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CON GAMES & FRAUD SCHEMES & SCAMS

(oh my)

Karen StegengaCrime Prevention OfficerMesa Police Department

480-644-5014

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Con game = "any scheme whereby a swindler wins the confidence of his victim and then cheats him out of his money by

taking advantage of the confidence reposed in him.“

“Confidence Man” – first used in 1849; William Thompson trial

Fraud = unfair or unlawful deception of consumers that causes them financial detriment

Scam = fraudulent business scheme

Fraud follows the headlines

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Incidence

30.2 million adults (13.5% of population) lost money from at least one type of fraud in 2004 *FTC study in 2005

$70 million loss to Canadian telemarketers$120 million/year to foreign lotteries (USPS)

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Victim Profiles

Seniors26% of telemarketing victims are 60+ (AARP)

60% of victims of sweepstakes fraud are 60+ (AARP)

Investment fraud against seniors rose 40% in 2007 (North American Securities Administrators Association)

African-Americans and HispanicsMore debt than can comfortably handle25-34 year old age group

No single demographic profile for victims

FTC 2005 Fraud Survey

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Fraud Victims

One of the most underreported crimes1/3 those 65+ did nothing when victimized (AARP 1999)Only an est. 15% of fraud victims report to law enforcement

One-timeRepeatChronic

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The Effects on the Victims

Personal violation; psychological equivalent of rapeShattered trust in self and othersSocietal condemnation and indifferenceIsolationFear for financial securityShame, embarrassment, anger, guilt

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Fraud Exploits:

GreedDishonestyVanity

HonestyCompassionNaiveté

- Emotion is a stronger force than logic

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Psychological triggers used by scammers to succeed

1. Reciprocation: scammer gives “gift” or assistance then victim feels obligated to offer something in return

2. Commitment and consistency = embarrassment of seeming indecisive or inconsistent

3. Social proof = “everyone does it”4. Liking = build a rapport, befriend the victim5. Authority = use authority to support their product6. Scarcity = fear of missing out, “act now”, “once in a

lifetime offer”7. Excitement

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Sample Envelopes

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Fraud Lists

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Phoenix-Mesa-Scottsdale AZ(FTC Consumer Fraud and ID Theft Complaint Data 2007)

Category % Complaints1. Shop at Home/Catalog Sales 102. Internet Services 73. Foreign Money Offers 54. Prizes/Sweepstakes/Lotteries 5 5. Health Care 4

Total number of complaints: 13,903

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IRS 2008 list of 12 most egregious tax schemes and scams

PhishingEconomic Stimulus Payment ScamsFrivolous Arguments (to avoid paying taxes)

Fuel Tax Credit ScamsHiding Income OffshoreAbusive Retirement Plans (to avoid limits on contributions to Roth IRAs

Zero WagesFalse Claims for Refund/Request for AbatementReturn Preparer FraudDisguised Corp. OwnershipMisuse of TrustsAbuse of Charitable Organizations and Deductions

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Top Ten Telemarketing Frauds

2006 2007

Fake Check Scams*Prizes/SweepstakesMagazine SalesScholarships/GrantsAdvance Fee LoansLotteries/Lottery ClubsCredit Card OffersPhishingWork-at-Home PlansTravel/Vacation

Fake Check ScamsPrizes/SweepstakesAdvance Fee LoansLotteries/Lottery Buying

ClubsPhishingMagazinesCredit Card OffersScholarships/GrantsBuyers ClubsNigerian Money Offers

*800 victims/month file complaints2007 USPS crackdown – arrests in Nigeria, Canada, Netherlands: 540,000 checks=$2.1billion face value

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Investment Fraud; annuities, lunch seminarsCharity FraudBank ExaminerFake Grandson ScamObituary ScamPigeon DropHome Repair FraudDistraction Crime/Impostor Burglaries

More Fraud Schemes

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INTERNET FRAUD

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Method of Contact for Internet Fraud (FTC)

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E-Mail 66% Web Page18.7%

Phone 7.6% Mail 3.9%

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Top Ten Internet Scams 2006 2007

AuctionsGeneral MerchandiseFake Check ScamsNigerian Money OffersLotteries/Lottery OffersAdvance Fee LoansPhishingPrizes/SweepstakesInternet Access ServicesInvestments

Fake Check ScamsGeneral MerchandiseAuctionsNigerian Money OffersLotteries/Lottery OffersAdvance Fee LoansPrizes/SweepstakesPhishingSweetheart SwindlesInternet Access Services

(NCL)

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Top Ten IC3 Complaints (Internet Crime Complaint Center)

Auction Fraud 35.7%Non-delivery 24.9%Confidence Fraud 6.7%Credit Card Fraud 6.3%Check Fraud 6.0%

Total dollar loss in 2007 = $239.09 million

Computer Fraud 5.3%Identity Theft 2.9%

(many go to FTC)

Bank Fraud 2.7%Threat 1.6%Nigerian Letter 1.1%

(many go to Secret Service)

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Resources & ReportingAZ Attorney General Consumer Information & Complaint line: 602-542-5763Better Business Bureau: 602-264-1721 (verify charities)National Fraud Information Center : 1-800-876-6090Registrar of Contractors: 602-542-1525 www.rc.state.az.us (most wanted)US Postal Inspector: www.postalinspectors.uspis.govInternet Crime Complaint Center www.ic3.govFederal Trade Commission

1-877-FTC-HELP (1-877-382-4357) www.ftc.gov or spam@uce.gov Secret Service: 419.fcd@usss.treas.gov or fax: 202.406.5031

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Prevention – fraud is a preventable crime

EducateResidentsBanks

Send out alertsEncourage reportingGet Officers involved

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Thank You