Covid Cons: Introducing the New ‘Scamdemic Series’ Spotlighting Coronavirus-Related Cons And How to Avoid Them

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Covid-19 and the New Wild West 

Imagine you are driving to town to restock on essentials. As you are driving, you see cars lining up under a white banner advertising, “Covid-19 testing here.” You wonder if you may have the coronavirus because you haven’t been feeling well lately and so you decide to get tested. 

It strikes you as odd that the operators of the testing site prefer a cash payment of $240 or that their personal protective equipment (PPE) has that signature DIY-flare. In a world where every new day brings in a “new normal,” it’s easy to lose sight of what normal actually looks like. 

You hand over the cash, get your throat swabbed and go home and wait for test results that will never be sent to you. You don’t know it yet, but you have become a victim of a new crop of coronavirus-themed scams. 

Businesses May be Closed but the Business of Fraud is Booming

The coronavirus pandemic has been a deterrent to the ordinary criminal—drug dealers, murderers, rapists, burglars, and their ilk—those who, under normal circumstances, have to leave the house in order to commit crimes. After all, a burglar usually waits for you to go out before helping himself to your things. For the scores of fraudsters and online criminals out there, however, this prolonged stay-at-home life has been a bonanza. According to the Federal Trade Commission, during the first three and a half months of 2020, Americans reported losing $13.44 million to Covid-19-related scams, while Canadians have lost $1.2 million in the last several weeks, alone.

In an effort to help arm our readers with the knowledge necessary to protect themselves from the growing number of pandemic scams out there, we’re putting together new series here on the blog called Scamdemic. Each week we’ll focus on a different scam born out of the global coronavirus pandemic, giving you the high-level overview of how these cons work, as well as tips on how to best protect yourself from them. 

In the meantime, here’s a quick list of covid-related cons that have been in in the news recently:

  • Phishing attacks: As we continue to isolate at home, we rely more than ever on the internet for work, essentials and entertainment. Scammers are taking advantage of this new reality by using phishing scams—which use emails, texts, spam, or websites to steal sensitive, personal information. Last month the Better Business Bureau released a report highlighting a number of “free trial” offer scams making the rounds during Covid-19, including one claiming to offer free Netflix streaming services. 
  •  Investment scams: Investment scams can be particularly enticing when they play off of what’s happening in the news—the search for a vaccine, PPE shortages, new testing technologies, etc.—luring victims into thinking an investment is guaranteed to bring in a good return.  Unsurprisingly, investment scams are on the rise during the pandemic. Last month Maryland’s Attorney General warned of an expected surge of coronavirus investment schemes, and the BBB published a “scam alert” on a new pyramid scheme making the rounds on social media.
  • Healthcare-related scams: PPEs, medical devices and other necessary items are in short supply these days.  Plenty of scammers are pushing fake and defective products or marking up prices on supplies. Don’t think you can fall for one? Even governments are susceptible to these scams—scammers conned the German government out of some $34 million in relief money meant to help its citizens, Forbes reports.
  • Stimulus checks and government impersonation schemes: For many people, stimulus payments represent a financial lifeline during these uncertain times. The U.S. Treasury Inspector General for Tax Administration (TIGTA), the agency responsible for deterring fraud related to Internal Revenue Service (IRS) programs and operations, “anticipates that criminals will engage in various scams and schemes in attempts to intercept EIPs (Economic Impact Payments), and/or steal sensitive taxpayer information during these challenging times.” These schemes include fake websites, emails or texts claiming to be from the IRS asking for personal, sensitive information so that scammers can steal your stimulus checks from you. 
  • Employment Scams: Many people are looking for online work while they wait for the job market to rebound from the pandemic shutdowns. In some of these scams, fraudsters may require an upfront “training” fee, ask that you provide personal and banking information to run a credit check or set up direct deposit payments, or send you a check to buy hardware and supplies from “approved vendors,” only to bounce the check and pocket the profits on the purchases the new hire made.  
  • Small Business Scams: As governments allocate millions of dollars to help businesses stay afloat, scammers are busy trying to divert these funds into their own pockets. Stay ahead of them by understanding some of the ways they can get their hands on your money before you do.
  • Charity Scams: People have fallen under unprecedentedly hard times—Covid-19 has had historic impact around the world— and many who are in stronger positions to weather the economic fallout want to do their part to help those less fortunate. But before giving your money away be sure that your charitable donations are really going to help those in need.

Up Next

In the next blog post, we will be taking a closer look at one of the most deceptive and effective ways that scammers steal sensitive and personal information from victims—phishing attacks. Phishing attacks are emails, texts, and other forms of communication that appear to come from sources that are trustworthy and reputable—when in fact they are anything but trustworthy.

Psychology of Fraud: Mental Triggers That Leave Us Vulnerable to Scams

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John Gentile and Lorn Leitman met in the Army Reserves in the early 1970s and quickly became best friends. After their military service, Gentile graduated from medical school and established a successful chiropractic business in South Florida. Mr. Leitman became a licensed attorney and CPA. For almost four decades they strengthened the bonds that were formed during their Army days—they traveled together, called themselves brothers; Gentile even became a godfather to Leitman’s daughter.

In 2012, this storied friendship came to a bitter end when Leitman received a 17.5-year prison sentence for operating a Ponzi scheme that defrauded investors, including Gentile, of a total of $4 million dollars.  

Mr. Gentile’s ordeal was in many respects similar to the experiences suffered by other victims of fraud. Yet, a pervasive misconception about financial fraud victims is that they are most often elderly, naïve, greedy, passive, socially isolated or uneducated people—when in fact, research suggests the opposite. The truth is that fraudsters and scammers target all people, regardless of their demographics.

In fact, having a brain makes you a good candidate for being scammed because the human brain is wired for persuasion. Humanity’s susceptibility to persuasion, like much of our behavior, is a product of evolution. From an anthropological perspective, the ability to be persuaded was a biological necessity required in order to get a group of individuals to act in the interest of the collective. In exchange for giving up a strongly held opinion, a tribe member would receive protection and inclusion into the tribe. In addition, there are a series of human tendencies and needs—our belief in the goodness of others, the desire to please, the need to be cooperative, our affinity for and willingness to believe in stories, etc.—that, if satisfied or met, can be exploited by skillful and unethical individuals. 

Here are some of the mental mechanisms by which our brains can expose us to scams.

But I’m Too Smart

Believing that you are incapable of falling for a scam leaves you in a highly vulnerable position because your guards are already down. Social scientists call it the “illusion of invulnerability”—the belief that you are free from a danger because of a perceived advantage or a false sense of optimism. The invulnerability illusion was illustrated in a Better Business Bureau study that found that younger and educated people—more so than elderly people—were more susceptible to scams because they never expected to be targeted. In the study, which surveyed more than 2,000 adults, 69% of victims were under the age of 45, and 78% had a college or graduate degree. 

The Need to Please

We supposedly live in an age of cynicism and selfishness. The nightly news airs a string of negative and sensationalized stories, Facebook can be a blackhole of toxicity and the neighbor rants about how there is no decency anymore. But the fact is that most people are nice. Not only are people nice but they are driven by a need to be generous and giving, especially when others have been generous to them. This need for reciprocity can be a dangerous weapon in the hands of a con artist.  

For example, if someone were to offer you a lucrative investment opportunity you may, in turn, see it as an act of goodwill. In exchange, you may be pressed into listening to a sales pitch or, worse yet, into making a misguided financial commitment.

The Captive Audience

Through storytelling, early man was able to build community and maintain social order. And even today, when we hear a compelling story, our brain becomes measurably more engaged. When this happens, the neurochemical oxytocin is synthesized in the brain, causing us to develop and associate trust with the storyteller. In movies, this causes us to identify and feel for the characters, but the same principle applies in interpersonal relationships. This is known among neuroscientists as the “you seem trustworthy” signal, and research suggests that “emotionally engaging narratives” inspire prosocial, cooperative behavior in response. Con artists who are good performers or storytellers have an easier time connecting with victims, and victims are prewired to emotionally respond, identify and empathize with them.

A Wolf In Sheep’s Clothing

Humans are social creatures that enjoy spending their time with people who share the same values, passions, beliefs and worldviews. The problem arises when you automatically regard everyone within your group as having the same goodwill and intention as you do.  

Scammers regularly target religious communities—aptly termed “affinity frauds” by law enforcement—because they can easily exploit the trust level that exists between members. Bernie Madoff, who orchestrated the biggest investment fraud in history, stealing close to $65 billion dollars from investors, was able to gain the trust of the Jewish community by exploiting his Jewish affiliations. 

In the case of Dr. John Gentile, the chiropractor and Army veteran, he relied on his close relationship with Leitman and never properly vetted the financial investments he was offered. Gentile saw in Leitman a like-minded individual. It never occurred to Gentile that his friend (and fellow veteran) was capable of scamming him.

F.O.M.O. (Fear of Missing Out)

People are generally afraid of missing out on a “good thing.” And if a “good thing” is available in limited quantities or for a short period of time, people tend to want it even more. Fear of missing out can be a driving force behind many ill-advised financial decisions. Con artists can present opportunities in ways that make it hard for an investor to decline. Scammers may say that the offer must be accepted after the pitch or that there is a cap on the number of investors and that swift action must be taken before it’s too late. In the end, the victim concludes that the opportunity is too good to miss out on without properly verifying the offer.

In Conclusion

By no means an exhaustive look at the way the mind can sometimes make it easier to fall for scams, this post can help with recognizing some of the cognitive pitfalls that can make anyone vulnerable. It is important to remember that if you have been defrauded it is not because of a shortcoming on your part. Naturally, the emotional toll of falling for a scam can be tough to overcome. But it helps to remember that anyone is susceptible to financial fraud—even the best and the brightest. 

Up Next!

Check back for more white-collar crime and fraud news, including the the biggest cons capitalizing on the global Covid-19 pandemic today, and how to spot one when when you see it.

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