Big money frauds involving investment can occur in the mail, by phone, over the internet or in person. Fraud artists play on peoples' trust and their financial fears of not having enough money in retirement.
Interest rates are currently low and those on fixed income are worried about how they are going to thrive with their investments. Con artists take advantage of this economic reality by offering larger returns on bogus "investments". When interest rates are low, they don't even have to offer huge pay out promises to get investors interested.
Investment frauds can include:-
Off - shore investments
Promising a tax haven, fraud artists convince investors that off - shore investments, free of bureaucratic red tape and government restrictions, will provide high returns on the investment. Once the money is off - shore, however, tracing it is difficult.
Pyramid (Ponzi) Schemes
These big money frauds are capable of enriching very few people. Those at the top recruit others to “invest” in the organization, promising large returns on their investment. These recruited participants are promised money if they recruit others into the scheme.
The top people often receive tens of thousands of dollars as the pyramid grows. When people fail to recruit or to send in any money, however, the pyramid crumbles and most people lose their money.
It’s mathematically impossible to recruit the numbers required to support them. For example if six people start it and each person has to sign up six more recruits, over 10 million people would be needed to build a nine level pyramid.
That would be like six people in Sweden signing up the whole of the country!
In this approach, con artists find something in common with potential victims. It could be the same church, club, ethnic group or hobbies. They know that it is often easier to trust someone who is like you, so they’ll find a way to show that you and they are alike. (Apparently Bernie Madhoff, who used a ponzi scheme to pull off the biggest of 'big money frauds' in history, used this technique extensively).
Prime Bank Instruments (PBIs) or Prime Debentures
A person is promised high returns through investments in the world's most prestigious banks. They are told that investors contribute to a pool of money for trading in short term loans to banks. Initial investments usually get a good return to encourage investing more and getting friends or family members to invest. The "return" is from unsuspecting new investors. Often con artists target the conspiracy theory type because of the secret nature of the investment. In reality, PBIs do not exist
One of the fastest growing big money frauds is mortgage fraud. The most common type is falsifying information to illegally secure mortgage funding - for example declaring a higher income or using false identification.
Another method is when a mortgage applicant borrows money to buy a property at a highly inflated price from an accomplice who recently purchased it for much less. The two will then abscond with the difference between the two sale prices leaving the lender with a property worth much less than declared.
In the above two scenarios, the lenders are on the hook. “Why should I care?” you may ask. “It doesn’t affect me and the banks can afford it”. However, if criminal groups target a particular area and falsely inflate values of many properties (often in an apartment block) it can lead to a real estate bubble and higher taxes. That’s not good for any of us.
A scenario that definitely can hurt an individual is being recruited as a ‘straw buyer’ - a gullible go-between who allows their name to be used on loan applications in return for a juicy fee or a quick profit. The bank advances the money, the fraudsters disappear with it and the straw buyer is left to pay a big mortgage.
Title fraud is a form of identity theft that can lead to big money frauds. A fraudster targets a home with clear title (no mortgage and no other liens against it.) They obtain personal information about the home and the owner. Then they manage to have the title transferred to their name.
The fraudster takes out a new mortgage registered against the property and absconds with the money. When the fraud artists fail to make the mortgage payments, the bank will serve notice that it intends to sell the property to recover their funds.
Alternatively, the fraudster creates a bogus deed to transfer the property into their hands. They then proceed to sell the property to an unwitting purchaser, creating havoc for both the purchaser and the original homeowner.
Fraudsters prefer to target homes that have clear title. That’s because they won’t have to discharge any liens registered against the home. For this reason it’s been suggested that having a small mortgage or line of credit against your home is a good strategy to deter fraudsters.
Many jurisdictions have a monthly property tax payment plan sometimes known as a TIPP program (Tax Installment Payment Plan). If payments suddenly cease it may indicate a fraudulent title transfer and so prevent big money frauds from occurring.
However, the only foolproof protection is title insurance. For a one - time
premium payment (as long as you own the property) the policy will pay legal
fees and losses in defense of a claim against the property. Click here for more on title insurance.
Title fraud is almost always a result of identity theft - click here for prevention tips on identity theft. You can also conduct a property search at your province land registry office to ensure that the title to your home is in your name