By Felicity Duncan
As South Africa struggles with slow growth and rising prices for just about everything, financial scams are popping up everywhere.
Unfortunately, non-violent financial crimes are not a huge priority for SA’s overwhelmed police service, which means that it’s up to individuals to protect themselves from would-be fraudsters. That means understanding how scams work.
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At their simplest, financial scams rely on basic human emotions like greed, trust, kindness. The types of financial scams where people meet new friends online and send them cash, for example, relies on our innate desire to help our friends and those we care about. The scams where people send fake emails or make fake phone calls, pretending to be our bankers to get our private information, rely on our fear of doing the wrong thing and our desire to make sure our affairs are well-managed.
So, what should you do to prevent yourself from falling victim to financial scams? There are a few basic steps you can take to insulate yourself from the worst.
- If it sounds way better than your other financial products, it’s probably a scam
You know, more or less, how much interest you can earn on a savings account (6 or 7% for a long-term fixed deposit) or how much growth the JSE has historically delivered (around 9% a year over the very long term). If someone is offering you a product that promises way more than that with no risk, something dodgy is up.
There are, sadly, few shortcuts to wealth. While it’s true that a lucky few people make a fortune taking a gamble, you are not one of them and neither am I. If it sounds too good to be true, it probaby is.
- If someone contacts you looking for your information, it’s probably a scam
Your bank will never phone you and ask for your PIN or a one-time password that it has texted you. No reputable company would ever do that – the point of a password or one-time PIN is that it is a secret known only to you.
There’s a simple way you can avoid giving your information to someone you don’t know or trust – if someone phones you and asks for your ID number or PIN, or anything else that would help them get hold of your money, ask them where they’re calling from. If they claim to be your bank, tell them you will call back using the bank’s official customer query phone number and provide any information that the bank needs. If it’s a legitimate request, there should be no problem with you doing that. If not, you’ve dodged a financial scam bullet.
- If you’re under pressure to make an immediate decision, it’s probably a scam
One of the most effective double-punches used in financial scams is the greed and urgency routine. First, the scammer tells you that the opportunity on offer is amazing – 20% returns in two months – and engages your greed. Then, the scammer hits you with the urgency appeal – you must buy now.
The goal, obviously, is to get you to plonk down your money without taking the time to think things through in cold blood and do your research. The solution is to make a firm rule that you’ll never “invest” any more than, say, R100 (or an amount you’re comfortable throwing into a fire) without doing your due diligence.
- If it isn’t registered, it’s probably a scam
This applies to people and products. If the “financial advisor” who has approached you isn’t registered with the Financial Services Board, if the great investment product on offer isn’t registered, you are probably looking at a financial scam or scammer.
It’s tempting to believe that an unregistered, “under-the-counter” financial product is a great opportunity to get your hands on something other people can’t get. But in reality, if a product is worthwhile, it will be registered and properly marketed to attract wealthy investors who know what they’re doing. The only reason to go unregistered is if you have something to hide.
The bottom line is that avoiding financial scams is all about being a cynical and untrusting person when it comes to money and your personal information. There’s no reason for, say, a company interviewing you for a job to ask for you bank number – if it’s a legitimate employer, they can get it when you sign on the dotted line at their offices. The safest thing to do is to take a scientific approach. Scientists assume that their ideas are false and look for evidence to prove that. You should assume that things are a scam and search for evidence that you’re right.
The wisest path to wealth is sticking with what you know, informing yourself as much as possible, and only working with people and institutions that have a legal obligation to do right by you. When you lose money to financial scams, that money is gone forever. Don’t be a victim. Be a cynic.
