Con Men and swindlers fervently believe that a fool and his money are soon parted. Those who fall prey to financial scams are themselves guilty of ‘greed’ – though it is buried so far down that it has to be coaxed out by the scammer. The latter indeed targets folk who would be most responsive to manipulation. Con men are especially talented at telling believable lies. These are easy to process and smooth sounding. No wonder the snake oil salesmen of olden times had oily tongues and the gift of the gab. “How to identify financial scams’ is a query that exercises our minds not a little. After all, our financial health depends on it.
How best not to be duped by con men
Scam victims, called ‘marks’, are frequently duped when they hope to have something for the price of nothing. The elderly, and suchlike, are vulnerable largely due to their innate generous natures. It would come as a surprise that, contrary to commonly held views, the typical financial scam victim is mostly male, comparatively wealthy, no risk-averse, interested in artful persuasion, not averse to sales situations. This guy turns out to be better educated than most compatriots. As per another expert evaluation, the typical financial scam victim is under a financial strain, besides being married and middle-aged.
Students of gullibility see that there are the following factors that make a person more likely to be gulled/duped:
- Situations
Responding to peer pressure, some folk tend to make financial decisions that have the appearance of being benign but are in reality extremely risky;
- Cognition
Gullibility impacts people right across the IQ range. Sometimes folk are gullible since they are not so much adept at using their intelligence fully, drawing rather upon impulse and intuition. In other cases, it’s just plain laziness;
- Personality
A trait shared by many con men victims is that they feel they need to be the standard ‘nice guy’. This, combined with impulsive thinking and a love of risks, get these folk marked for the scam;
- Emotion
The excitement inherent in adding to or shielding from harm one’s wealth – some might call this ‘greed’ – is a persuasive catalyst in proceeding with a risky investment. This is even truer in case the scammer is gifted when it comes to playing down the fear of loss.
Operators
Financial scams are best sidestepped thru better awareness and intelligent vigilance. Small wonder, we must also focus upon the talented guys who bring these scams about.
Con men are also called operators. They are past masters at manipulating people’s hopes and fears. A genuine con man is so good at what he does that he cajoles the mark into letting his guard down, to the extent that the latter abandons his own disbelief.
Operators must have partners in crime. These accomplices are also known as :
- Ropers
Operators’ associates more often than not pose as rich people to identify mark most likely to bite the bait ‘hook, line, and sinker;
- Shills
It is common practice for con men to work alongside purported independent experts to let the entire episode take on the air of legitimacy. In a few instances, real professionals have been gulled into acting as shills for operators, winning the latter extra credibility.
Types of financial scams
Now we get down to brass tacks. First, we take a gander at the types of financial scams that are liable to suckering folk day in, day out.
Ponzi schemes
Charles Ponzi offered to manage international reply coupons arbitrage and US Postal stamps arbitrage, promising investors a 50% profit in 45 days. That totalled up to a ludicrous 400% per year. Notably, Ponzi used the funds obtained from later investors to make payments to earlier investors. That’s the swindle’s bedrock.
Pyramid schemes
Pyramid schemes or their more current label Multi-Level Marketing take their antecedents from chain letter scams. Multi-Level Marketing or MLM companies count upon a structure that permits investors/distributors to obtain commissions for the downline’s sales. The downline is made up of the various levels of salespersons recruited to sell the company’s products. A real MLM fraud concentrates on recruits, and there’s no talk of products.
Pump & Dump scams
Such a scam begins with salespeople promoting barely capitalised public companies thru fake news and dubious financial results. The aim is to propel up the stock price, followed by selling their positions in the companies at high prices.
Scammers are super-skilled at manipulating social media in aid of stock promotion and attract investors by the thousands thru robotic calls and email messages.
Pre IPO Investment frauds
Many dream of purchasing in a successful company prior to its IPO or Initial Public Offering. Con men are skilled at promising investors suc purchases from the next grat company. Pre IPO scams depend mainly on gaudy websites, spam emails, and glossy brochures and offering documents. The memorandum issued is obviously not going to be reviewed by the FCA.
Conclusion
Identifying financial scams is doable, thanks to awareness and a cultivated habit of vigilance. There are a number of free resources available online to bone up on your Financial Quotient, including FCA documents. Action Fraud is the starting point for testing the tepid waters. Finally, there’s neither free lunch nor easy money. If it’s too good to be true – stay away from it.
