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New web portal seeks to protect you against financial scams

by Wayne Cheveldayoff, 2006-05-04

People love to talk about rising house prices or winning stock trades at dinner or cocktail parties but it is unlikely that you have heard someone confessing to falling for a financial scam. It would be too embarrassing.

Yet, scams are quite common and there’s a good chance someone you know has been taken in and lost money.

The Financial Services Commission of Ontario (FSCO) has become so concerned about the financial scams that are being perpetrated that it recently set up a special web portal, named Beware of Potential Consumer Scams, on its website at www.fsco.gov.on.ca.

FSCO said it took the action to help individuals identify and protect themselves against scams.

For anyone trying to build wealth, the website is an excellent resource. Obviously, if you lose money in a scam, you have less to invest for your retirement.

Besides that, what a great new topic of conversation for the next party! You can help protect your friends by citing in great detail how others are being cheated. There’s nothing embarrassing about doing that.

Here are examples of the scams FSCO identifies on its website.

1. Cheap Auto Insurance Scam: Con artists will advertise the sale of cheap auto insurance in a local newspaper. When you call, they’ll ask for a fee and then, with the information you give them, impersonate you when arranging insurance at a real insurance company, telling lies in order to get the cheapest insurance rate. You then pay premiums to the insurance company but your insurance is invalid because the information provided to the insurance company is false. In another verson of this scam, the con artists will pretend to offer the insurance directly and get you to send payment. Again, your auto insurance coverage is non-existent because it was never arranged and the individual that contacted you has pocketed your payment.
2. Nigerian Scam or Advance Fee Fraud: Perpetrators will dangle a carrot in front of your nose and say all you have to do is transfer some money to them to get a huge return. They may be talking about millions of dollars sitting in a bank account that can be transferred only upon payment of taxes, attorney fees, or even bribes. Or they may want you to act as a sales agent, invest in real estate, purchase crude oil at reduced prices, collect as a beneficiary of a will and so on. Of course, if you send them money, their promises aren’t kept. In some cases, they will come up with new reasons for you to send even more money. And in late April, FSCO published the names of phony financial institutions supposedly operating in Ontario that people were being directed to deposit advance fees into – with credible sounding names such as Equity Financial Trust, North West Pacific Credit Union, Royal Alliance Investment Trust Bank, Royal Pacific Credit Union and Trust Union Financial and Investment Services.
3. Up-Front fees for Loans: Con artists have a simple solution for people who need to borrow money and are willing to do it over the Internet. They request an up-front fee. Of course, borrowers never get the promised loan.
4. Cash in RRSP Without Paying Income Taxes: Scam artists claim they have a way you can withdraw money from an RRSP, particularly a locked-in RRSP. These solutions involve loans or purchasing shares in a start-up company. The reality is that these all lead to tragedy, with all or part of your money disappearing in various ways, including to pay a large tax bill.

FSCO is an agency of the Ontario Ministry of Finance and regulates insurance, pensions, credit unions, caisses populaires, co-operatives, mortgage brokers, and loan and trust companies.

Another site with information on financial scams is www.investorED.ca, operated by the Ontario Securities Commission.

If you want to check out a detailed case study of an investment fraud that bilked investors of more than $200 million, look for the special research study by criminology expert Neil Boyd about the Eron Mortgage fraud. It’s on the B.C. Securities Commission website at www.bcsc.bc.ca.

Another great site for scam alerts and self-defence tips is www.nasaa.org, which is run by the North American Securities Administrators Association, representing U.S. state and Canadian provincial regulators.

Wayne Cheveldayoff is a former investment advisor and professional financial planner. He is currently specializing in financial communications and investor relations at Wertheim + Co. in Toronto. His columns are archived at www.smartinvesting.ca and he can be contacted at wcheveldayoff@yahoo.ca.

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©2006 Wayne Cheveldayoff