How to Recognise a Financial Scam
Financial scams have become increasingly sophisticated, exploiting the trust and vulnerabilities of individuals and organisations. With the rise of digital communication and online transactions, recognising a financial scam is critical.
The ACCC Scamwatch service received 301,791 scam reports in 2023 (up 26% on 2022).
In this blog post, we will identify common financial scams, the warning signs and, how to protect yourself from falling for these schemes.
Understanding Financial Scams
Financial scams are designed to defraud individuals or organisations out of money or valuable information. These scams can take many different forms from phishing emails, identity theft and, online shopping scams.
As digital technology continues to evolve, so do the methods that scammers use. Financial scams often leverage the anonymity of the internet, making it easier to target victims across the world.
Scams can happen to anyone, regardless of age, financial status and level of education. Therefore, it is important to understand not just the types of scams but also the strategies used by scammers.
Common Types of Financial Scams
1) Phishing Scams
Phishing scams involve communications, generally emails or messages that appear to come from legitimate sources. Scammers then use these messages to convince you to provide sensitive details such as passwords, credit card numbers, or transferring money. In recent years, phishing scams have become increasingly sophisticated, often copying the branding, tone and appearance of legitimate businesses.
2) Investment Scams
These scams can promise high returns with little or no risk, examples include Ponzi schemes, pyramid schemes and, fake investment opportunities. Scammers often target individuals looking to grow their savings or retirement funds.
3) Identity Theft
This occurs when someone uses your personal details without permission to commit crimes and fraud. This may include opening bank accounts and making unauthorised purchases.
4) Dating Scams
People create fake profiles on dating sites or social media to create relationships with their victims. They then ask for money in various situations such as a medical or family emergency.
1) Unsolicited Communication
Be cautious if an email, phone call or message comes from an unknown source. Real companies rarely ask for sensitive information through these channels.
2) High Returns with No Risk
Promises of investments with high returns and little to no risk are too good to be true.
3) Pressure
Pressure to act quickly and make a decision without thinking is a warning sign. The scammers may claim that you need to act immediately to secure a price or investment.
4) Payment Method
Scammers often ask for payment through unusual methods such as pre-paid cards and crypto. These methods may be difficult to trace and to get money returned.
5) Suspicious Email or Websites
Taking the time to review details closely is important, scammers can use details that closely match legitimate ones. Check for spelling errors, odd formatting or unusual domain names.
6) Poor Grammar and Spelling
Scam emails can contain spelling errors and wrong grammar. Professional companies usually have well-written communication.
Protecting Yourself from Financial Scams
1) Education
Stay informed of the latest common scams and the warning signs. Checking trusted sources such as government websites for updates.
2) Verify
Before providing information or making a payment, take the time to verify the source. This could involve contacting the organisation directly using their official contact information or in person if possible. For example, in the event of a potential scam involving your bank, a visit to a local branch is beneficial.
3) Strong Passwords and Updating
Using strong, unique passwords and updating often is important. Avoid using the same password for multiple accounts and not using your own personal information in the password.
4) Enable Two-Factor Authentication
Another valuable step that adds protection is two-factor authentication. This step requires a second form of verification such as a text message, authentication app code in addition to your password before gaining access.
6) Secure Connections
When making online transactions, check that the website uses a secure connection, and try to avoid using public Wi-Fi when doing online banking.
What To Do If You Have Been Scammed
1) Contact Your Bank
Notify your bank or credit card company immediately. The first step is to contact your bank or credit card provider. They can help to freeze the account, and prevent further unauthorised transactions.
2) Report Identity Theft
If you believe that your personal details have been stolen or being used without your permission, report this to the police.
3) Change Passwords
Change passwords for any compromised accounts and enable two-factor authentication where possible.
4) Seek Support
Being scammed is emotionally difficult to process, seek support from friends, family or professionals to help.
After working as an advisor for a decade, Joel founded Unified Wealth.
Unified Wealth specialises in helping clients who are facing life’s big decisions.
Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.
Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.
Our company values are:
Unity - We are most effective when we work together as a team
Trust - We are trustworthy and act in your best interests
Transparency - We are honest and communicate openly
Education - We are committed to lifelong education