Fraud in Modern America, a Nation at Risk-The Telltale Signs

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The FINRA Investor Education Foundation has a message to investors. After thorough study of the subject, foundation president Gerri Walsh concluded that America is at risk of falling prey to fraudulent schemes and scams, finding that "The ability of most Americans to spot persuasion techniques is dismal."

The persuasion techniques Walsh refers to are not simply maneuvers intended to entice investors into surrendering money into illicit schemes, they are telltale signs of a fraud at work and an investor's best defense at combating confidence tricksters and their brand of mischief.

With results finding that more than 80 percent of those surveyed have been solicited to invest in a potentially fraudulent scheme, being able to identify a potential fraud could be the difference between proactive protection and banking bamboozlement.

Walsh's foundation warns that "nothing is really guaranteed without a cost," suggesting that an investment opportunity that advertises high-yield with minimal risk and "guaranteed safety" of the invested amount, for instance, should raise the red flag of fraud.

Referring to the infamous Ponzi scheme, employed by crooks Bernie Madoff and the like, the foundation mentioned promises of investor-side referral commissions and the "dangling of phantom riches before us."

For instance, seemingly innocent promises of daily returns of a low number like 2 percent should strike investors as troubling. Notes the foundation, such rate of return might be appropriate for a year, but a definite red flag for a day.

Investing $10,000 at a daily return of just 2 percent leads to $11,040.81 after one week—a $1,040.81 weekly gain, which, after one year, becomes nearly $1.47 million, representing a $1.46 million annual profit.

In what Walsh deems a lack of reasonableness, such a scheme confirms the unfortunate reality: if it seems too good to be true, it likely is.

The survey found that the greater the respondent's level of education and household income, the more likely they were to invest in a potentially fraudulent scheme, leading Walsh to conclude that well-educated and wealthy people are more apt to "let down their defenses" due to overconfidence.

Those with household incomes exceeding $100,000 were more apt to select fraudulent investment opportunities than those with less income to invest.

To combat overconfidence, Walsh suggests sitting down and crunching the numbers, just as we have done above with the 2-percent daily return sales pitch: "'Check and verify' ought to be everyone's watchword. But we've found that many people don't bother."

If you have invested with a broker, firm or financial advisor in an opportunity you suspect contains one of the hallmark red flags for fraud or you have been the victim of such a nefarious financial scheme that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

News: The Bridges Are New, but Business Scams Are Timeless (The New York Times)