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How to spot financial frauds to protect your money

When asked by a news reporter why he robbed banks, the prolific bank robber Willie Sutton said "because that is where the money is." Jokes apart, financial fraudsters and thieves do the same - they go after you in order to rob you of your money. In case you are careless or not paying attention to details, you could be scammed. Here are some ways to spot frauds and scams and some way to avoid them.

1. Banking Fraud:

   Fortunately banking is a highly regulated industry, so the chances of a bank scamming you are low. But, you still need to be worried. Here are some things to watch out for:

   • ATM and PIN number fraud: Don't use ATMs when there are other people around you; don't share your PIN number with anyone
   • Wire transfers: Don't make electronic transfers to people who you do not know anything about
   • Don't make out blank cheques: Don't leave the amount blank
   • Don't make out cheques in the personal name of the salesperson when you are dealing with a company
   • Cash transactions without any receipt: Always demand an official receipt on company stationery
2. Cyber Fraud:

   We rely so much on the internet that we can never be totally free from cyber fraud.

   • Watch out for identity fraud: Don't let someone else pretend to be you online, so don't share all your personal details with anyone
   • Lottery fraud: Stay away from answering spam-like emails that promise you winnings from a lottery
   • Don't share your banking details: Be very careful if you do Net Banking, especially if you are using a shared computer; log off appropriately
   • Online use of credit cards: Only use your cards on sites that are protected and look for the appropriate signs and marks on the site to confirm this
3. Cash Fraud:

   The typical cash fraud involves the fraudster taking money from you and promising you a very high return for your money in a short period of time. Often you don't even know what the money is being used for. Chit funds in India are common ways that this fraud occurs.

   Cash fraud can also occur using Ponzi schemes or Pyramid schemes. In these scams the fraudster takes money from one set of investors and uses this money to pay a return to other investors. Seeing these returns, the investors pile in with more money, but these schemes are unsustainable. Ultimately, only the fraudster is the one who is enriched. Sometimes the fraudster might also take cash in the name of a charity and promise returns to investors.

   Don't trust anyone who asks for your cash and promises to make you a fortune in a short period of time

4. Investment Fraud:

   Investment frauds usually involve the fraudster guaranteeing some kind of assured return on the investors' money. Whenever someone offers you high returns with very low risk, run away from them. This is practically impossible in the world of finance. Even the world's best investors cannot generate high returns with low risk.

   Common areas where such fraud occurs are in the stock market or in real estate developments. Don't give your money blindly to someone whose background or operating history you are unfamiliar with. Always ask them for the details behind how they plan to generate high returns. Don't give your stock broker complete discretion to trade on your behalf. Please keep yourself informed regularly, otherwise you might be in for a surprise. Don't get swayed just because your peers are putting pressure on you to invest.

   Plantation investments are one common fraud of this kind in India. Stay away from property investment trusts as well. Often developers will show you their vision and drawings of exotic developments in undeveloped areas and guarantee you returns for your investments. The outcome is usually not a happy one

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