Beware of scams

Tan Kin Lian / Columnist

Someone sent me a link to an article in an English newspaper about scams recently. I looked through the article and found that some of these scams are common in Singapore. They include the following:

Phony jobs
This is usually an “advance fee” fraud where you wire money in the expectation you will get a job, usually one offering substantial money for “part-time work from home”. The money transmission may be called a “test”. Fraudsters often use the names of legitimate companies and “guarantee” earnings.

Mail-order brides
This is really sad. Scamsters look for lonely people – usually men – and offer them love on the internet or by post. The “beautiful” women, who often claim to be Eastern European or Asian, don’t exist: what victims see are pictures copied from entertainment, fashion or celebrity magazines.

Once hooked, men are asked to send their lovers money for air tickets, cash for “the family” or even amounts to pay off old boyfriends. To keep them interested, the targets may be sent sexy pictures or intimate clothing items. Victims are strung along until they realise they have been stung – or until they run out of money.

Investments

Persuasive salesmen cold call investors and try to persuade them to buy shares or commodities on the promise that “they will double or treble your investment in three to six months.”

The sales pitch may have a pinch of truth, but what is on offer is phoney. Investors are often shuttled between “analysts” and “senior analysts” but these titles are meaningless.

The shares are usually in companies that don’t exist, while those bets on currency exchange rates or heating oil are never made – often the salesmen tells victims they have quick gains, to encourage them to invest even more.

Nigerian scam
When the “widow” of a former Nigerian dictator emails to ask your help in getting access to the millions that happens to be locked in a bank account, most treat it as a joke. Using various names, this scam has been around for at least 30 years. While the dictator was real, and the fact that those in corrupt regimes stashed away money in offshore banks is not disputed, the widow is a total phoney – as is the promised bank account.

Land banking
Here you are persuaded to pay a large sum of money for a tenth of an acre in a field – on the promise the land will soon receive planning permission and soar in value. So far, no land banking site has ever gained the building go-ahead.

Most land sold in this way is green belt or zoned for agricultural use only. But land bankers seize on every government statement about the need for more homes to stress that this means that it is certain that the site they are selling will soon be covered in houses – like almost all scams, this relies on an element of truth.

A few more

I posted these scams in my blog (www.tankinlian.com) and received a few more contributions.

Oil Pods

This company used to advertise in many seminars and investing seminars. It appears that they and their investors were conned. The company has filed a Motion for Appointment of Receiver to administer and manage the business affairs, funds, assets and other properties for the protection of the investors.

Sunshine Empire

Recently the Sunshine Empire’s finances were frozen due to investigations. My uncle was quite sad over it as he had made some investment in it.

Stronger Regulation

I believe that there is a case for stronger regulation for the protection of small investors. I suggest the following measures:

> It should be a crime to cheat people or to mislead people. The regulator should take action against people who create these scams and should be ready to prosecute these promoters in court.

The courts can decide if it was a genuine business or the promoters had the intent to cheat the public. I have high respect for the former and current Attorney General of New York City as they are prepared to take action against businesses which were involved in questionable practices.

> Special attention should be given to businesses that promote the investment schemes in the main stream newspapers. These advertisements should be put to a higher standard of scrutiny by the authority.

If the authority is not able to decide on the fairness of these advertised products, how can they expect the small investors to make the judgment?

The small investors are likely to believe that an advertised product has gone through some scrutiny by the authority. If the authority is not sure, they can ask questions of the advertiser, or they can appoint an expert to give an independent opinion.

The authority can also ask the consumer association to engage the experts to give an opinion. The opinion should be displayed in a website for easy reference by the public.

Conclusion

It is the role of the authority (i.e. Government) to protect the consumer from being cheated by scammers or even by legitimate businesses that offer complicated financial products that are unfair to small investors.

It may be difficult for the authority to draw the line between what is fair and what is cheating, but this difficulty should not give the reason for the authority to abdicate its responsibility. They should make the initial judgment and leave the final decision to the court.

I concede that some of these scams will be difficult to detect and prevent, and that the problem will not be entirely eliminated by stronger regulation and enforcement action. But, pro-active action by the authority will go a long way.

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