Understanding Four Red Flags of Financial Fraud

Understanding Four Red Flags of Financial Fraud

by Susannah Marshall, Arkansas Securities Commissioner

Financial fraud has changed. The old image of scammers working through cold calls or emails promising millions from a Nigerian prince is badly outdated.

These days, fraudsters can steal from Arkansans' bank accounts through text messages, their social-media accounts, their cell phone or even a machine inside a convenience store. They aren't safecrackers or even hackers. They're just very good at convincing and conning victims which helps them steal and commit a crime.

I believe our best defense against financial crime is education: knowing the red flags that point to a scam, so you can stop fraud before the money is gone. Here are four red flags that should make you stop and think before you send money, share private banking information or move your funds.

Demanding That You Act Immediately

Scammers don't want to give you time to think or contact trusted sources, because that gives you a chance to question what you're hearing. To pump up the pressure, they may tell you your account is under attack, or that you'll be in trouble with the police if you don't act right now.

Urgency can be part of the scam. So please slow down. If someone contacting you claims to represent your bank, the IRS or another government agency, don't let them rush you. Take a number, contact that organization yourself using a phone number or website you know is legitimate and ask directly. Remember: never rely on contact information provided by the person who reached out to you. It could be another facet of the scam.

Asking for Information Your Bank Should Already Have

No legitimate banking official is going to unexpectedly call and ask you to provide or verify your PIN, routing numbers or any other sensitive account information. It's one reason the banking industry has worked so hard to educate consumers through efforts like the American Bankers Association's "Banks Never Ask That" campaign.

Be suspicious anytime an unsolicited caller, texter or emailer asks for private information you've already supplied to your bank. While the questions might seem routine, they could be fraud. If in doubt, end the conversation, find the number for your bank and contact them directly.

Moving Money in an Unexpected Way

Gift cards, wire transfers and cryptocurrency can all be attractive to scammers because these transactions can be difficult or impossible to trace. If someone is directing you to transfer money through a payment method you or your bank would not normally use, that's a big red flag.

For example, Arkansas has seen many fraud cases in recent years involving what are called crypto kiosks. Found in convenience stores, these machines look somewhat like ATMs, but are used to convert cash into cryptocurrencies like Bitcoin. In one case, a woman in her 80s withdrew thousands in cash, drove to a kiosk at a scammer's direction, then fed money to the machine. Her bank tried to warn her when she was withdrawing the money. But in the end, it was her account.

Remember: If someone tells you to purchase gift cards, complete a transfer by phone or put money into a crypto kiosk, stop. Call law enforcement or your bank and ask their opinion before you continue. If it's legit, they'll tell you.

Demanding Secrecy

Financial scammers often try to isolate their victims, keeping them from seeking help until it's too late. They may tell you the situation is confidential, part of a secret investigation or that involving another person will make things worse.

The truth will always survive a second opinion. If someone is trying to keep you from talking to another person about your account or a purported financial investigation, that's a major red flag.

It's one reason I encourage Arkansans to develop a personal relationship with their bank, rather than relying solely on online platforms. If your banker raises concerns about a transaction, listen.

Helping Arkansans Beat Scams

The financial institutions and regulatory agencies of Arkansas spend hundreds of hours each year helping citizens understand money and avoid financial crimes.

Sometimes that means teaching young children about banking basics, or playing "Fraud Bingo" with senior citizens to help them learn the warning signs of a scam. But the goal is the same: help more Arkansans recognize the warning signs before a fraudster gets away with their money.

We can't stop every fraud. But we can make it harder for scammers to find new victims. By staying vigilant and knowing the red flags, you can help in that cause.