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Beware of financial fraud schemes in online and social media world

While scrolling through your Facebook feed, you notice a friend of a friend recommending a new investment newsletter. Curious, you click through to the newsletter, which appears to be a high-quality publication authored by a credible financial professional.

Reading further, you find investing advice and stock tips that promise an easy way to grow your nest egg. You start looking around on social media services and search engines and find testimonials from satisfied clients….

It all looks legitimate. But is it the real thing—or could it be the entry point for a financial fraud scheme?

Most of us think we’re too savvy to be taken in by a scam, but in reality, that’s exactly how many financial scams work—by exploiting the target’s confidence in his or her abilities and intelligence. And the Internet and social media platforms, which have empowered us with endless opportunities for connection and learning, have empowered criminals and fraudsters, who are growing increasingly skilled at manipulating investors into parting with their money.

An investor bulletin from the U.S. Securities and Exchange Commission (SEC), the federal regulatory agency that oversees financial markets and enforces securities laws, provides a helpful overview of the fraud risks that lurk in the online world. Investors and web users would do well to review the warning signs.

Investors who conduct trades or research opportunities online may like the convenience and wealth of information, but it pays to be wary. Social media networks, online chat forums, newsletters and e-mail are all valuable tools that a fraud perpetrator can turn to his or her advantage.

The SEC notes, for example, how anonymity on the web can be used to exploit people’s trust to create interest in a shady “investment opportunity.”

“You never know for certain who you’re dealing with, or whether they’re credible, because many sites allow users to hide their identity behind multiple aliases,” the SEC bulletin explains. “People claiming to be unbiased observers may actually be insiders, large shareholders, or paid promoters. One person can easily create the illusion of widespread interest in a small, thinly traded stock by posting numerous messages under various aliases.”

They suggest being wary of unsolicited investment offers, and to keep in mind the old adage, “if it sounds too good to be true, it probably is.” Knowing the common signs of financial fraud, and knowing the steps to take to protect yourself, are a good place to start. Report cases of suspected fraud to the SEC Complaint Center.

Beware of old wine in new bottles

Financial fraud is nothing new, and in fact, many of the scams deployed online to exploit investors are simply repackaged schemes that criminals have used for decades. But thanks to the reach of the Internet, it’s easier than ever for fraudsters to “fish in a bigger pond,” so to speak, thereby increasing their chances to success.

Legendary con artist Frank Abnagale, famously portrayed by Leonardo DiCaprio in the hit film “Catch Me If You Can,” found a second career as a fraud expert helping law enforcement identify scams and warning consumers about the risks. As an ambassador for the AARP Fraud Watch Network, he explains how many of the schemes you see online are simply updated versions of old tactics.

“Scammers have been using email and telephone calls to target unsuspecting victims for years,” Abnagale explains. “Now, with today’s boom in social media use, the con artists are just as likely to use Twitter, Facebook and other social media platforms to execute their insidious scams to steal people’s money and identities.”

In fact, when it comes to social media and online sharing, we may be our own worst enemies, since publicly posted biographical and personal information can provide an entry point that criminals can exploit. Abnagale and AARP share tips about how to protect yourself online:

  • Think carefully about what you post about yourself, especially on Facebook. When you post that glorious beach photo, you’re signaling to the world that your home or business might be unprotected. 
  • Limit access to your social media accounts to people you know. 
  • Avoid posting a front-facing picture of your full face. A con artist can copy the image and use it to create a photo ID that can be used to steal your identity. 
  • Take advantage of the privacy options to restrict your information so it can be viewed only by select people. Check your privacy settings regularly. 
  • Be aware of dubious ads and fake news that you might click on, opening yourself up to phishing attacks or malware. 
  • Don’t log in to your social media accounts via a public wireless network, where scammers can lurk and more easily grab information about you. 
  • Be suspicious of unsolicited emails and requests from strangers to connect or be friends.

The full AARP article includes examples of common online scams—like how fraudsters use charitable appeals to play on peoples’ sympathies on social media networks, or pose as long-lost friends on Facebook to gain trust—and is worth checking out in its entirety.

Anyone can be a victim of financial fraud and exploitation—and just having confidence in your ability to spot a scam doesn’t mean you’re safe from harm. Many of today’s frauds are more sophisticated, and may appear far more professional and credible, than the infamous “Nigerian prince” spam e-mail scam of the past. One of the biggest online scams today is the online dating scam. Scammers create fake profiles on dating websites, build and foster relationships, and then ask for money. Scammers can often spend hours per day – even over the course of months – communicating with a target before the ask comes.  The ask can be for a range of reasons, including, but not limited to: emergency surgery, plane tickets, or some other urgent ask. What can you do if you feel you may be the target of such a scam? The easy answer is to stop and don’t send money.

The good news is that while online technologies and social media services have empowered criminal actors, they’ve also empowered us with new tools for getting the facts. And if you’re presented with an investment opportunity online, take time to consult with a financial professional before committing any funds.

Further reading 

Get smarter about your online security 

Be on the lookout for financial scams 

Get the facts about senior financial abuse

Senior Investor Protection Toolkit