What You Need to Know About Scams and Why Scammers Have You on Their Radar

Picture this: The phone rings. You answer it. On the other end is someone who claims to be an IRS agent, but in reality is a criminal impersonating one. The impostor asserts that you owe unpaid taxes, and if you don't pay up, you could face incarceration, deportation, license revocation or something equally unpleasant. Your gut tells you something doesn't seem right, and you hang up. Moments later, you receive a second call from someone claiming to be a police officer or DMV representative, who is in fact an accomplice to the impostor. You hang up again. Congratulations -- you didn't fall for a massive tax scam that defrauded millions of innocent taxpayers.

This latest iteration of Internal Revenue Service (IRS) phone scams made the IRS's 2015 "Dirty Dozen" list of tax scams. About 3,000 victims have forked over roughly $14 million as a result of this scam, according to the Treasury Inspector General for Taxpayer Administration (TIGTA).

The National Crime Prevention Council (NCPC) reports that Americans lose $40 billion each year just to telemarketing fraud, and that scammers favorite targets are seniors. Up to 80 percent of fraudulent telemarketers' calls are made to seniors, according to a study conducted by National Consumer Law Center, Inc. (NCLC).

So, why are seniors prime targets for financial crimes? The Federal Bureau of Investigation (FBI) cites several reasons. First, seniors usually have a "nest egg" and excellent credit, which attract scammers. Second, older Americans were raised to be courteous and trusting, which are qualities scam artists play on. Third, seniors are less inclined to report a fraud, as they don't always know where to go to report it. Fourth, seniors often feel ashamed that they've been scammed and so hide the incident from family members and others. Finally, older victims often make poor witnesses, because it might take them several weeks or months to realize that they have been scammed, making it difficult for them to remember what happened -- scammers actually count on this.

The number of different types of scams is limited only by the scammers' imagination to concoct them. Here are some common scams to watch out for.

1. Investment Schemes
These schemes include market manipulation fraud, advance fee schemes like "419" fraud, pyramid schemes and Ponzi schemes. For example, Bernie Madoff literally "made off" with some $65 billion of his clients' money by means of an elaborate Ponzi scheme. Here, the schemer promises you higher returns or dividends over traditional investments. The kicker is that instead of investing your funds, the scammer pays dividends to initial investors by using the funds of subsequent investors. As a result, you might end up getting nothing and instead lose everything.

2. Telemarketing Fraud
Using telephone or email, a perpetrator may solicit money for fraudulent investments, insurance policies, charities, sweepstakes and so on. Typical bogus products and services sold through telemarketing scams are offers of free prizes, vitamins, health care products and inexpensive vacations.

3. Internet Fraud
The Internet is awash with scammers who use a variety of schemes to get you to part with your money. For example, the Jamaican lottery scammers make about 300,000 calls each day to the U.S., with American citizens losing $300 million each year to this scam. I

4. Social Media Scams
Scammers are increasingly using social media, such as Facebook and Twitter, to exploit seniors. In the "granny scam," a scammer poses as a grandchild who claims that he or she needs money to take care of an emergency. Another popular online scam is the "romance scam" on dating sites. The scammer strikes a friendship or a romance with the "mark." Weaving a sob story, the scammer manipulates the mark to send the scammer money to resolve an issue.

5. Loan and Mortgage Scams
We all remember the foreclosure crisis of 2008 that was partly fueled by predatory lending practices. Predatory lenders offer loans with astronomical interest rates, hidden fees and punishing repayment schedules, making it difficult for many seniors to pay. In the "reverse mortgage scam," shady realtors or financial advisors steal the equity from the property of unsuspecting victims.

6. Heath, Funeral, and Life Insurance Scams
Shifty salespeople take advantage of seniors' end-of-life concerns by convincing them to buy policies that duplicate existing coverage, don't provide the coverage promised, or are phony.

7. Mail Fraud
Mass mailings of fraudulent offers are sent to homes and businesses. The unsuspecting homeowner or the business owner may "self-select" by returning the postcard or by calling to inquire about the offer, which may be a sham.

None of us want to believe that we can fall for these gimmicks, but it can happen to the best of us because scammers are really good at what they do. In the next article, you'll learn what you can do to protect yourself and your loved ones from scam artists.

If you have been a victim of a financial crime, or someone you know has been targeted, please share your stories.

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