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Fraud and scam avoidance

“Character is doing what’s right when nobody is looking.” JC Watts

The nature of greed is such that few were looking too hard when Bre-X claimed to have hit the mother of all gold lodes, when accountants were cooking the books at Enron, or when BC-based Eron Mortgage Corporation was bilking local investors out of some $220 million. Unfortunately, corporate fraud too often victimizes the small shareholders or pension plan members who can least afford it, while the perpetrators get barely a slap and then set up shop elsewhere.

None of us is immune to a good fleecing and Canadians (especially seniors) are increasingly becoming the victims of criminals who prey upon their loneliness, vulnerability and financial concerns. While seniors are the primary target, a person of any age who has a lapse in judgement or is under financial pressure may fall victim to scam artists or purveyors of ‘get rich quick’ schemes. The elderly are the most likely to be taken advantage of because they have a tendency to be more trusting than other individuals.

There are a number of steps that can be taken to reduce the possibility that you, or someone in your family, are victim of a scam. Consider setting up a power of attorney on behalf of a loved one so that you are able to examine financial records and make responsible decisions on an elder’s behalf. You may want to ask an elder’s bank manager to alert you to unusually large, unexpected withdrawals from their savings or investment accounts. Open up a dialogue and talk about this issue with your parents. This may alert you to potential problems.

Fraud-proofing you and your family:

  • DO insist that all product and service guarantees be put in writing.
  • DO ask for references before proceeding.
  • DO resist being rushed into a decision – take the time you need.
  • DO ask someone you trust for their opinion.
  • DO get a second estimate (repairs, etc.)
  • DO proceed with caution when looking for deals on the internet. Sophisticated new scams are appearing daily.
  • DO investigate before investing. Know who you are doing business with. Check with the Better Business Bureau, Chamber of Commerce, or Provincial Departmentof Consumer and Corporate Affairs. Check product reliability with other investors and purchasers.
  • DO NOT ignore your first instincts.
  • DO NOT pay up front, or purchase anything solicited by telephone.
  • DO NOT give out your social insurance, bank account and credit card numbers for indentification in ‘good faith’.
  • DO NOT allow total strangers to engage you in conversations about money in public places. (Seniors have been coerced into depositing large amounts of cash from a stranger into their personal accounts. They are unknowingly participating in a money laundering scheme).

The scam artist’s most successful tactics:

  • Seem too friendly and interested in you.
  • Dwell on their recent ‘financial success’.
  • Mention connections with authority to quickly establish their credibility.
  • Request secrecy when doing business.
  • Insist on speed when doing business with you – a ‘limited time offer’, for example.
  • Insist on a deposit or cash payment before service or products are delivered.
  • Appear to be doing you a favour because you remind them of their father or mother.
  • Stress their trustworthiness and ability to make good on their promises.
  • Are reluctant to provide personal or business references.

With regards to promised returns on investments, a truly risk-free and guaranteed investment these days will earn you anywhere from zero (for many savings accounts) to around 3% for certain short-term government securities. Even a Government of Canada bond earning 5% is not, in fact, entirely risk-free. If someone should offer you a guaranteed return of 8%, 10%, 12% or more, your alarm bells should start ringing. There is no such thing as a guaranteed investment that pays these kinds of returns.

I would also suggest that any hyping of stock you receive through the internet, by fax or on the phone is not worth responding to. There are operations right here in BC called ‘boiler rooms’ that are set up specifically to flog worthless shares to the unsuspecting. Avoid these offers like the plague!

For a full description of the latest consumer con schemes, visit the Royal Canadian Mounted Police website at http://www.rcmp-grc.gc.ca/html/ecbweb.htm and click on “Latest Scams.” Investors can take advantage of the information on the BC Securities Commission website at http://www.bcsc.bc.ca/ From the homepage, click on “Investor Information” then “Protect yourself”.

Seniors may be interested in attending a free seminar sponsored by the BC Securities Commission to learn how to hang on to your hard-earned money. Why not call the Seniors’ Foundation of BC toll free at 1-800-377-5566 and book a seat for your parents? While this seminar is being conducted throughout BC, the nearest up-island location will be in Parksville on March 25 at the Tigh-na-Mara from 9am to noon.

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