General Studies and Communication Skills

Answer the following questions.

1. Research and find out examples of financial scams that are on the rise in the country since the introduction of mobile and online banking.

2. Visit a bank near your school. Ask a resource person at the bank the following questions.

     a) Have they witnessed cases of financial scams at the bank?

     b) What methods were used by fraudsters to steal money from innocent people?

     c) How can individuals protect themselves from fraudsters?

Financial scams are deceptive schemes used by fraudsters to rob people and business organisations off their money. Fraudsters are also called financial scammers. Financial scams do not involve documentation since most of the information they provide is falsified. Financial scams are treated as serious crimes and a violation of civil law. Financial scamming is also called white collar crime because of the non-violent means used to rob victims off their money.

In the world, there are numerous financial fraudsters who have robbed people and organisations off billions of dollars’ worth of money. Financial scams characterise every economy in the world today. World governments are increasingly concerned about the catastrophic effects of fraudulent activities carried out by numerous financial scammers and fraudsters.

Financial scams have been characterised according to the methods or ways used by scammers. Some of the common types of financial scams include the following:

Scammers communicate with their target victims informing them that they have won prize money from a lottery, sweep stake or other competitions in which the target victims did not participate. They inform their intended victims that they need to pay some advance fees to a specified account before the prize money is released. Once the money is deposited in the specified account, the prize money is not released. The scammers then vanish by switching off their communication channels. The victims end up losing their money to the scammers.

                           

Alternatively, scammers call their target victims and trick them into entering a non-existent lottery or sweep stake competition. They are lured into buying fake lottery, sweep stake or gambling competition tickets. The victims are then informed that they have won huge sums of money in the lottery or sweep stake competition they entered. The victims will then be told that they need to pay a prize fee to a specific account before the money is released to them. Once the prize fee paid, scammers switch off communication, having conned the victims.

Discuss examples of advance fee scams that are prevalent in Rwanda. Propose measures individuals may use to protect themselves from advance fee scams.

Scammers use investment scams to con people who want to invest their money in highly profitable ventures. Some of the investment scams that scammers use to con their victims are:

a) Ponzi investment scams or pyramid schemes

Scammers establish fake companies to target wealthy investors. These companies trick their victims by offering very high rates of return on investors’ money in the form of share capital. The victims invest in buying shares in fake companies and become 'shareholders'.

                                      

The scheme collapses when money from new investors is not enough to pay the original initial investors. The new and initial investors lose their money once the scheme collapses. Investors are also tricked into marketing schemes that appear to be real, for example, marketing of products. Investors are promised large profits based on the number of people they recruit in the marketing scheme. Profits are not based on the actual sale of products but rather the number of recruits.

1. Discuss an example of a pyramid scheme that has happened in Rwanda.

2. Identify how the victims became prey to the fraud.

3. How does the government deal with investment scammers in Rwanda?

This is where the price of stocks in a specific company are promoted based on false and misleading information. The stock prices rise to high levels on the stock exchange markets. This overvalues the actual price of the stocks in the market. Promoters sell their stock at an overvalued price and stop promoting the stock. The stock prices then fall to low levels. Investors end up losing the value of their capital.

Financial scammers promote non-existent off shore investments. These are investments made in fake foreign companies and sold to investors. The scammers benefit from high rates of return and avoid paying government taxes. These fake companies will then vanish making it impossible for investors to trace or recover their money in the foreign company.

Scammers lure investors into trading in foreign currencies in a forex market. An unsuspecting investor is lured into wiring money to an off shore account as a requirement before being accepted to trade in foreign currencies. Financial scammers then disappear with the investor’s money.

With the help of your teacher, visit a police station near your school. Find out if there is a financial crimes unit at the station. Ask officers from the unit how they fight investment scams in Rwanda. Also ask the officers if there are other types of investment scams other than the ones mentioned in this book. After the visit, write a report informing other students about investment scams and how they can protect themselves from scammers.

Financial scammers target victims promising them a sale of precious minerals, for example, diamonds. They persuade their victims that the sale of precious minerals is a lifetime opportunity to grow wealthy. The unsuspecting victims then buy these precious minerals only to realise later that they are not worth the money invested. By this time, the financial scammers have vanished.

Door-to-door sales scammers use this method to scam their target victims by selling them poor quality products at high prices. Such scammers pretend to sell or promote goods of very high quality. Financial scammers carry out a survey in advance to obtain personal details of their intended victims. They use this information to scam their victims. They also con people out of their household goods.

Role-play a scenario of a door-to-door sales scam. Use examples of cases that have actually happened in Rwanda. After the role-play, explain why the victims were gullible to the fraudsters. Discuss what targeted victims can do to avoid such scammers.

Many people, especially the young, use online dating websites and applications such as Facebook in search of companions. Financial scammers take advantage of these online dating sites to scam innocent people. Scammers use fictitious names to conceal their identities and target people. They play with the emotions of the target victims by establishing close relationships. They also send the victims gifts, personal photos and greeting cards. Scammers then ask for personal information which may be used to scam a victim. After the victims have sent information or money, the scammers vanish and block their communication channels.

                                                 

Discuss cases of dating and romance scams that you have heard of. Identify ways in which one can avoid being a victim of such a scam.

Internet and mobile banking are the latest business technologies in today’s electronic age. Electronic commerce (e-commerce) is revolutionising the way people do business across the globe. Financial scammers have encroached on the new banking technologies to steal money. There are three main categories of banking and online payment scams. They include the following:

Scammers email their victims pretending they are from the victims’ banks. They inform the victim that they want to rectify a problem that has occurred in the victims’ accounts. They ask their victims to give them their bank account details such as account name and number. If the victims respond, scammers use the details to send information electronically to manipulate personal identification details such as passwords and fraudulently transact business on the victims’ behalf.

      

This is similar to phishing. However, instead of emailing, scammers call the victims purporting to be working for a bank, police unit or fraud investigation agency. They inform their intended victims that they need their bank account details such as account name and number, passwords or debit/credit card details. They inform victims that their accounts are at risk and that they are likely to lose their money. The victims may respond by giving out their account details. Scammers then use the details to access funds from victim accounts and transfer them to another or other accounts. The victims may lose their money through this method.

Scammers steal information from credit cards and ATM cards during a legitimate transaction. They use skimming devices to store information on a magnetic strip. This information is used to access victims’ accounts and steal money from them.

Scammers use stolen credit or debit cards to make unauthorised transactions from the victims' accounts. They can also use information from unsuspecting victims to make fake cards. The fake cards are then used to make transactions and steal money from a victim.

1. Visit a bank near your school. Ask to talk to a resource person from the security and fraud department to explain to you how to spot card skimming.

2. Identify ways in which people can prevent banking and online payment scams.

E-commerce involves buying and selling of goods and services online. Many online businesses are legitimate. However, financial scammers use e-commerce to con unsuspecting shoppers. They use the following financial scams:

Financial scammers create online-classified websites that provide an opportunity for would-be sellers and buyers of online goods to transact business. Scammers also use genuine websites pretending to be genuine sellers or buyers of goods to con unsuspecting members of the public. Thus, they create an opportunity to scam their victims, for example, by giving out bouncing cheques.

b) Online auction scams

Financial scammers take advantage of websites that auction products online. They send messages to their targets claiming that they are winners in an auction for a specified product. They ask for advance payment as commitment to buy the product. The excited victim promptly pays the advance payment. After receiving the advance payment, the financial scammers vanish from the auction sites. The victims end up losing their money.

Financial scammers create fake retailer websites. They ask unsuspecting buyers to pay for items through online money transfers. Once the victims pay, the scammers vanish and never communicate again.

With the high rates of unemployment, financial scammers promise unemployed persons job placements with high salaries. This scam is promoted by advertisements on fake websites or the use of the Short Message Service (SMS). Th e scammers lure their victims to pay a certain amount of money to a specified account for processing of documentation and a commission fee. Once unsuspecting victims have paid the money, the websites are closed and scammers cut off all communication.

Scammers create fake websites where they target victims of charity scams. They are most prevalent when there are national disasters in certain countries. Victims are requested to make donations to assist the people affected by the disaster. Once the victims deposit money in the scammers' account, the scammers disappear and the websites are closed down.

                              

Answer the following questions.

1. Identify other types of online financial scams prevalent in the world.

2. Discuss how people lose their money to financial scammers through the seven types of financial scams identified above.

3. Explain reasons why people in Rwanda are vulnerable to the types of financial scams identified in question (1) above.