So often, many people fall into the trap, ending up losing vast amounts of their savings. But despite the rampant cases reported of people conned through pyramid schemes and other fraud-related activities, many, including you, are likely to become victims. Think about it! Have you been promised a high return at no risk whatsoever if you invest in a particular scheme, promised higher returns the more people you recruit into your investment scheme, made an investment decision because the opportunity will close, or bombarded with testimonials, especially from people who have made a lot of money, or who constantly seem to be on holiday, or surrounded by expensive cars and houses?
You may be about to lose your money to fraudsters. Always be alert. They say that what comes easy does not stay for long in the streets.
According to the Central Bank of Kenya, fraudsters are continuously coming up with new tactics to swindle people for financial gain. As technology advances, so does the level of sophistication used to lure people into parting with their money or assets. Therefore, it is important to be alert and cautious about the information you receive or any solicitations geared towards getting you to share personal information or invest in certain schemes.
Some examples of financial scams and fraud are listed below as highlighted by CBK:
Pyramid Schemes – These are fraudulent schemes that promise high returns/profits to investors. However, this is pegged on the ability of the recruit to enroll more people to join the scheme. The next level of recruits is also expected to recruit more investors, thus becoming a chain of recruitment. However, the profits from these schemes are not based on a product but rather the money that recruits ‘invest’ in, which is then used to pay earlier investors. Some schemes may indicate that they have a product they are selling, but this is usually a front to entice consumers and hide the pyramid nature of the scheme. Initially, the scheme organizers may appear to pay investors on time, but they eventually stop and disappear, thereby fleecing investors of their money.
Ponzi Schemes – These are investment schemes that promise high short-term rates of return or dividends to investors. With a Ponzi scheme, investors pay money to a portfolio manager with the understanding that they will receive payment at a later date. Investors are usually mistakenly believed that they are investing in a product or service.
However, unlike a pyramid scheme, the investor in a Ponzi scheme is not expected to enroll recruits to get paid. When investors want their money back, or a dividend is due, they are paid using the money received from new investors. Like pyramid schemes, the fraudster uses the money collected from the initial investor to pay subsequent investors. The cycle continues until the organizer flees with the money, which usually happens when no new investors are being brought on board to generate enough capital to facilitate payment of dividends or principal amount to the existing large pool of investors.
Bank Card Fraud – Fraudsters may send email or text messages that appear to come from your bank or a reputable financial institution in what is known as phishing. They use various tactics to get you to share confidential information such as your PIN, account number, login details, password, etc.Â
There are also card skimmers who illegally copy the information from the magnetic stripe of a credit card or ATM card. These fraudsters create copies of your card and make charges on your account.
Identity Theft – In such cases, fraudsters obtain an individual’s personally identifiable information for financial gain. This may include full names, ID numbers, bank or mobile phone details, etc. With such information, the fraudster assumes your identity. It undertakes financial transactions such as taking on loans, including mobile loans, making purchases using your credit card and transferring money from your account to another one.
Advance Fee Scam – A scammer will send an email, letter, or make a phone call to a potential victim, offering them a large sum of money, service, or goods. The catch, however, is that one is expected to part with a fee before you can access whatever is being promised. The scammer may indicate that the fee is for taxes and shipping costs. You will be requested to wire the money or send it through a mobile payment platform. However, once the payment is made, the scammer disappears.
How to protect yourself against being scammed or defrauded
· Do not respond to unsolicited emails, letters, or calls promising you some benefit.
· Do not share personal information online (website, social media), email, or phone.
· Create a strong, unique password for your online accounts. Do not use the same password for various accounts. Where possible, have multifactor authentication for sensitive accounts.
· If someone you know requests monetary assistance through email or text, call them first to confirm if it’s a genuine request. It may be someone impersonating them.
· Exercise caution when making online payments with your bank card. Countercheck if the person or company is genuine before providing details or making payments.
· Do not click on email and text message links or attachments that request you to log in or verify your password. You should go to the official/legitimate website and log in.
· When in doubt about an issue, person, company, or investment, seek a second or third opinion from someone else who is not associated with whoever is corresponding with you.
What you should do in case you are a victim of fraud
In the unfortunate circumstance that you fall victim to a fraudster, ensure you do the following:
If you share personal banking details, inform your bank immediately. Change the passwords to your online accounts immediately.
Report the fraud to the police.
Remember always to exercise caution when you receive unexpected/unsolicited emails or calls. Confirm if the offer, company, or person is legitimate. Do not share your personal information, such as your password, as a credible institution would not require you to give out such information. Source www.centralbank.go.ke
