Financial Fraud and How To Prevent It

financially savvy kids

By K. Bridget Schneider, CFP®, CRPC®

financial fraud

If you think you’re immune to financial fraud, think again.  Financial fraud is an ever-present threat to all ages.  It comes in many forms from an attempt to access your money and financial accounts with your personal information, use of your stolen identity to defraud another individual or entity, and even financial exploitation by a caregiver or family member. 

The most recent attempt for my personal information was a text message claiming to be from the Secretary of State. The text said I needed to review my driver’s license information.  Sounds serious, right?  They also provided a handy link!  No, I didn’t click on the link.  So, this month let’s look at some common types of financial fraud and ways to help you prevent it.

Identity Theft

Identity theft is stealing personal, private, or financial information with the intent of using it to assume someone’s identity.  Many pieces of information can be used by identity thieves, but here are a few that you should always keep safe and be careful of sharing unless there is a valid business reason for doing so:

  • Name
  • Social Security Number
  • Birth Date
  • Address
  • Passwords
  • Credit Card Numbers
  • Bank Accounts

However, your identity may be stolen in other ways besides accidentally sharing the information with the wrong people.  The use of unsafe internet connections, computer hacking, or phishing attempts through e-mail and text messages are also ways to obtain your personal information.  For example, a lost smartphone could provide thieves with a variety of personal information.  A stolen wallet could provide access to your ID, credit cards, bank cards, and more.  

Protect Your Identity

Protecting your personal information is the best way to protect yourself from identity theft.  So, make sure the security software on your devices is up to date.  Create strong passwords and make sure they are unique for each site or program you access.  Beware of e-mails asking you to verify any information by clicking on a link in the e-mail.  When I get an e-mail that looks like it is from an entity I know, I contact them directly rather than using the link provided. 

Be careful of commenting on social media posts that ask for “your childhood best friend, your first car, the place you were born, your first pet, your favorite restaurant”, etc. Those are the same type of questions asked when setting up secure accounts. You are giving out the answers to your security questions without realizing it.  Use the security features on your smartphone such as Face ID or a PIN to keep information locked up.  And set up remote wipe, if available, to activate in case of lost devices.  Finally, please stop writing down your User IDs and passwords and storing them in your wallet or your desk!  Use a password manager like Last Pass or RoboForm.

Identity Fraud

Identity fraud occurs when your stolen information is used to make fraudulent transactions.  Some examples of identity fraud include fake IDs or passports, false credit card or bank accounts, and fraudulent transactions on accounts including withdrawals.  These not only affect the business or entity where they are used but can affect you as well.  Identity fraud can have a lasting impact on your credit score.  Since the accounts and charges that are fraudulently created may appear on your credit report and are your responsibility until disputed, checking your credit report regularly is a good way to protect yourself from identity fraud.  

Financial Exploitation

Financial exploitation occurs when a person misuses or takes the assets of a vulnerable adult for their own benefit.  It can occur without their knowledge.  But assets are also taken from an individual using deception, coercion, and harassment.  This could be in the form of a mortgage scam, fake lottery scam, debt collection scam, or more recently COVID-19 scams.  The exploitation can even occur at the hands of a family member, friend, or caregiver.  Regardless of the source, it deprives the victim of vital financial resources for their personal needs. 

A Simple Solution

Financial fraud can affect all age groups.  Even though older people seem to be targeted more, younger adults also fall victim to it.  The victims tend to have some level of social isolation and loneliness.  Typically, they don’t discuss finances or financial decisions with people who are close to them.  Or they have these discussions with only one person and no one else, and that one person takes advantage of them.

Support Network

Everyone, especially retirees, can benefit from a support network – people with whom they can discuss important matters and ideas.  Sometimes, avoiding a scam simply requires a close friend or family member pointing out that a company or person you’re dealing with seems suspicious.  If you’re unsure about a financial transaction or the validity of an email, reach out to someone you trust.  That person may be able to see that you’re dealing with a thief, even when you don’t.

Unfortunately, isolation and loneliness become more common as we age.  That’s why it’s important to not only build and maintain social contacts throughout your lifetime but also to have people with whom you can discuss money matters.  It’s good to have more than one person to discuss important financial decisions with.  I suggest forming a team of at least four trusted people such as an attorney, an accountant, an insurance agent, and a financial planner.  You could also include reliable friends and relatives, but they should be knowledgeable about legal or money matters and aware of your financial picture.  Then your team can be consulted when considering any significant decisions. 

It’s also possible there will come a time when someone else will have to handle or help with your finances.  You’ll want to have your team in place well before that time, so everyone can continue guiding financial decisions based on an understanding of your wishes.

Summary

Financial fraud is a frightening issue for many people today.  A lack of knowledge and misinformation can leave you scared and vulnerable.  The isolation that can occur as we age tends to compound the problem.  But arming yourself with information like I have shared here in addition to establishing and maintaining a support network are some good steps to avoid becoming a victim of financial fraud. 

You may find it helpful to speak with a Certified Financial Planner™ professional for additional advice about your situation.  Be sure to visit our website today or call us at 217-605-8130.  At Connections Financial Advisors, our mission is to help you make more informed decisions to better your financial position and reduce your financial stress. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. 

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