The Rise of Financial Fraud: Scams Never Change but Disguises Do

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Americans submitted nearly 1.1 million complaints about financial and other fraud in 2010 – a 35 percent increase in just three years. But scammers may be difficult to recognize, because they constantly alter their disguises.

A primary goal of this report is to provide insight into the disguises con men use to perpetrate their age-old fraud schemes and to recruit their potential targets, who may be retirees, members of the military, college students, the unemployed, homebuyers, investors, low-income families, among others.

Some con men, for example, position themselves as a sort of rescue squad, swooping in during a natural or man-made disaster and offering a product or business opportunity to ameliorate the crisis – and bring untold wealth to investors. Others infiltrate churches where they claim to be doing God’s work. Church-based scams are the most common form of “affinity fraud,” which occurs when con men exploit an interest shared by many potential victims, whether a religious belief or country club membership. There are affinity scams against Iranian-Americans, Cubans in Miami, Spanish speakers, Haitian immigrants, and Muslims, to name a few. Fraudulent subprime mortgage brokers who were immigrants made loans to homeowners who came from the home country and spoke the same language.

Cloaked in new skins, con men appeal to an individuals’ weak spot: a desperate shortage of money before payday, a need to earn more than the yield on their certificate of deposit, a need for cash to pay medical bills. But awareness of these disguises can prevent fraud by helping individuals recognize and steer clear of it.