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How to Spot and Potentially Protect Against Financial Fraud

Credit card and financial fraud can affect anyone, though there are strategies that may help minimize your risk. Educate yourself on the common scams and ways to potentially protect yourself from being a victim of financial fraud.

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5 min read
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Key Takeaways

  • Educate yourself about common financial scams, especially the more common scams recently targeted to those working remotely
  • Be wary of investments that seem too good to be true and always guard your personal information
  • Notify local authorities immediately if you suspect, or fall victim to, a scam

Unfortunately, data breaches that put our identities at risk or scams designed to steal our money have become far too common in this day and age, especially in the remote work-from-home environment that many people find themselves in due to the recent COVID-19 pandemic. Often, the elderly are the primary target of financial fraud, but the truth is, fraudsters take advantage of anyone who is in a more vulnerable state. And today, with so many people staying home and utilizing more online services, fraudsters have adapted to target those who might temporarily be in a more vulnerable state.

So how can you help protect yourself and your loved ones? Consider going on the offensive—educate yourself about the more common financial scams. That way, if you’re ever approached, you’ll hopefully recognize the warning signs and be able to respond accordingly, before any money is lost.

Financial Fraud: More than Identity Theft

With the increased likelihood your personal information is floating around on the dark web, it’s only natural to focus your attention on identity theft and trying to prevent thieves from using your credit cards, accessing your bank accounts, or stealing your tax refund. But financial fraud can take many forms, including:

  • Investment. This category involves a broad array of deceptive practices designed to convince you to invest in a particular stock, bond, or other security. Think Bernie Madoff and Ponzi or pyramid schemes, where people are lured by the appeal of earning higher-than-market returns on their money. To keep investors in the dark, these fraudsters typically spread false or misleading information about the investment and create fake statements that support their claims.
  • Mortgage and lending. The scenarios range from falsifying documents to obtain a home loan to promising to help refinance a mortgage or prevent foreclosure in exchange for an upfront fee. These scammers typically use flyers and other advertising to prey on people who are in danger of losing their homes. Once they receive the money, they disappear without providing any services.
  • Mass marketing. These internet, telephones, mail, or in-person schemes promise cash prizes, services, and goods in exchange for a fee or purchase. Think fake checks, foreign lotteries, and mystery shopper scams. Fraudsters try to entice people who think the reward is too good to pass up.

Staying Alert

Here are some of the more common financial scams. Keep in mind that criminals are constantly changing their tactics to stay ahead of the law.

Firm imposter scam: Fraudsters are taking advantage of more people telecommuting and doing more business online to impersonate firm associates. They might create a fake online presence and seek to obtain the customer’s personal information, including account information, or trick them into making investments or transferring funds. A red flag is if they encourage you NOT to contact the firm due to “long wait times”.

IRS scam: Historically, this one has been a very common scam. A person calls pretending to be from the IRS and accuses you of owing money. They then threaten to have you arrested if you don’t pay immediately with prepaid gift cards.

Lottery scam: Fraudsters tell you you’ve won a large sum of money and that to collect the prize, all you have to do is pay upfront processing fees or taxes. The caller is initially friendly but may become threatening or aggressive if you say you’re not interested.

Sweetheart/romance scam: This Internet-based scam uses fake profiles on dating sites and in social media to target you, establish a romantic relationship, and then make pleas for financial assistance to drain your resources. If successful, this scam may progress into outright blackmail because the perpetrator knows you don’t want friends and loved ones to find out what happened.

Foreign letter fraud: You receive a letter or e-mail with the “opportunity” to share in a percentage of the money the sender is trying to get out of their country. You’re encouraged to send money and/or bank information for ease of transfer.

Grandparent/relative scam: You receive a phone call from someone claiming to be a family member who’s in desperate need of money. The scammers often rely on information found on social media to try and defraud you.

Protecting Yourself and Your Money

Awareness is just the first step in helping keep you and your loved ones safe from financial fraud. Caution and diligence are also key. Consider these tips to help avoid scams and identity theft:

  • Ask questions and investigate thoroughly before investing.
  • Add a trusted contact to your investment accounts. Seek guidance from a loved one or trusted person if you have suspicions about a potential investment opportunity or have found yourself victimized by a scam.
  • Never share personal information over the phone, via email, or with strangers.
  • Monitor credit history, credit cards, and brokerage/bank accounts. Register for alerts if offered.
  • Sign up for the “Do Not Call” list for both your cell phone and landline.
  • Use caller ID to screen your calls. Don’t pick up if you don’t recognize the number.
  • Trust your gut; if it sounds too good to be true, it usually is.

Recovering from Financial Fraud

If you fall for a scam, immediately place a fraud alert on your credit report and notify the appropriate banks, brokerage firms, and credit card companies to help prevent future fraudulent activity. Then gather and document all the conversations and/or correspondence you’ve had regarding the theft. Contact the local authorities and give them copies of the documentation. Depending on the type of scam, file a complaint with the Federal Trade Commission (FTC), U.S. Postal Service, or the Social Security Administration.

And don’t be too hard on yourself. As mentioned earlier, financial fraud can happen to anyone. Instead, focus on moving forward and creating a plan to help protect yourself and your assets in the future.

If you suspect your TD Ameritrade account(s) have been compromised, or if you receive an email that appears to come from us asking for personal information or claiming to know the status of your account, please contact us. We can provide assistance, including help with closing your account and opening a new one, should this be necessary.

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Key Takeaways

  • Educate yourself about common financial scams, especially the more common scams recently targeted to those working remotely
  • Be wary of investments that seem too good to be true and always guard your personal information
  • Notify local authorities immediately if you suspect, or fall victim to, a scam

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