How to Spot Common Financial Scams

When a scammer succeeds in parting you from your money, there’s an added insult you don’t have with other types of financial fraud: You’ve been sucked in—duped—and that hurts. “You lose a bit of your self-respect along with your money,” says Peter Campbell, a managing director in Charles Schwab’s Financial Crimes Risk Management group.

Cybercrimes accounted for $2.7 billion in financial losses in 2018, according to the FBI’s most recent Internet Crime Report.¹ And while identity theft gets most of the headlines, other types of fraud cost consumers more.

Here are some potentially costly scams—and how to avoid them.

1. Email account compromise

• What it is: Scammers target individuals by hacking or phishing their email to request unauthorized wire transfers. Consumers are particularly vulnerable to this scam during real estate transactions, when they anticipate moving large sums of money.
• What you can do: “Real estate scams, in particular, can cost consumers tens of thousands of dollars per transaction,” Peter says. “As a result, you should verbally verify all wire transfers by calling the escrow or title company at a known phone number—not one contained in an email that might have been written by a fraudster.”
   

2. Confidence fraud/romance

• What it is: Perpetrators gain trust by pretending friendship or romantic interest, then persuade the victim to reveal sensitive financial information or even send money.
• What you can do: “An interaction that occurs entirely online is a tip-off for a potential friendship/romance scam,” Peter says. “Never send money to anyone you haven’t met in person.”
   

3. Nonpayment/nondelivery

• What it is: Sending goods without ever getting paid, or paying without ever receiving goods.
• What you can do: “When buying something valuable online that’s not from a known retailer, ask to physically inspect the item or get an appraisal—or request proof of the seller’s identity,” Peter says.
   

4. Investment

• What it is: Fraudsters offer large returns with minimal risk based on false information—think Ponzi, pyramid and retirement schemes.
• What you can do: “If it sounds too good to be true, it probably is,” Peter says. In particular, turn down opportunities that are available today only. “That’s another sure sign of a scam,” he says.

¹“IC3 Annual Report Released,” fbi.gov, 04/22/2019.