In this electronic age where it is easy to create illusions and pretend to be something that we are not, it is so easy for con men (and women) to thrive, preying on innocent people. We are often gullible, through no fault of our own, and this is exploited by clever people who promise us the world. Sadly, these situations always end badly, leaving the victims devastated, often with severe emotional and financial impacts.
The scamster may tap into a person’s sense of loneliness, using online dating sites and social media to create fake profiles with the aim of conning innocent men and women out of money. Be very careful who you befriend or speak to online, and do not give away any personal details. Do you homework on the person you are chatting to – from where they say they work, to where they live to any other information about them. And do a reverse image search on google with their photograph – you may be surprised as to what you find out!
When it comes to financial scams, there are as many as there are days in the year. These so-called Ponzi scheme are nothing but hot air. They are fuelled by getting new investors to join so that current investors can be paid out the promised high returns. There is no business or product behind these schemes – their sole business is attracting new investors with new money. Eventually the scheme cannot attract enough new investors to keep paying out to earlier investors, and the scheme collapses.
These schemes tap into our sense of greed, either because we see an easy way of getting out of a difficult financial situation, or because we are just attracted to the promise of getting rich quick. When things go wrong, there can be tragic consequences, as we saw earlier this year when Aneesa Arrison, a 43 year old Cape Town mother of four, shot her children and herself after she had invested R1m of her late husband’s pension money in a suspected Ponzi scheme, 4th Power Investment.
If anything seems to be too good to be true, then it probably is.
Be very vigilant of promises that are made to you, even if it is recommended by friends or family members. They could also just be falling for the scam without realizing it. Some of the warning signs that you should look out for:
- Promises of abnormally high returns in a short period of time
- ‘Secret formulas’ or business concepts that can only be shared with selected investors
- Guaranteed returns
- Vague business models – if you don’t understand it, don’t invest
- The more people you recruit, the more money you make
- Pressure to re-invest your earnings
Before handing over any money to a financial institution, make sure they are legitimate. All financial institutions (apart from banks) have to be registered with the Financial Services Board (FSB), meaning that they will operate within legislative rules that protect the consumer. Ask them for proof of membership, or check with the Financial Services Board yourself at www.fsca.co.za.
Scamsters ply their trade because of the ignorance of the people they target. Be alert and aware and take ownership of your decisions. Think twice, do your homework and don’t become one of the tragic statistics.
Sylvia Walker is a financial planner, author and speaker. As a qualified financial planner, she works closely with her clients to make their dreams come true, by providing holistic financial solutions in terms of growing and protecting their wealth. She writes articles for various online publications and conducts workshops and talks on various aspects of financial planning. She has a long history of working with major media in South Africa and is currently the resident financial guru on the Cape Talk Early Breakfast Show, and is on air every Friday morning around 5.10am.
Tel: 082 447 6339
Eight digital banking scams to avoid in 2017 – click here
Pensioners – be specially vigilant at ATMS this festive season – click here
Scam Alert – click here