2. Learning Objectives
• Define what consumer fraud is and understand its seriousness
• Understand identity theft
• Classify the various types of investment and consumer frauds
3. Consumer Fraud
• Any fraud that targets a consumer or an individual as its victim.
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
• Two types of consumer fraud
• Identity Theft
• Consumer Scams
• With advancements in technology consumer fraud has become much more common
than it used to be.
4. Identity Theft
• Identity theft is using the identity information of another
person to pretend to be them.
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
5. Identity Crime in New Zealand
Identity Crime in New Zealand
•Costs the New Zealand economy approximately $209 million every year.
•133,000 New Zealanders are victims of identity theft annually.
New Zealanders tend to be trusting people which makes New Zealand appear to
be an easy target.
(Department of Internal Affairs, 2013)
7. Methods of Identity Theft
• Posing as an employee or representative of an organisation
• Shoulder surfing
• Dumpster diving
• Skimming
• Phishing
• Stealing wallets
• Theft of mail
• Social engineering
(Department of Internal Affairs, 2013) & (Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
9. How Fraudsters Benefit from Identity Theft
• Buy large ticket items
• Take out car, home or other loans
• Establish phone or wireless service in the victims name
• Opening a new bank account
• Filing for bankruptcy under the victims name
• Reporting a victim’s name to the police in lieu of their own
• Opening new credit card accounts
• Changing victim’s mailing address
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
10. How to Minimise the Risks of Identity Theft
• Keep key documents (e.g. birth certificate and passport) in a safe place
• Shred or burn mail with your name and address on it.
• Be careful when publishing information in public places
• Do not log onto internet banking from a shared or public computers.
• Remove all personal information from computers before you dispose of them.
• Be suspicious of any unexpected events
• Request an access register report from Births, Deaths and Marriages
• Request a credit report from Dun & Bradstreet or Veda.
(Department of Internal Affairs, 2011)
12. Other Types of Consumer Scams
• Fraudsters use various schemes to earn a
consumer’s confidence and then use that
confidence to get the consumer to pay or invest
money or provide personal information.
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
13. Other Consumer Scams
Foreign Advance-Fee Scams
•Nigerian money offers
•Clearinghouse scam
•Purchase of real estate scam
•Sale of crude oil at below market price
•Disbursement of money from wills
15. Scams in New Zealand
• Increasing number of people being ripped off through simple scams in New
Zealand
• Complaints are being made almost daily
• Scams would continue until public became more savvy about how the frauds
work
(Leask, 2013)
• New Zealanders reported $4 million lost in scams last year, although the
government estimates that scams could cost the country up to half a billion
dollars every year.
(Wannan, 2013)
16. How to Detect Scams
• it's addressed to 'My Dear' or something generic
• there are many grammatical or spelling errors in the email
• the email address is a public service domain like Gmail / Yahoo / Livemail
• a bank that you don't have an account with contacts you
• you are urged to visit a website to update your account information or fill in a form with personal information
• you're advised to act fast to claim money or some other prize in a lottery or competition that you never entered
• you inherit money or possessions from someone you've never heard of
• you receive a request from a stranger who needs your help (usually to send money)
• someone on a social networking site asks you to send them money so they can pay debts or so that they can visit you.
(The Department of Internal Affairs, 2013)
17. Example Consumer Scam
Dear Alsemgeest ,
Please forgive my using this means to reach you but I can't think of any other
way of letting you know of this urgent matter at hand. I am Barrister Davidson
Paul Kingsley ,an Attorney at law and the Personal lawyer to(late)Engineer D.
Alsemgeest , who dwelt and worked here for more than twenty years as a major
contractor and businessman.
On the 21st of june 2005, my client,his wife and their only daugther were
involved in an automobile accident and It was unfortunate my client and his
family all lost their lives and leaving some huge amount of money, Eight
Million Five hundred thousand united state dollars ($8.5 )in a security finance
firm.
I shall detail you on the confirmation of your genuinty to work this out with
me. use your personal email address and contact me directly through this my
private email address davidson-atg@terra.com for more details.
Thanks
Davidson Paul Kingsley (Esq)
Email: davidson-atg@terra.com
18. Scams Targeting the Elderly and Uneducated
• Those who are the most susceptible to consumer fraud are the elderly and the
uneducated.
• Elderly are more susceptible to telemarketing fraud than any other type of fraud.
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
• “old folk are being targeted by scammers”
• “People in the senior age group might have more money to invest or be seeking
online business opportunities”
• Grey Power Wanganui President seniors would probably be too embarrassed to say
they had been conned.
(Karauria, 2013)
19. Five Worst Scams in NZ
• Dating and romance scams
• Investment Scams
• Upfront money scams
• Online auction and trading scams
• Online products, advertising and computer hacking
(Ministry of Business Innovation and Employment’s Consumer Affairs Team, 2013)
21. Investment Scams
• Any fraud which is related to stocks, bonds, commodities, limited
partnerships, real estate, or other types of investments.
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
• Perpetrators usually make fraudulent promises or mis-statements
to induce people to make investments
Example
• Ponzi Scheme
22. Investment Fraud – Red Flags
• Unreasonably high or guaranteed rates of return
• Investments that do not make sound business sense or lack detail
• Pressure to make the investment early
• A business with a history of scandals
• Unaudited financial reports or adverse opinions
• Luxurious lifestyles of principals
• Investment success that is dependent on someone’s “unique expertise”
• Inability to pull out or liquidate the investment
(Albrecht, Albrecht, Albrecht, & Zimbleman, 2012)
23. Conclusion
• Consumer fraud is any type of fraud that targets consumers as its victims.
• Any offer that sounds too good to be true probably is.
• Scams operate in a manner which aim to gain an individual’s confidence and
then use that confidence to defraud the consumer.
• Advances in technology have made consumer fraud much easier for
perpetrators to commit.
