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Fraud

Scams

There are many variations on scams which often start with unsolicited mail sent by post, over the phone or via e-mail, but however they operate, they are all designed to enable criminals to make money at your expense.

Scams by e-mail or letter may tell you that you are entitled to money (often through a lottery prize); or that you are the unexpected beneficiary of a will; or seek your help in moving money out of another country or they may offer you shares or investments.

Scams often have similar features that may alert you to the fact that they are not genuine:

if it sounds too good to be true it probably is
you are asked for money up front to pay unexpected fees (such as customs ot taxes) before your 'prize' can be released
you are asked to provide your bank account, credit card details or other sensitive personal information
you are put under pressure to reply immediately or the money will be given to someone else
you are asked to keep the details secret

Many of these scams are what is commonly known as "advance fee fraud" where the victim is asked for money to pay certain "administrative costs" before the "prize" or "entitlement" can be released. It is possible to lose a considerable amount of money to such frauds before finding out that no prize exists. These frauds may also ask victims to supply sensitive personal or financial information which could leave them vulnerable to identity theft. Such letters or e-mails will be sent out to many addresses which fraudsters can collect through a number of methods.

The Office of Fair Trading runs a Scams Awareness Campaign each month in February which aims to increase awareness of Scams in general. The OFT website contains useful advice about the campaign and its initiatives.

Some common scams and frauds:

Boiler Room Fraud (Share investment fraud)

Boiler room fraud is so called because of the high pressure selling techniques used by those involved. This scam often begins with a cold call at home or at work by someone trying to convince you to invest in shares that they are selling. The phone call will appear to be professional and sympathetic. The name of the company may sound very similar to a well known financial company in an attempt to make you think it is genuine. The shares that are being sold are often worthless or non existent. They will not be quoted on a stock exchange and will be virtually impossible to sell. You may find after you have sent money that you can no longer contact the person who sold you the shares.

These boiler rooms are often situated abroad but deliberately target UK residents, particularly middle aged men with a record of previous investing. As they operate from abroad these boiler rooms are not subject to regulation by the Financial Services Authority (FSA) and you may find it impossible to recover any losses as such companies are not covered by any compensation scheme. It is possible to lose a great deal of money to these share scams.

If you are thinking of buying shares be very sceptical of any approach from a cold call. Always make sure that the firm you use is on the FSA register by checking the register online. The FSA maintains a list of unauthorised overseas companies on its website but it may not include all boiler room operations. The FSA also provides additional information about boiler room frauds on its consumer website

If you have been a vicitm of this type of fraud, or believe that you are being targeted by a boiler room you should report the matter to Operation Archway. Operation Archway is the national boiler room reporting system and is operated by the City of London Police. Operation Archway can be contacted by e-mail at operationarchway@city-of-london.pnn.police.uk

Lottery scams

These start with an unsolicited letter, telephone call or e-mail telling you that you have won a prize in a lottery. The catch, that you only discover if you start to get involved, is that you must pay money before your winnings can be released - the fee you are asked to pay will be for administrative fees, or "government" certificates to allow the money to be transferred. Often these scams will use the name of a respected organisation such as the police or a government department to try to make them appear convincing. There is of course no lottery and no prize and it is possible to lose a considerable amount of money to the criminals who operate this type of fraud.

The Canadian Lottery

A specific lottery fraud that you may have seen reports about. Some people in the UK have lost considerable sums of money to this scam –more than £60,000 in one case – and more than 80% of the targets have been over 65 years of age.

The scam is often operated from Canada, hence its name, although there are similar schemes operating from other countries. Victims are contacted by telephone and told that they have won a big lottery prize (usually Canadian, but also Australian or Spanish). They are asked to send money to cover taxes, fees, etc., so that their prize can be released. In fact, no prize exists.

These telephone calls are very convincing. The people who make them appear to be very sympathetic to their victims' personal circumstances.

Victims are asked if they would like to enter into a prize draw and, when told of the 'win', are encouraged to pay up by further telephone calls, allegedly from the Canadian authorities. If the victim pays the first amount requested, they are often asked to make more payments for a variety of reasons.

If you think you may have been a victim of this scam, inform your local police and Consumer Direct

The OFT is co-ordinating the UK response to this scam. It has set up a telephone hotline to collect evidence that the Canadian Authorities can use to prosecute the fraudsters. It cannot however investigate cases on behalf of individuals, nor can it help recover money that has been lost to this fraud.

The hotline number is 020 7211 8111.

"419" or "advance fee" fraud

A well-established type of scam that apparently offers the opportunity to earn a substantial sum of money for allowing funds to be transferred to your account and then passing on a proportion of these to another party, keeping the remainder as your commission. Approaches are made by letter, fax, e-mail or telephone and invariably claim to be from a high ranking government or bank official and may appear genuine if taken at face value. The scams often claim that you have been recommended by a business contact as a highly respected and trusted individual with high integrity. Victims of this fraud are coerced into parting with sums of money in order to help the transfer process and as the fraud progresses, a considerable amount of money can be lost. The promised transfer of funds, of course, never arrives.

If you receive a communication of this sort do not respond to it in any way as this can lead to you receiving further approaches. If you have been contacted by e-mail you can cause the fraudster some inconvenience by forwarding a copy of the e-mail to the abuse desk of the Internet Service Provider from where the e-mail originated using the following format (e.g. abuse@hotmail.com)

Phishing

The practice of sending spoof e-mails which try to persuade unsuspecting victims to send confidential bank and personal details. The e-mails will appear to come from a genuine bank or payment service, and will contain links to genuine looking websites. The e-mail will ask you to update, validate or reactivate your account by inputting personal details. The fraudster is then able to use your identity to run up bills in your name.

In practice a genuine company will never ask you to supply such sensitive details in this way. If you do receive a communication of this sort do not respond, or click on any of the links in the message, or copy and paste any of the links from the message into your browser. Forward it to the bank concerned and report it to Bank Safe Online.

See more advice on the Bank Safe Online website.

Money mule scam

This is a form of money laundering, where, having been recruited online by fraudsters so called "money mules" receive transfers of money into their accounts which they are then instructed to wire to another account, but may retain a commission payment. This activity leaves victims at risk of identity theft as their personal and fincial details are know to the fraudster. It is also illegal. The Bank Safe Online website contains further information about how this scam works.

How can I avoid scams?

Remember that if something looks to good to be true it probably is.
If you are contacted by telephone and told that you have won a prize, beware. It could be fraud. Don't commit to anything.
Only invest your money after seeking independent advice from a known and trusted source.
Don't give out sensitive personal or financial information to unknown parties.
You cannot win a competition that you haven't entered, and beware of competitions that tell you that your name or e-mail address has been picked at random from a list.
If you are at all concerned about a communication that you receive then seek advice either from trusted friends or relatives, from, citizen's advice, or see the advice given in the websites listed in the "Learn More" section below.