A guide on how to avoid financial fraud If something seems too good to be true, it most likely is not true
By Ahtesam Ahmad
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hat would you do if someone came up to you and told you they had a great investment opportunity with quick returns? While only you can know yourself well enough to answer that question, what we can do is give you advice - run. There are two key ingredients in everyday financial fraud. And no, we are not talking about the kind of financial fraud committed by high rolling bankers, corporate executives, or government officials. We are talking about the kind of scams faced by the everyday, working-man, investor. The first element in these scams is the desire to get rich quickly. The second is the desire to trust. These two desires are basic. After all, who wouldn’t want to get rich and who wouldn’t want to believe that humans look out for each other? Wealth and trust are both evolutionarily wired into our brains. Yet both of these things can lead to complete financial ruin. Essentially, the scammer in question scopes people and finds the easy ones to prey on. Usually, these scammers are fully aware of what they are doing and are doing it with malicious intent. If they are wiley, they choose weaker targets with liquid cash and very little understanding of how finance works. They get these people to trust them by promising big returns. Greed and blind trust are a bad combi-
PERSONAL FINANCE
nation, and the victims of these scams fall prey to the scammers that target their ‘get rich quick’ mentalities. After all, the idea of getting rich overnight is wildly attractive and has been played out in entertainment media ad nauseum, from winning the lottery to a mysterious distant uncle leaving you a vast estate. At times this urge of instant gratification can be so overwhelming that people impair their ability of thinking straight and logically. Thus, end up being scammed. While we’re all out there on our own, what we can give you is a list of common scams that someone might try on you, and some general rules on how to identify scammers and people that are lying to you. (Spoiler: If it sounds too good to be true, it probably isn’t true).
Advance Fee Scam
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dvance fee scams are one of the most popular ways of scamming people (your spam folder will vouch for it) and believe me people still fall for it. These scams are usually orchestrated with the scammer making the victim believe that they have won some prize money or are entitled to some other benefit but they are required to pay charges upfront to claim their prize or entitlement. However, once these charges are disbursed, the scammer vanishes in thin air. A very suitable local example was when Jeeto Pakistan’s (A popular comedy, ahm, I mean game show) name was used to fool people around the country into losing their money.
An unknown group sent texts to random people claiming that they have won prizes in the game show. For the supposed prize people were asked to contact a certain number and pay a certain amount. Once the victims paid up, the scammers would switch off their phones. However, to avoid being scammed by such perpetrators one should remember a few simple things. The language in these messages and emails is incoherent and most of the time grammatically incorrect. Furthermore, if you get a call from someone claiming that you have won a prize, post a counter question about their identity, they will be taken off guard and most likely disconnect the call if you keep on insisting. Lastly, the most important thing is to not make an impulsive decision, research about the matter, try to call an official source to confirm about any possibility of lottery winnings.
Ponzi Schemes
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onzi Schemes are basically structured in a way that involves the “Borrowing from Peter to Pay Paul” approach. The organizers of Ponzi schemes usually promise to invest the money they collect to generate supernormal profits with little to no risk. However, in the real sense, the fraudsters don’t really plan to invest the money. Their intention is to pay off the earliest investors to make the scheme look believable. As such, a Ponzi scheme requires a constant flow of funds to sustain itself. When the
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