Friday, June 21, 2013

Watch out! Fraudsters on the prowl




With people regularly losing their earnings and investments to scammers, experts have come up with tips on how to avoid becoming a victim.


A few years back, a young man named Kennedy (not real name) attended a seminar in Port Harcourt on the importance of investments. He and others like him were told to stop expending their money and learn to put some of it to work in order to boost their finances in the future. The key speaker was particular about investment in stocks.
Kennedy was inspired and at the end of the seminar, he approached the ‘expert’ for advice on how to go about buying shares. The expert was willing to help, and in two installments, Kennedy transferred N500,000 to him for the purchase of shares of some top companies in the country.

Continue reading after the cut...

The expert kept Kennedy updated about the progress of his investment for over a year before becoming incommunicado. It took a trip to Lagos for Kennedy to realise that he had been defrauded. At the purported address given to him by the expert, he found out that it was a residential building. Of course, the residents made it clear to him that there had never been a stockbroking firm in the area, neither had they ever heard of anybody by the name the expert gave him.

A big problem
Stories like this abound, highlighting what experts say is the need for people to be more careful when carrying out financial transactions.
“Just as banks have always attracted robbers, the money management business has always attracted charlatans,” financial advisor and money manager at Fairfield Financial Advisors Limited, Jane King, wrote in a contribution to Forbes.
There are many forms of financial fraud and scams today and experts say a lot of caution is required by people if they are to stand a chance of preventing themselves from becoming victims.
Being careless will not only amount to the loss of hard-earned funds or savings, it can also subject the victim to ridicule. In the case of Kennedy, while his friends were sympathetic, they also laughed at his ‘foolishness’.
“Many victims of financial crimes blame themselves for not seeing through the scam,” the Washington State Department of Financial Institutions observes.
Calling on people to take steps to protect themselves against scams it says, “No matter what we call them — con artists, con men, scamsters — they’re criminals. They steal our money. They’re not just people next door trying to make a living. They are trying to deprive us of the money that we have worked hard to earn and save. They destroy lives.”

To avoid becoming a victim, the WSDFI says the following self-defence tips will be helpful.

Don’t be a courtesy victim
Con artists will not hesitate to exploit the good manners of the potential victim.  Remember that a stranger who calls and asks for your money is to be regarded with utmost caution and skepticism. You have absolutely no obligation to stay on the phone with a stranger who wants your money. It’s not impolite to say you are not interested and hang up.

Don’t be rushed – check it out
Say no to any salesperson that pressures you to make an immediate decision.  If he or she doesn’t have the time to explain the investment to your regular investment professional, or other party, or if they ask “Can’t you make your own investment decisions?”  Say NO!  You have the right and responsibility to check out the salesperson, firm, and the investment opportunity itself.  Before you even consider investing, get the prospectus, review it carefully, and make sure you understand all the risks involved.  But remember, even written material sent from the promoter can be fraudulent or misleading.

Always stay in charge of your money
Don’t be taken in by anyone who wants your money and assures you that he or she is a professional and can handle everything.  Beware of any financial professional who suggests putting your money into something you don’t understand.  And never let yourself be talked into leaving everything in his or her hands.

Always watch over and protect your nest egg
Never trust anyone who wants you to turn over your money to them and then sit back and wait for results.  If you understand little about the world of investments, take the time to educate yourself.  Constant vigilance is a necessary part of being an investor.

Never judge a person’s integrity by how they look or sound
Far too many investors who are wiped out by con artists later explain that the swindler “looked and sounded so professional.”  Successful con artists sound extremely professional and have the ability to make even the flimsiest investment deal sound as safe as putting money in the bank.  Remember that sincerity in a voice, especially on the phone, has no bearing on the soundness of an investment opportunity.  Always do the necessary homework.

Watch out for salespeople that prey on your fears
Con artists know that many investors, particularly older investors, worry that they will either outlive their savings or see all of their financial resources vanish overnight as the result of a catastrophic event.  It’s quite common for swindlers and abusive salespeople to pitch their schemes as a way to build up life savings to the point where such fears are no longer necessary.  Remember that fear and greed can cloud your good judgment and leave you in a much worse financial posture.

Exercise particular caution if you have limited or no experience handling money
Ask a con artist to describe his ideal victim and you’re likely to hear “elderly widow or widower.”  Many people now in their retirement years have limited knowledge about handling money.  They often relied on their spouses to handle most or all money decisions.  Those who have received windfall insurance in the wake of the death of a spouse are prime targets for con artists.  People who are on their own for the first time in years should always seek advice of family members or impartial professionals before deciding what to do with their money.

Monitor your investments and ask tough questions
Too many investors trust unscrupulous investment professionals and outright con artists to make financial decisions for them.  They then compound their error by failing to keep an eye on the progress of the investment. Insist on regular written reports.  Check the written information.  Look for excessive or unauthorised trading in your funds.  Don’t be swayed by assurances that such practices are routine or in your best interest.  Don’t permit a sense of friendship or trust to keep you from demanding this information. If you suspect something is wrong and you don’t get satisfactory answers, get help.

Look for trouble retrieving your principal or cashing out profits
If a stockbroker, financial planner, or other individual stalls you when you want to pull out your principal or profits, demand to know why.  Since unscrupulous investment promoters have probably pocketed the funds of their victims, they will go to great lengths to explain why your savings are not available.

Don’t let embarrassment or fear keep you from reporting investment fraud
Investors who fail to report that they’ve been victimised often hesitate out of embarrassment. Con artists know all about such sensitivities.
They count on these fears preventing or delaying the time when the authorities will be notified about the scam.  It’s true that most money lost to investment fraud is rarely recovered. In many cases, however, when investors recognised early that they’d been misled, they were able to recover some or all of their funds by being a “squeaky wheel”.

-Punch

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