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What are some common financial scams that are easy to fall for?


One of the more common and infamous scams is also one of the more obvious ones, so it’s unlikely to snare most potential victims. A Mr. or Mrs. So-and-So – usually some long African name – sends an email, offering to split several million dollars, typically acquired in some dodgy way, with you – a total stranger – if you will only wire him or her a few thousand dollars for expenses or to show your good faith. It’s astonishing to think that such a ploy works at all, but evidently there are enough greedy, gullible people around to make it worth the effort.
The best scams, meaning the most effective ones, make modest promises rather than grand ones that are obviously too good to be true. The most notorious scammer of them all, Bernard Madoff, was able to pry billions of dollars loose from otherwise sensible investors, including some pros, not by promising an effortless windfall but by offering returns in the low double digits with almost no risk. That performance is nearly impossible to achieve, but it seems plausible.
The Internet has spawned a new repertoire of scams. Possibly the most common and insidious involve phishing, in which potential victims are tricked into releasing personal information, such as Social Security or bank account or credit card numbers. In a typical attack, a worrisome email will be sent from what may or may not appear to be the address of a legitimate institution where the intended victim may or may not have an account. The email will say that a transaction was denied or that account information must be verified or updated or – points for irony – that the mark may have been a victim of fraud. The email may provide a link to a website that asks for sensitive information, or perhaps the mere act of clicking will allow the bad guys to plant a virus that will surreptitiously extract the data from the mark’s computer. Phishing scams are fairly easy to avoid. No bank or other financial-service company will ever ask for sensitive information in an email. It’s a wise policy never to click on anything in an email but rather go directly to the institution’s website. If you’ve got any doubts, pick up the phone and call.
-Conrad de Aenlle