Your clients may be falling prey to the Puppy Scam, the Grandmother Scam and the Tax Refund Scam.
Accountants pride themselves on their role as protectors of their clients — using their continuing education; vast resources from the IRS and industry; and even the audit process to help business owners and investors to side-step the worst of the fraudulent scams.
Yet clients and their businesses continue to be victimized each year, losing billions of dollars each year to a wide range of scams, both corporate and individual. While there are no firm numbers, the newly-established Fraud Enforcement Task Force within the FBI has uncovered more than $8billion in securities, commodities, and investment fraud losses alone – and that data is five years old. The Federal Trade Commission estimated that there were 48.7 million individual fraud transactions in 2005, and the average loss was $60 per transaction. This would put the total dollar loss to fraud at approximately $2.92 billion per year in the United States alone (FTC, 2007).
So while CPA firms champion fraud protection, they have been largely unable to stem the rising tide of fraud, particularly among owners of small businesses. Help in this area, though, is getting better. Two tools in particular – the Identity Theft Resource Center (http://www.idtheftcenter.org/) and the Scam Detector web site (http://scam-detector.com/) – can help.
The Identity Theft Resource Center provides best-in-class victim assistance at no charge to consumers throughout the United States; educates consumers, corporations, government agencies, and other organizations on best practices for fraud and identity theft detection, reduction and mitigation; and serves as a relevant national resource on consumer issues related to cybersecurity, data breaches, social media, fraud, scams and other issues.
Its training and presentations on best practices and risk reduction for businesses and consumers include a Victim Assistance Call Center, which provides toll-free, no-cost case mitigation and consumer education to approximately 10,000 victims and consumers annually. ITRC maintains a multi-year data breach report extending back to 2005. The ITRC Breach Report is published weekly and supplemental reports are readily available. Its advisors represent more than 50 years of case resolution experience and are dedicated to providing world-class customer service, and protecting the victim’s or consumer’s privacy.
It also maintains and updates more than 240 written documents, videos, and games to provide victim assistance and education on identity theft and financial fraud. In addition, idtheftcenter.org provides a large number of links to a wide variety of resources. Documents are presented in English, Spanish, and Chinese. Finally, the ITRC conducts research and surveys in collaboration with partners and sponsors resulting in white papers, fact sheets, and solutions to educate consumers and businesses.
Scam Detector is a different resource, combining both a web site and a smartphone app to assist in the identification and resolution of scams worldwide.
The Scam Detector app was created after the outstanding success of The 419: The Nigerian Scam, a short film which quickly became a viral hit, being viewed over a million times online. The docu-drama was the first movie ever made on the infamous 419 topic. The web site contains a number of resources, from the Better Business Bureau list of the most prevalent scams each week to a detailed list of scams from automobiles to travel.
The best way to use these resources is to add both to your weekly reading list. And there are other resources as well. The Office of the State Comptroller for New York (http://www.osc.state.ny.us/localgov/pubs/red_flags_fraud.pdf) has an excellent white paper on “Red Flags for Fraud.” In addition, the UK-based Leicestershire County government (http://www.leics.gov.uk/audit_twenty_common_frauds_and_scams.htm) offers a handy list of the 20 most common scams found by auditors.
The point is that there is a growing list of resources to assist CPAs in their mission to protect clients from common and costly scams, beginning with the ones presented here.
And the puppy scam? Here’s what Scam Detector has to say at http://scam-detector.com/social-networking-scams/pet-adoption-for-free: You want to get a puppy and come across a Twitter post or classified ad, from somebody willing to give a pet away (or have a bunch of them for a ridiculously low price). The pictures are cute and you fall in love with the animal. It could even be advertised as a “perfect Christmas gift for your kid or for his/her birthday”. How does the scam work?
You contact the person and they explain that they just moved out of the country and their pet is having a horrible time accommodating to the new climate. After exchanging a few e-mails and building trust, the owner of the animal will only require that you pay for the shipping, just promise you’ll take good care of the pet.
After you wire the money, it will be the last you hear from them, since the pet never existed in the first place. The scammer just used Internet pictures with the cute puppies. The crook could also approach victims by saying their spouse died and now they need to get rid of all the things that remind them of the deceased. The crook might also pretend they are using a third party to mediate the deal, to make the transaction seem more secure.
Avoiding the scam is easy — buy pets from your own town or your local animal shelter. This way, you can go and pick them up yourself.