Fraud Victim Advocacy, Fraud Education and Prevention

The Insideman

Wouldn't it be nice to be able to pin one of those standard profiles on con artists - a 35-year old white male who was mistreated by his mother.

It just doesn't work that way.

What sets the con artist apart

Con artists come from diverse backgrounds. They may come from a broken home or the most stable and well-adjusted of families. They may have been afforded an excellent education, or very little. Such backgrounds do not set them apart.

Nor are they set apart by their country of origin, sexual preferences, political bent, religious beliefs, or ingrained social values. Actually, pertaining to those last three, the con artist is a free spirit. His own personal welfare far outweighs any standard social considerations.

What does set con artists apart is the natural ability, often discovered at a very young age, to manipulate the people around them. Added to this is the fact that such manipulation leaves them without any feeling of guilt or remorse. On the contrary, it leaves them with an intense feeling of satisfaction - a particular glow that encourages them to continue manipulating to get whatever they want, regardless of the cost to the giver.

A formidable foe

Con artists, particularly financial con artists who specialize in big cons such as High-Yield Investment Programs, Debenture Trading, phony Investment Clubs, and Boiler Room Telemarketing, are above average in intelligence. They are self-educated, and know how to be extremely sociable, although they are anti-social which means lacking any social conscience. Their charm and sincerity are empty of any real concern - masks # 5 and #6 respectively.

They have the innate ability to juggle several balls at once without missing a beat. They easily compartmentalize their different characters, victims, and on-going scams. Gifted with an exceptional memory, the con artist can access each current script with the speed of a computer; and if they cannot quite remember a fact (or lie), they can dance around the lapse so convincingly that you will seldom, if ever, notice.

I do not mean to portray the con artist as a Superman, only as a formidable foe.

The Insideman: an experienced con artist

The Insideman may be referred to the Insideman as a Trustee, Trader, Commitment Holder, or Funder. He is promoted by the Middleman as one whom only the privileged few ever get to see or speak to. He is placed on a financial pedestal right up there with the most sophisticated and secretive of financiers.

Once you have "proven your worthiness" you are admitted to the inner circle.

You become one of the privileged few. You get to meet The Insideman. And you will be charmed right out of your boots by this character in the play.

Between February and June of 2003 more than $25 Million Dollars disappeared into Nigeria, Kuwait, and China as a result of the latest Nigerian fraud - counterfeit checks. You can figure that by now that amount has more than tripled.

Every day we work with victims of this fraud and the Payment Processing Scam who have had to file for bankruptcy, been rendered homeless, or have been picked up by local law enforcement and jailed for presenting a counterfeit check, stolen or forged money order, stolen and washed corporate or Treasury checks, or for receiving stolen funds transferred into their bank or credit card account.

Here's how it starts

You want to sell your old car, or Aunt Tillie's bureau, or those terrific dogs you breed? Just run an ad in any one of the online classifieds and you can reach an audience of thousands.

One of those thousands is a swindler who has been patiently watching his screen all morning, just waiting for you - and several hundred other people - to post an ad.

He or she will contact you by email or phone and offer to buy what you're selling, usually no questions asked, sight unseen. What a deal! Your item will be picked up on behalf of the so-called buyer by someone local. As for the payment, you'll be sent a check that's way over the amount you're asking. Please just go ahead and deposit the check and send the buyer the difference.

Where do these checks come from?

In the beginning, most of the checks arrived by mail with a return address of "Maryland, LAGOS." That is to say, they came from Nigeria but a quick glance would lead you to believe it arrived from the State of Maryland in the U.S.

These days the checks arrive from all over - Toronto, New York, Amsterdam, London, California (any one of the United States, actually), Malaysia, pick a country, any country. Pick a city, any city.

The check forging rings are so widespread that members can be found just about anywhere. They stay in place on long enough to ensure the forged checks arrive at their destination. Most communication from the phony buyer is received via email, cell phone, and satellite phone.

Who says you can't cheat an honest man?

Most Nigerian scams rely on a certain amount of greed on the part of the target and a willingness to overlook the legal aspects of the proposal, such as ferreting illegally acquired funds out of Nigeria or other countries.

The Counterfeit Check scam, on the other hand, is based on the total honesty of the swindler's target which is you, the seller.

Following the buyer's request, you deposit the check into your account. If you have received a Cashier's Check or have an excellent credit record with your bank, the check will be credited to your account without delay. If the funds were wired directly to your account from another bank, then there is no question that the money is readily available.

You then immediately arrange for the excess funds to be wired to the bank account number the buyer has supplied to you for that purpose, or to forward the funds through Western Union. Your bank sends the funds out either that day or the following morning, or you run down to the nearest Western Union office to wire the funds to London or Italy or wherever.

Shortly thereafter you receive a call from the bank and the roof falls in on you.

Fact is, NO legitimate business transaction asks you to wire excess funds anywhere. It's simply not done for the basic reason that no legitimate business person is about to trust an absolute stranger with their money.

Who ends up paying the price?

In most instances, you are going to have to pay for the loss. That means you will have to make up for the amount that you wired - plus any of the money you spent. In rare instances, the bank will absorb the loss, but don't count on it.

The reason for this is that when you endorse a check, you are vouching for the validity of that check.

But what about Cashier's Checks? Or funds wired directly into your account? In those instances the liability is determined on a case by case basis. Some banks are on the alert for the scam, others are not. Nonetheless, the final responsibility lies with the depositor.

You see, the only responsibility a financial institution has toward its customers is to keep each person's funds accounted for and safe from harm. Those are the basics. Beyond that, there are Federal regulations, state regulations, and internal regulations. Laws are different for Credit Unions, Commercial Banks, and brokerage houses. Each is accountable to a different oversight organization.

How to REALLY verify that check

Understand this: the basis of the scam is Money Laundering. You are laundering money for a gang of criminals. That means there is ALWAYS money in the account. Criminals are not going to the trouble of setting you up to launder money from an empty account.

Traditionally, we have been taught that the best way to verify the validity of any check is to call the account holder's bank to see of there is money in the account to cover the check. That is no longer a reliable method of check verification. Those days are gone forever.

The fact is that the only response the account holder's bank can give you is based on an electronic verification. This only confirms that the account exists and that there are sufficient funds in that account at the moment of your call.

In this day and age, one must contact the account holder himself. Only the account holder can provide definitive information as whether or not a check has been issued in your name for the requested product.

Verifying a Money Order

It sometimes happens that these swindlers use Money Orders. I haven't heard of too many cases, but it does occur. If you receive a Money Order, contact the Money Order company or the bank listed on the money order and make sure that you explain that you want to verify that the amount and Payee match their records. Do the same whether the money order was purchased at a market or at a Post Office.

Verifying a Cashier's Check

But what about a Cashier's Check? Well here's what you do.

Ordinarily one calls the issuing bank. If this bank is huge, like Bank of America or Wells Fargo, one is put through a series of options on a voice menu. Again, if you go through the merchant verification routine, only the electronic validity of the check is confirmed.

Skip that. Go directly to an assistant or whatever the real live person is called on the voice menu. Ask for the telephone number of the branch on which the Cashier's Check is drawn. If you are asked why you need to speak to the branch, tell them that you need to get a physical verification of the Cashier's Check you are holding.

Call the branch. Now you will be able to receive a physical verification of the check you have in hand because a ledger record is kept right there at the branch. That branch can immediately tell you whether that specific check was written for the amount indicated, and whether or not it was made out to you.

Accepting Wired Funds

Just say NO. Sometimes the swindlers will wire funds directly to your account. Under no circumstances whatsoever should you accept funds wired to you by a stranger. Why? Because you have no way of verifying the source of those funds. If you accept those funds, you may find out after it's too late that the source is a forged or counterfeit Cashier's Check.

What smart people are doing ...

It is important to keep in mind that if you do not know the person with whom you are doing business, then be wary until you have a proven track record of dependability.

Every day merchants are taken to the cleaners by bad checks and stolen credit cards. It's no different if you are an individual selling your car in the classifieds.

The smart thing to do is have the check verified before even depositing it into your account. Contact the owner of the check, or give the check to your bank telling them you want it physically verified for authenticity.

... and smarter still

Do you know what an escrow account is? If you don't, here's the explanation of escrow services: https://www.escrow.com/index.asp (Escrow.com)

I'm sending over there so that you will have an absolute understanding of why you should use escrow services whenever you enter into a buying or selling transaction with a complete stranger. And sometimes with friends and relatives.

An escrow service offers you the protection you need from being taken to the cleaners by swindlers, disagreements on receipt of product, misunderstandings, and all sorts of flies that can turn up in the ointment.

Essentially, you are hiring a licensed and bonded 3rd party to hold the funds until all parties are satisfied with the transaction, at which point the buyer can order the release of his money to the seller. On the other hand, if the item is to be returned to the seller, the buyer can't access his funds until the seller agrees that he has received the item back in the same condition as it was upon shipment.

Escrow services can be used for large ticket items, or small ones. It's better to pay for this service (you can include the fees in your product cost) than to find out that you are in a world of hurt because you didn't protect yourself when dealing with a stranger.

Know Your Customer (KYC)

This has become a byword for banks all over the world. It helps keep banks from unknowingly being used for money laundering and other criminal activities.

Knowing your customer means that you are not merely taking the word of someone about whom you know nothing. Regardless of the financial transaction, you should never accept as gospel what you are being told. You MUST protect yourself and your family.

Con artists scam because it gives them infinite pleasure to "put one over" on anyone who stands still long enough. The compulsion to scam is so strong that a con artist will produce a scam even if he/she gains no money out of it. Con artists even scam each other!

An unusually sick group

Quoting a studies by Richard Blum (Deceivers and Deceived: Observations on Confidence Men and Their Victims, Informants and Their Quarry, Political and Industrial Spies and Ordinary Citizens), Chuck Whitlock points out that most con artists are:

... impulsive, amoral, uncontrolled and detached from normal

The essential feature of Antisocial Personality Disorder is a pervasive pattern of disregard for, and violation of, the rights of others ...

This pattern has also been referred to as psychopathy, sociopathy, or dissocial personality disorder...

Individuals with Antisocial Personality Disorder frequently lack empathy and tend to be callous, cynical, and contemptuous of the feelings, rights, and sufferings of others."

Chuck Whitlock, Chuck Whitlock's Scam School, © 1997, macmillan, New York, NY, pages 20, 21; Richard H. Blum, Deceivers and Deceived: Observations on Confidence Men and Their Victims, Informants and Their Quarry, Political and Industrial Spies and Ordinary Citizens, (Springfield: Charles C. Thomas, 1972), pp 49-50.

Alright, let's put that into ordinary words.

Adrenaline rush
The con artist is compulsive, exactly like a compulsive gambler or compulsive liar. (Sidebar: although the con artist is a sharp-witted liar, his gambling skills are such that he usually loses his ill-gotten gains within hours of the take).

The con artist is irresistibly drawn to scam. It gives the con an adrenaline rush when you are so enthralled with his made-up persona that you quite literally shove your money into his hands. The scam itself is an ego trip. While the con is stroking you with praises galore, you are praising the con artist by believing everything you are told. Oh joy in the morning!

The danger of the missing gene

There is no guilt associated with a scam, not even the slightest twinge. A con artist is quite simply missing that particular gene. The con artist has no inbred stops, no conscience. That's what it means to be a sociopath. If anything, the con feels justified in taking your money, "You deserved to be taken. You asked for it."

Why is this dangerous? Because it means that the con artist will pressure you to the end of your resources, regardless of the pain and grief it causes you. Neither children, nor the elderly, nor the fragile of health are immune from his attack. It does not matter to the con that he may be taking your last dime, nor does it matter to him that you may need the promised wealth to pay for a dire need. This criminal will take your money to the detriment of your health by selling fake cures and false hopes, even knowing that his scam may ultimately cause your death.

The swindler's attitude toward his victim is the same as any serial criminal.

When you wire funds from your checking account to your cousin's checking account in Oshkosh, a paper trail is established. If your cousin calls you on Tuesday to find out where the money is that you wired last Thursday, your bank can track the path of the money through the banking system to see what went wrong. A record of transfer is generated each and every time the amount moves from one bank's ledger to the next.
Wiring funds through Western Union

That's not the case at all when you use Western Union. The only record kept by Western Union is of your funds being transferred from one of their accounts to another. For instance, if you are in Los Angeles and you wire funds to somebody in London, all that Western Union can tell you is that the funds were picked up in London, and at which office.

Western Union takes your money and gives you a receipt. Your funds are then placed in the Los Angeles central Western Union account along with all the other monies they have received during the day from all over Los Angeles. Each transfer request is logged electronically such that your specific amount is then sent off to the central Western Union account in London.

Once the funds are in a central account, the actual money can be picked up at any office covered by that account. Just because you were told to wire money to such-and-such a fellow at such-and-such a Western Union office does not mean he'll actually pick it up there. He can pick it up at an office clear across the city.

Western Union can verify that the fellow who picked up the money carried the specified identification. They might even be able to tell you what he looked like. This doesn't really do you much good. His identification can be phony as the day is long. All you know when you wired the funds is what you were told. Once your guy walks out of that office, there is absolutely nothing to bring him back, unlike your cousin in Oshkosh who has an open bank account. There is no way to trace him. He's gone. And in the case of a scam, so is your money.

Federal Counterfeit Check Law

The laws that affect you as the holder of a Nigerian Counterfeit Check
US Criminal Code, Title 18, Section 113

US Code Collection, Title 18, Part I, Chapter 25 - Counterfeiting and Forgery

Sec. 472. - Uttering counterfeit obligations or securities

Whoever, with intent to defraud, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or with like intent brings into the United States or keeps in possession or conceals any falsely made, forged, counterfeited, or altered obligation or other security of the United States, shall be fined under this title or imprisoned not more than 20 years, or both.

Sec. 473. - Dealing in counterfeit obligations or securities

Whoever buys, sells, exchanges, transfers, receives, or delivers any false, forged, counterfeited, or altered obligation or other security of the United States, with the intent that the same be passed, published, or used as true and genuine, shall be fined under this title or imprisoned not more than 20 years, or both.

Sec. 479. - Uttering counterfeit foreign obligations or securities

Whoever, within the United States, knowingly and with intent to defraud, utters, passes, or puts off, in payment or negotiation, any false, forged, or counterfeited bond, certificate, obligation, security, treasury note, bill, or promise to pay, mentioned in section 478 of this title, whether or not the same was made, altered, forged, or counterfeited within the United States, shall be fined under this title or imprisoned not more than 20 years, or both

.

Sec. 480. - Possessing counterfeit foreign obligations or securities

Whoever, within the United States, knowingly and with intent to defraud, possesses or delivers any false, forged, or counterfeit bond, certificate, obligation, security, treasury note, bill, promise to pay, bank note, or bill issued by a bank or corporation of any foreign country, shall be fined under this title or imprisoned not more than 20 years, or both.