In today’s environment, financial fraud and scams are becoming more common. New accounts
of people losing all of their money through investments in shady scams surface every year.
However, this hasn’t stopped other people from being victims of these con games. This is a
result of thieves’ inventiveness, since they constantly adapting their strategies to target new
people. By being aware of these hazards, you can protect your finances. Do you personally
know any victims? Knowing what a fraud or scam is and how to spot different kinds of it is the
first step in defending yourself from it.

Types of Fraud

Scammers and fraudsters prey on people in a number of ways, including by obtaining personal
information, calling and emailing victims, and interfering with their financial transactions.

1. Ponzi Scheme:

Scammers routinely demand exorbitant rates of return from investors in
exchange for their capital. During the early stages, the return will be judiciously
distributed so as to establish confidence among the general public. As soon as investors
observe a return on their investment, they will disseminate the information to the
general public via word-of-mouth, thereby fostering confidence. The investors would
incur financial loss and the fraud would come to an end if the con artist acquired a
sufficiently large sum of money. Eg: Money chain fraud; Total 4 U scam.

2. Investment Fraud

Someone solicits your participation in a commercial transaction, such as an
investment or the purchase of inventory to resell. You are to be responsible for bringing
in new members. After some time has passed, we no longer receive new members.
When this happens, the promoters will disappear, taking your money with them.

3. Credit and Debit card Frauds
   Fraud with debit cards or credit cards occurs when a fraudster uses a device to
   compromise an automated teller machine (ATM) or point of sale payment terminal (also
   known as a “debit machine”) in order to steal information from a payment card and/or
   personal identification number (PIN), and then uses that information to make
   purchases.

Prevention/ Fraud Management

To mitigate the likelihood of falling prey to payment card deception, abide by the
following guidance:

1. Protect your credit cards
   a) Maintain payment card information in a secure location.
   b) Avoid revealing your payment card to a third party during the payment process.
   c) Immediately notify your financial institution of any occurrences involving the
   loss, theft, or apparent theft of your payment card by a bank machine.

2. Protect your PIN
   a) Never disclose your PIN to a third party.
   b) Establish a PIN that is devoid of any personal or financial account data.
   c) Avoid jotting down your PIN. Put it to memory.
   d) Protect your PIN from the view of any potential camera or individual.
   e) After completing your transaction, wipe every key from the PIN pad to prevent
   heat sensing technology from being used to determine your PIN.

3. Safeguard your credit card details
   a) Provide your payment card number only to a reputable bill payer.
   b) It is not advisable to provide your payment card information to an individual
   who claims to have won a lottery, prize, or any other “too good to be true”
   scheme.
   c) When engaging in online banking or completing any online purchase, refrain
   from permitting a website to retain your payment card number or
   passcode/password.

4. Conquer any device or machine sabotage
   a) Automated Bank/Teller Machine (ABM/ATM) or Point of Sale terminal (also
   known as a “debit machine”) examination for indications of interference.
   b) Examine the card acceptance port and other areas of the ABM/ATM for the
   presence of a false front, which is a counterfeit device that has been installed.
   c) The act of manipulating an ABM/ATM or point-of-sale terminal is referred to
   as “shimming.” A fraudster who employs shimming technology steals
   information from the chip of your payment card. If the card acceptance port on
   your payment card is overly snug, tampering may have taken place. Immediately halt the transaction, remove and safeguard your card, and get in touch with your financial institution.

d) Skimming additionally refers to the manipulation of an ABM/ATM or point-of-
sale terminal. Skimming occurs when a fraudster uses technology to capture information from the magnetic stripe of your payment card.

5. Verify your statements.
   a) Ensure that you routinely review your statements and online accounts.
   b) Verify that you originated each transaction.
   c) Report immediately to your financial institution any suspicious transactions.

4.Affinity Fraud

Affinity scheme perpetrators often identify as (or pose as) members of the group
that the con artists intend to defraud. A religious organisation, such as a specific
denomination or church, an ethnic group, or an immigrant community could comprise
the group. It might be a minority race. It could be members of a specific workforce;
military personnel have even fallen victim to these forgeries. Fraudsters target any
group they believe they can persuade to entrust the hard-earned savings of its members
to them.
Affinity fraud typically entails either a simulated investment or an investment
in which the perpetrator provides false information regarding material aspects (e.g., the
scheme’s promoter’s background, the investment’s track record, or the risk of loss).A
considerable number of affinity forgeries can be classified as Ponzi or pyramid
schemes, in which funds contributed by new investors to the promoter are repaid to
earlier investors under the guise that the investment was profitable. In actuality,
notwithstanding the existence of an investment, it is common for said investment to
yield minute to nonexistent returns. The fraudster simply appropriates the funds of new
investors for personal gain, frequently utilising a portion of the funds to bribe existing
investors who are becoming dubious. The scheme eventually collapses when the supply
of investor funds runs out and existing investors begin to demand payment, at which
point investors realise that the majority, if not all, of their capital has been depleted.

Prevention/ Fraud Management

1. Read up on the background of your investment professional.
2. Attend events hosted by organisations such as the SEBI to learn about the most recent fraudster trends and how to avoid falling victim to them.
3. Investor.gov provides a wealth of information to assist investors in avoiding fraud.

5.Mass Marketing Fraud

In broad terms, “mass-marketing fraud” encompasses any fraudulent scheme that
solicits or transacts with a significant number of potential victims through the use of one or
more mass-communication channels (e.g., the Internet, telephones, the mail, or in-person
meetings), or transfers fraudulent proceeds to financial institutions or other entities affiliated
with the scheme. In general, mass-marketing fraud schemes can be classified into two
overarching categories: (1) schemes that exploit a relatively small number of victims for
substantial sums of money, such as several hundred dollars per victim; and (2) schemes that
exploit a relatively smaller number of victims for substantial sums of money, including
thousands or millions of dollars per victim.

On occasion, consumer protection authorities and law enforcement agencies categorize
specific fraudulent schemes according to the mode of communication employed (e.g.,
“telemarketing fraud,” “mail fraud,” and “Internet fraud”). Simultaneously, they acknowledge
that mass-marketing deception strategies frequently employ a variety of communication
methods in order to reach a greater number of potential victims. To illustrate, an advance-fee
fraud scheme (which will be elaborated upon in the following section) may employ a
substantial quantity of unsolicited emails (“spam”) to initiate communication, solicit interested
recipients to contact a specific telephone number for additional details, and deliver materials,
including counterfeit checks, to the potential victim via mail. Mass-marketing fraud schemes
can take the form of “too good to be true” situations, such as demanding upfront payments for
goods or services, soliciting personal information via telephone, presenting unsolicited offers,
or employing high-pressure sales techniques that threaten to miss a “once in a lifetime”
opportunity.

Types of Mass Marketing Fraud

Advance-Fee Fraud Schemes

The foundation of these schemes lies in the notion that an individual who falls victim to them
will be assured of a significant advantage — such as a million-dollar prize, winnings from the

lottery, a substantial inheritance, or another valuable item — but will be required to prepay a
fee or series of fees prior to receiving said advantage.

Online auction and online retail Scheme: Aim to provide premium products, including
collectibles, computers, and high-priced timepieces, that are anticipated to appeal to a
substantial number of customers. Instruct individuals to transfer funds in exchange for pledged
merchandise, but subsequently fail to deliver the promised item or an item of significantly
diminished value (e.g., fraudulent or altered products). Scammers may send email notifications
to potential victims claiming to possess surplus quantities of the items that were previously
auctioned off. However, they may attempt to convince them to visit alternative websites that
lack the consumer protections typically found on legitimate auction platforms.

Business Opportunity and Work at Home schemes: Make contact with individuals in order to
promote business opportunities that claim to enable “work-from-home” ventures that generate
thousands of dollars per month. Consistently demand hundreds of dollars (or more) from individuals, but fail to provide the materials or information required to transform the work-at-
home opportunity into a potentially lucrative business.

Charity Schemes: Solicit contributions on behalf of fraudulent or non-existent organizations.
Occur predominantly in the aftermath of disasters or during the holiday season, when potential
victims are at their most susceptible to monetary donations and philanthropy is at its peak.

Credit card interest reduction schemes: Approach individuals with the promise of reducing their
credit card interest rates; however, levy charges without implementing tangible reductions in
the interest rates of the cardholders.

Inheritance Scheme: Advocate for potential victims by asserting that the individuals contacted
are eligible to inherit a significant amount from a deceased family member or an unclaimed
estate. Following this, the victim is subjected to a succession of demands for prepayment of
fictitious fees prior to the transfer of the inheritance.

Foreign Lottery/prize/Sweep stakes schemes: Scammers deceive the recipient into believing
they have won a significant lottery prize or other prize contest, but require them to pay an
increasing number of non-existent “fees” or “taxes” prior to receiving the prize. Conduct
business from an increasing number of nations, including Spain, Costa Rica, the Dominican
Republic, Jamaica, the Netherlands, and Nigeria.

Online sales/ counterfeit cashier’s check/over payment schemes: Employ individuals who
utilize online platforms to promote sizable products, including automobiles, in order to conduct
business. Individuals who initiate contact with the potential vendor assert their interest in
purchasing the item, but subsequently remit payment in the form of a cheque that exceeds the purchase price. The vendor receives instructions from the fraudulent “buyer” to utilize a money-
transfer company in order to transfer the surplus funds from the purchase price to the “buyer.” Immediately following the deposit of the cheque into his account, the vendor will invariably
discover that it is fraudulent. In addition to forfeiting the funds that were transferred to the
“buyer,” the vendor potentially faces legal responsibility if they deposit the counterfeit cheque.

Bank and Financial Account Schemes

Certain forms of mass-marketing deception entail deceiving prospective victims into
divulging their bank or financial account information in order to obtain unauthorised access to
those accounts and subsequently withdraw funds or charge merchandise to the victims’
accounts. Identity theft could be an element of these schemes as well.

Phishing: Malicious emails and websites that deceive Internet users into divulging personal
and financial information by feigning affiliation with reputable banks, financial institutions, or
companies.

Vishing: The equivalent of fraud over the phone. Frequently, fraudsters contact potential
victims while impersonating bank representatives in an attempt to coerce the individual into
divulging banking information

Pump and Dump Scheme: Scammers commonly distribute inaccurate and deceptive data with
the intention of inducing substantial price surges in thinly traded stocks or stocks of shell
corporations (termed “pump”). Subsequently, they liquidate their stock holdings (termed
“dump”) in an attempt to recoup considerable financial gains prior to the stock price reverting
to its customary low point. Investors in stocks who are not informed of the deceptive
information are enticed to fall victim to the ruse when the price declines.

Short-Selling or Scalping Scheme: Distribute inaccurate or deceptive information with the
intention of inducing declines in the value of a specific company’s stock for the purpose of
profiting from short selling said stock. A party generates a profit on the difference between the
reduced price at which the stock was purchased back and the initial higher price at which it
was sold when it engages in a short sale of the stock.