Wednesday, December 13, 2006

Top 10 Scams of 2006 - 1

As 2006 draws to a close, a review of Scam Alerts archive shows that scammers have had a busy and & lucrative year.

Targeting the most vulnerable citizens and using increasingly sophisticated tools, most have been able to easily elude law enforcement as they pick their victims' pockets, sometimes even making off with their life savings.

Scammers scored at will, generating instant cash using lottery and fake check scams. They capitalized on news events and pop culture to catch consumers off guard, and enlisted all kinds of emerging technology to perfect identity theft.

Chosen from the roughly 50,000 consumer complaints they’ve processed in the past year, are the Top Ten Scams of 2006.

1. Fake Lottery Scam
Topping our list for 2006, the fake lottery or sweepstakes scam only seems to get bigger and more dangerous. Promising victims they have won thousands of dollars in a Canadian or European lottery, they target the elderly, who seem to be particular susceptible to these schemes. reported on one case in which an elderly Kansas man lost over $300,000.

More than 400 New Yorkers fell victim to sweepstakes and lottery scams in the first seven months of 2006, with losses ranging from a few hundred dollars to more than $35,000, according to an analysis by the New York State Consumer Protection Board.

While elderly people lost the most money, lottery scams also tricked younger people into believing they had won a large cash prize from a foreign lottery or sweepstakes. In each case, the victims sent money, usually to Canada, thinking they had to pay insurance or taxes before they could collect these bogus prizes.

"No legitimate contest makes you pay a fee to collect a prize," said CPB Chairperson and Executive Director Teresa A. Santiago. "For many of the elderly victims, the scam artists made multiple demands for cash, falsely claiming that more money was needed in order to pay for 'taxes' or insurance."

Sons and daughters have filed complaints after failing to convince their elderly parent that there was no prize.

"You can't win a contest that you didn't enter. But it's hard to convince someone that they are the victim of a scam, especially when the con artists have made numerous phone calls and formed a bond with the victim," Santiago said.

2. Phishing-Vishing Scams
This scam, in which identity thieves "phish" for a consumer's personal information, are getting more prevalent, due in large part to technological advances. The use of email now makes to increasingly easy for criminals to trick people into revealing account numbers, passwords and social security numbers.

Cleverly designed emails appear to be from a bank, credit union, or online payment service like PayPal, requesting account verification. If the consumer clicks on a link in the email, they are taken to a site designed to look like the bank's actual site, where they are instructed to enter the sensitive information, which is captured and used for identity theft purposes.

In 2006, "vishing" arrived on the scene. Instead of asking the spam recipient to click on a link, they are instructed to call a toll-free customer service number, which seems more the way a financial institution might do business. When they call, an automated system instructs the caller to enter account numbers or passwords, which are then recorded by the scammer.

Secure Computing, which specializes in secure connections over networks, sent up the red flag over this new method in 2005, though the first recorded incident didn't take place until May 2006, involving a Santa Barbara, California, bank. Secure Computing engineers have been tracking news group sites and open disclosure discussion groups discussing vishing.

"This is just a natural evolution of phishing itself," said Paul Henry, vice president of strategic accounts for Secure Computing.

"Simply put, people are becoming more aware of the fact that an e-mail containing a URL could be malicious in nature. So hackers are moving away from the URL and using something victims are more familiar with like calling a number."

This "advancement" has forced some financial institutions to consider additional changes to the way in which they communicate with customers.

3. Phony Job Scam
Scammers are increasingly responding to job seekers posting their resumes at online employment sites, such as The job offer usually has nothing to do with the job seeker's experience or qualification. Even so, they are offered a job on the spot, serving as a "courier."

They are instructed to receive large checks and deposit them in their personal accounts. They are then instructed to wire the money to an account out of the country. The checks, of course, are counterfeit, but they aren't exposed until after they have been deposited and after the victim has wired the money -- their own money, it turns out -- to the scammer.

"Any employment offered online without a formal interview, no matter where it originates, should be treated with skepticism," said Arkansas Attorney General Mike Beebe, who investigated one of these scams in 2006. "Terms that seem too good to be true will prove to be just that and may cost you in stolen personal information or money lost."

4. Negative Option Scams
Unlike most scams, which are perpetrated by out-and-out criminals, negative option schemes are run by otherwise legitimate businesses. Using pop-up ads on the Internet and extremely fine print on the back of sales tickets, consumers completing a transaction with their credit card are offered some free gift or enticement, not realizing their acceptance enrolls them in a travel discount club or affinity group of some kind, or commits them to a year's subscription of a magazine they most likely don't want.

The consumer may think there is no harm in accepting the "free offer," because they don't realize there strings are attached. While laws generally require consumers to make an "informed consent" to purchase, negative option turns the transaction around. It assumes the consumer has made the purchase, unless the consumer "opts out" or takes the "negative option." The volume of complaints to on this subject suggests consumers are completely unaware of the transaction.

5. Nigerian 419 Scams
These scams continue to make our list, year after year, because they continue to ensnare thousands of victims. This is the scam in which the victim receives an email, allegedly from a wealthy, dying person in another country who is desperately trying to get their fortune out of the country. They promise the victim a sizable percentage if they will help.

The victim either has to send money to cover fees or provide their bank account information, or both. The scams are mostly run from Nigeria and get their name because they are covered in section 419 in the Nigerian penal code.

Most people find these emails a big joke, but seemingly sophisticated people have fallen hard for them, losing hundreds of thousands of dollars. While the crime mostly goes unpunished, reported on British prankster Michael Berry's humorous war on these scams, which actually show as much promise as any countervailing measure. Called "scambaiting," Berry actively engages these scammers, pretending to be a gullible victim, wasting their time and forcing them to perform all types of ridiculous and time consuming tasks.

Continued in the next post...

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