Investing can be part of a healthy financial future, enabling you to grow your money for retirement and financial goals like vacations or your child’s education costs. Making sure any investment opportunity fits in your financial plan or goals is important. So is protecting yourself from market manipulation or investment fraud.
In a recent study by the Alberta Securities Commission (ASC), 1 in 4 Albertans believed they were approached with a possible fraudulent investment. As COVID-19 continues to affect our lives, associated scams have emerged as fraudsters try to exploit the crisis to profit from Albertan’s fears and misinformation. While the look of a scam may vary, fraudsters follow a series of steps that are easy to identify if you know what to look for. To understand those seven steps, the ASC created a new resource entitled “Don’t be fooled by fraud”. It outlines the steps fraudster’s take, in addition to providing information on how to avoid a scam and protect yourself.
Step One: Identifying a potential victim
A fraudster’s first step is to identify targets. They leverage current events like a pandemic or economic downturn and source vulnerable investors with common anxieties or fears about their money.
Step Two: Befriend and earn trust
Once fraudsters have found suitable targets, they move quickly to cultivate friendships and gain trust. They often do this through community groups, organizations, online groups and through your friends or family to establish themselves as a reliable resource and authority.
Step Three: Showcase the benefits of investing
As the targets become trusting, the fraudster will flaunt their wealth and success to establish credibility. They will casually mention the investment opportunity that brought them this wealth, telling them that it came at little to no risk.
Step Four: Offer the investment
With the potential target’s trust in place and the perceived credibility of his investor savviness solidified, fraudsters move fast to offer the “investment opportunity”. To ensure targets quickly buy-in and do little or no research, they will sell it as an exclusive or time-sensitive offer, private deal and promise high returns with little to no risk.
Step Five: Receiving money for the investment
Leading up to receiving money, fraudsters will inundate targets frequently with communication, provide confusing and complex paperwork to establish legitimacy, and highlight the urgency of buying-in as soon as possible.
Step Six: Disappear (the Ghosting Act)
Once the target “invests”, fraudsters reassure the victim of the investment opportunity and even request more funds for a bigger payout. Following this, they will delay access to funds and eventually disappear and ignore the target when the scam can no longer be hidden.
Step Seven: Target the victim again ( the Recovery Act)
Fraudsters are hardly finished once a scam is complete. They will often sell the victim’s information to another fraudster or criminal organization, which will contact the victim acting as a credible agency that can reclaim their investment for a fee. This is ultimately another scam in which the victim is robbed again in their attempts to get their money back.
Understanding these seven steps is important so that you can recognize unsafe situations you or someone you know could be in. To learn more, read the fraudsters playbook entitled “Don’t be fooled by fraud”, accessible for free at www.checkfirst.ca/playbook. While visiting checkfirst, check out the other information and resources designed to help you increase your investing knowledge and keep your money safe when considering any investment.
