The internet has opened up a vast new world for millions of people in ways that could hardly be conceived a generation ago, but while it has created a myriad of opportunities for online entrepreneurs, it has also opened a floodgate for scammers and con artists seeking to part unsuspecting consumers and internet users from their money. More traditional forms of communication are still used for this purpose as well, such as the telephone, but new types of scams have become common that frequently originate from outside the U.S. The targets of these swindles are usually the same: the elderly, the gullible and the emotionally vulnerable. In this article, we'll show you some common scams and show you how to recover if you've been victimized.

Scam 1: Suggesting Wire Transfers and Deposits
A common trend among scammers is to send out email blasts to thousands of people with a fictitious story about someone in a foreign country needing a transfer agent to help him or her transfer money to someone else in the U.S. These offers are all perpetrated by scam artists who are depending on you to receive the wired funds and forward on the now-cleared funds immediately - before your bank or savings institution can notify you that the wire was fraudulent. Sometimes banks will even clear the wire prematurely, and it is up to you to cover the loss of funds when the wire is later confirmed fraudulent.

This type of scam has been labeled a "Nigerian scam" - due to much of this activity originating in Nigeria and other African countries, where internet scammers work around the clock to bilk American consumers out of their savings.

This type of scam can also be disguised as a job offer in which one can earn a big profit by acting as a transfer agent for money wired in to the U.S. However, keep in mind that if the scammer's request were a legal need, a bank would have no problem acting as the wire transfer agent, and you would not be needed.

Scam 2: Announcing That "You're a Winner!"
Another popular scam via telephone and internet involves notifying the recipient that they have "won" a cash prize and must send funds to cover insurance and taxes right away to the contest "provider" in order to receive their prize. Of course, both the provider and the cash prize are bogus, and the scam artist simply pockets any funds that are sent.

If you have applied to win any sort of prize online, you have probably opened up your inbox to receive hundreds of fake "You're a Winner!" emails. Simply updating your spam filter can prevent dozens of these emails from ever reaching you in the first place.

Scam 3: Creating The Victim Mentality
As stated previously, elderly people are often targeted in financial scams, especially those who have recently lost a loved one or undergone some other traumatic experience, such as a major health-related issue or other life-changing circumstance. The first few years after such a loss or change can leave many elderly persons especially vulnerable to ruthless con artists. (For more see, Common Concerns For Retirees.)

These con men will first get to know the victim on a personal level and gain their trust. This is often accomplished by building up the victim's self-esteem with compliments and feigned sympathy of the victim's problems. Then the victim is duped into viewing anyone that tries to stop them from sending money as an enemy, someone that is trying to prevent them from receiving their rightful winnings.

Their opposition can come to be seen as a threat to their independence, particularly if the "winnings" that are to be collected will enable the victim to become more self-sufficient. However, if the victim becomes reluctant to send the requested funds, then the scam artist may become verbally intimidating or threatening - and then immediately switch back to being the victim's friend once the person complies. (To uncover even more scams, see our Online Investment Scams Tutorial.)

Fighting Back: What You Can Do
The victim mentality can be extremely difficult to overcome, particularly for those seeking to protect their loved. If trying to convince a potential victim with words and actions hasn't worked, in many cases a power of attorney can allow children to take control of a parent's assets and prevent a fraudulent transfer of funds. This course of action can have severe repercussions for the relationship. It will also validate the scammer's assertion that the protector is trying to infringe on the victim's right to the winnings.

It is extremely difficult to get someone in the victim's position to admit that he or she is a victim of fraud. One way to get around this is to ask the victim if you can participate in this contest as well, which will help the victim to think about the situation from another angle. Even if they can't admit it to themselves, many victims know that their prize is too good to be true. So, while they may allow themselves to be duped, letting a loved one be swindled may be another matter. This approach allows the victim to change his or her mind about the situation while keeping a sense of dignity intact and avoiding invasive legal or financial action.

Preventive Measures
Even victims who come to see the truth may need to take further steps to stop scammers from contacting them again. Changing phone numbers and bank accounts may be necessary in some cases, and the new phone number should not be publicly listed. Of course all fraudulent activity, whether successful or unsuccessful, must be reported to the proper authorities, such as the Federal Communications Commission (FCC).

In addition, simply putting scammers on hold and leaving them there can discourage them from calling back as well. And, as said above, a smart spam filter can stop any internet scammers in their tracks.

Millions of fraudulent requests for funds are made every day via telephone and internet. For more information on this matter, consult the NationalFraudInformationCenter. In addition, taking action now to better your relationship with your parents, elderly friends or other contacts can go a long way toward protecting them in the future. A discussion or two about the hazards of scams can do more for these people than helping them get back on track after they've already become victims.

Related Articles
  1. Entrepreneurship

    Top 5 Startups that Emerged in Toronto

    Learn how Toronto has built a fertile climate for startups, and identify some of the top companies to emerge from the city's hot startup market.
  2. Entrepreneurship

    Top 5 Startups that Emerged in London

    Learn why London's startup scene is so prolific, and identify some of the hottest companies emerging from this scene as of mid-2015.
  3. Active Trading Fundamentals

    The 4 Biggest Private Equity Firms in London

    Discover information about the largest private equity firms that are headquartered in London, ranked by total assets under management.
  4. Retirement

    Retirement Planning for Entrepreneurs and Small Businesses

    If your business has receiveables, here's a smart way to leverage them to build up your retirement fund fast.
  5. Investing

    The 8 Best Business and Finance T.V. Shows

    With so many talking heads to choose from, which is the right show for your business and money matter needs? We review the best shows on now.
  6. Active Trading Fundamentals

    The Biggest Private Equity Firms in San Francisco

    Learn about some of the larger private equity firms with a presence in San Francisco, including KKR, the Blackstone Group and Warburg Pincus.
  7. Active Trading Fundamentals

    The Companies of Peter Theil's Founders Fund

    Learn about the major public companies that Peter Thiel has invested in and companies that are on the verge of going public at multibillion-dollar valuations.
  8. Active Trading Fundamentals

    The Biggest Private Equity Firms in Los Angeles

    Learn why Los Angeles is a thriving market for private equity, and identify the five largest private equity firms operating in the city.
  9. Entrepreneurship

    What Does Bootstrap Mean?

    The term bootstrap refers to launching and building a business with little capital and no funding from outside sources.
  10. Entrepreneurship

    Top 5 Startups That Emerged in Denver

    Learn why Denver is one of the hottest markets in America for startups, and identify five of the top startups that are emerging from the Denver market.
  1. Black Money

    Money earned through any illegal activity controlled by country ...
  2. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  3. Credit Card Dump

    The unauthorized copying of all the information contained in ...
  4. PIN Cashing

    A type of fraud in which a stolen credit card or debit card is ...
  5. Carding Forum

    A website dedicated to the sharing of stolen credit card numbers. ...
  6. Synthetic Identity Theft

    A type of fraud in which a criminal combines real (usually stolen) ...
  1. What are the most common scams regarding Social Security benefits?

    There are a number of common scams that target Social Security benefits. These scams generally involve criminals who impersonate ... Read Full Answer >>
  2. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  4. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  5. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  6. How should a whistleblower report unlawful or unethical behavior?

    Whistleblowing takes many forms. A whistleblower could expose government corruption, expose unethical business behavior or ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!