AARP Publishes Annual Fraudwatch Issue

 

Image Credit: Markus Winkler, Pexels

By Lilian H. Hill

Financial fraud and scams encompass a wide range of deceptive practices aimed at unlawfully obtaining money, assets, or sensitive information from individuals or organizations. These schemes vary in complexity and sophistication but generally involve manipulation, misrepresentation, or exploitation for illicit gain. According to the American Association of Retired People (AARP), which publishes an annual fraud watch issue of the AARP Bulletin in April, we are bombarded with solicitations for fraud through letters, emails, phone calls, and texts. Americans lost as much as 10 billion dollars to fraud in 2023 (AARPa, 2024). Seniors are targeted because they may have significant financial resources.

In their April 2024 Bulletin, AARP reported on the fastest-growing scams. They include:

Check Cooking is a new iteration of check-washing, where criminals use chemicals to remove the payee and amount but leave the signature from stolen checks. Check cooking involves taking a digital picture of a check and using readily available software to alter it. These checks look very realistic and even include watermarks (AARPa, 2024).

·      Do not send checks by mail, or if you must, deliver them directly to the post office. Use a mailbox inside the office rather than one outside its doors. Learn to send money electronically and monitor your checking accounts frequently.

Voiceprinting: Criminals use AI tools to capture your voice and create a realistic version that can be used to impersonate you. They only need to capture a moment of your speech to accomplish this. Then, they call your bank and request that funds be transferred to an account that belongs to them (AARPa, 2024).

·      Do not answer calls from unknown numbers. If you receive a call where you are asked, “Can you hear me?”, do not respond and hang up immediately.

·      Even calls that appear to be from known numbers can be fraudulent, so it is better to text with people other than your immediate family and close friends.

Celebrity Impersonation: Pretending to be a celebrity and having a conversation with you, as a favored fan, gradually turns to how the celebrity is in financial trouble and how you can help (AARPa, 2024).

·      Receiving a direct message from a celebrity or even their agent or manager is highly likely. Be skeptical.

Multistage Grandparent Scam: An expansion of the more familiar grandparent scam, but in this case, criminals employ teenagers in call centers to make contact. The call center operators will supply a case number to make the request seem legitimate. They may even send a runner to pick up money from you directly (AARPa, 2024).

·      If you receive a call from an unknown number claiming to be a family member in trouble, hang up and then call that family member directly. If you can’t reach the person, call other family members who may know the person’s location. Do not send money.

Delayed-Action Sweepstakes: To collect the nonexistent prize, you may be asked for bank account numbers and other personal information to “validate” your identity. Then, the criminals will write small checks to determine if you are paying attention. They will continue to use your account to establish lines of credit and credit cards in your name to give themselves a bigger payday (AARPa, 2024).

·      There are few large sweepstakes left. If you receive a phone call that claims you are the recipient, hang up. Do not provide any personal information.

Paris Olympics Scams: This scam involves hacking someone’s email account, and subsequently, all the person’s contacts will receive a message that reads as if it was sent by him/her, saying something like, “Help, I’m in Paris, and my wallet was stolen. Please send money by Venmo or gift cards” (AARPa, 2024).

·      Don’t react immediately. Instead, try other ways to contact the person “in need” such as calling them to determine if the request is genuine.

Crypto-currency ATMs: These devices are being installed in stores and are a legitimate way to convert cash to cryptocurrency. They may look like other ATMs, and victims may not realize they are depositing money into a cryptocurrency ATM. Instead of the more familiar gift cards, bank transfers, and payment apps, criminals are now directing victims to deposit cash because cryptocurrency is difficult to trace (AARPb, 2024).   

·      Real businesses and government agencies don’t accept cryptocurrency. Being directed to deposit cash into cryptocurrency ATMs should serve as an alert that a scam has taken you in.

 

Self-Protection Actions

There are several actions you can take to protect yourself (AARPc, 2024):

1. Review the contact list on your smartphone, add your doctors, banks, and other people or organizations likely to call you. Then, select “silence unknown callers.” This will direct unknown calls to voicemail, which you can filter.
2. Sign out of any financial apps on your phone, tablet, and computer each time you visit the site or complete a transaction.
3. Revise your passwords: It is a good idea to change the passwords on any financial accounts or apps every few months. Use strong passwords and enable multi-step authentication for all financial accounts.
4. Audit your wallet: There is no need to carry your Social Security, healthcare, or Medicare cards. Only carry the debit and credit cards you use regularly. Make copies of items you carry and keep the copies in a safe place, so you have the bank contact information for those cards should they be stolen.
5. Monitor your credit reports: Visit AnnualCreditReport.com to get free reports from the three recognized credit bureaus: Experian, Equifax, and TransUnion. Look for unknown transactions or activities you did not request or authorize.
6. Be skeptical: Criminals may use friendliness, compassion, and kindness to gain your trust. Another approach they use is to create a sense of urgency to prompt you to act without thinking.
7. Keep learning about fraud and scams. Fraud and scams are fast-moving areas. Criminals are often tech-savvy and will exploit new technologies while trying to exploit potential victims' vulnerabilities.

References

AARPa (2024, April). Six fast-growing scams coming your way. AARP Bulletin, p. 12.

AARPb (2024, April). Why criminals love cryptocurrency ATMs. AARP Bulletin, p. 13.

AARPc (2024, April). Do these things today. Be safer tomorrow. AARP Bulletin, p. 14.

April is Financial Literacy Month

 

Image Credit: Tima Miroshnichenko, Pexels

 

Financial Literacy Month is an annual observance held in April in United States, Canada, and the United Kingdom (Christenson, 2024). The primary aim is to raise awareness about the importance of financial education and empower individuals with the knowledge and skills to make informed financial decisions. Advantages of financial literacy include the ability to make better financial decisions, manage money and debt, reduce expenses through budgeting, plan for emergencies, and alleviate financial anxiety. People with higher levels of financial literacy are more likely to spend less income, have an emergency fund, save, and open a retirement account earlier than those with lower levels. However, only 57% of American adults are financially literate. The numbers of women and minorities are lower. Estimates indicate that lack of financial literacy can cost an average of $1800 per year (Lin et al., 2022).

 

Financial Literacy Defined

Financial literacy is the possession of skills, knowledge, and behaviors that allow an individual to make informed decisions to effectively manage their financial resources. It encompasses a wide range of skills, including budgeting, saving, investing, borrowing, debt, and avoiding fraud. In today's complex financial landscape, financial literacy is increasingly important for individuals to achieve their financial goals (Tamplin, 2023).

 

Components of Financial Literacy

Dorman (2023) indicates that there are 5 components of financial literacy: earn, spend, save, borrow, and protect. An alternative expression is budgeting, saving, investing, borrowing and managing debt, avoiding predatory loans, and detecting financial fraud.

• Budgeting is a fundamental aspect of financial literacy. A budget is a plan that outlines an individual's income and expenses over a specific period, typically monthly. By creating and sticking to a budget, individuals can ensure that they allocate their money effectively, prioritize their spending, and avoid overspending.
  
  
• Saving is another critical component of financial literacy. Saving involves setting aside a portion of income for future use, whether it is for emergencies, retirement, or specific goals like buying a home or traveling. Understanding the different saving options, such as savings accounts, certificates of deposit (CDs), and retirement accounts like 401(k)s or IRAs, is essential for individuals to make informed decisions about where to keep their savings and how to maximize their returns.
  
  
• Investing is another aspect of financial literacy that involves putting money into assets with the expectation of generating a return. Investments can include stocks, bonds, mutual funds, real estate, and other vehicles. Understanding investment principles, risk management, and the impact of inflation and taxes on investment returns is crucial for individuals looking to grow their wealth over the long term.
  
  
• Borrowing and managing debt are also important topics in financial literacy. While borrowing can help individuals finance significant purchases like a home or education, it is essential to understand the terms of borrowing, including interest rates, fees, and repayment schedules. Managing debt involves developing strategies to pay off debt efficiently, avoid high-interest debt, and maintain a good credit score.
  
  
• Avoiding predatory loans, meaning unethical or deceptive lending practices that take advantage of borrowers who lack understanding about loans, financial systems, or their vulnerable financial situations. These practices can occur in various lending products, such as mortgages, payday loans, auto loans, and even student loans. Common characteristics of predatory lending include high interest rates, hidden fees and charges, misleading or deceptive information, impossible repayment terms, and pressure tactics. Predatory lending practices can have devastating effects on borrowers, leading to financial hardship, ruined credit, foreclosure, and even bankruptcy.
  
  
• Detecting financial fraud is another aspect of financial literacy. Fraud includes a wide range of deceptive practices aimed at unlawfully obtaining money, assets, or sensitive information from individuals or organizations. These schemes can vary in complexity and sophistication but involve manipulation, misrepresentation, or exploitation for illicit gain. Some common types of financial fraud include identity theft, phishing attempts, technology support scams, credit card fraud, and charity scams.

 

Education for Financial Literacy

By improving financial literacy, individuals can take control of their financial futures, make informed decisions, and work towards achieving their financial goals. Financial literacy education plays a vital role in empowering individuals to make sound financial decisions. It should start early, ideally in schools, yet only 20 states require that financial literacy be taught in high school (Tamplin, 2023). Adults need to continue their financial education throughout life to address their evolving financial needs and challenges during their lives. Governments, financial institutions, employers, and community organizations all have a role to play in promoting financial literacy through educational programs, resources, and tools.

 

References

 

Christenson, T. (2024, February 5). April is Financial Literacy Month. Moneyfit. https://www.moneyfit.org/financial-literacy-month/

Dorman, H. (2023, April 27). Five components of financial literacy. Milli Bank. https://milli.bank/blog/the-five-components-of-financial-literacy/

Lin, J. T., Bumcrot, C., Mottola, G., Valdes, O., Ganem, R., Kieffer, C., Lusardi, A., & Walsh, G. (2022). Financial Capability in the United States: Highlights from the FINRA Foundation National Financial Capability Study (5th Edition). FINRA Investor Education Foundation. www.FINRAFoundation.org/NFCSReport2021

 Tamplin, T. (2023). Why financial literacy is important and how you can improve yours. Forbes. https://www.forbes.com/sites/truetamplin/2023/09/21/financial-literacy--meaning-components-benefits--strategies/