In the far-off days before the Internet, smartphones and even credit cards, the greatest opportunities to become rich overnight often arrived in the form of hand-written airmail letters carrying exotic postage stamps, usually from West Africa.
Typically, a letter would explain that a close relative in a very important government position had been murdered or killed in a plane crash. Often they would actually name the person so that the death could be corroborated. But invariably the person who came to a tragic end had a massive sum of cash hidden in a bank account that was about to be seized by the government. The only way to extract it would be with the assistance of a highly trusted person outside the country, namely the recipient of the letter who would arrange to transfer it to his or her account. Needless to say, if the money was successfully transferred to the recipient’s account, the sender of the letter would ask the highly trusted person to remit it back to the sender but retain say a few million dollars for the ‘inconvenience’.
The tale of course was false yet many people fell for it. I recall that police authorities at the time estimated that one person in 100 took the ‘bait’. So no wonder the letters kept coming. I was quite happy to receive the letters as I would keep the stamps, but those that took the message seriously (and of course kept it secret at the time as they had been told it was highly confidential) found that they first had to part with some money to ‘facilitate’ the transaction. More demands followed until the victim finally realised it was a scam.
Scammers latch on quickly to new technology
A whole generation later the letters keep coming, and from a wider range of sources, but now they come by e-mail so there are no exotic stamps to collect. Most servers are able to filter such messages into the junk mailbox, but with thousands of newcomers to the Internet around the world every day there will always be a potential pool of victims.
On a local note, in recent years you have probably received text messages telling you that you have won a sum of money or a prize, even though you never entered any competition or prize draw. This is not in the league of the international scammers but being offered an amount of money or new car is sufficiently attractive to persuade people to part with ‘administration’ fees.
‘Phishing’ is the term for another popular scam where you receive e-mails from what appears to be a legitimate financial institution such as a bank and which requests, sometimes via a link to a fake website, personal information and even passwords for urgent ‘security’ reasons. These scams can usually be spotted by looking at the sender’s e-mail address. On the surface it looks like the real thing but it may have just a one letter difference which means your reply is going to the scammer and not the legitimate bank. Anyone unwise enough to provide confidential information risks having their accounts emptied or their identity stolen.
Another very common scam is an e-mail from what appears to be a regular e-mail provider such as Yahoo asking you to confirm your user name and password, failing which your account will be blocked. The victims of this scam can actually be the people in the person’s address book, all of whom are now available to the scammer. I have heard of several cases similar to the following which I experienced myself:
One day I received an e-mail from a client saying she was in an African city, had lost her passport and credit cards and that the manager of the hotel was about to have her arrested unless funds were urgently remitted to a Western Union office within the next two hours. I noted that the e-mail address, although it bore her name, was slightly different from the normal one she used. I called her office and was relieved to find that she was there, and not in an African city!
But the scammer had done his homework and by reading all her e-mails was able to deduce her job and travel patterns, thus ensuring the story sounded credible. Out of all the names in the address book there is a chance that a good friend somewhere will believe the story and arrange a rapid transfer before the deadline, which was set of course to enable the scammer to collect and run before his scheme was exposed.
Scammers are not just evil elements operating from cities in Africa, Eastern Europe or Asia. And victims are not just individuals unfamiliar with the ways of the world. Soon after the Global Financial Crisis of 2008 a British solicitor set up a fund that robbed investors of over 100 million pounds. Based on the credibility and reputation of the British legal profession the fund was readily accepted by the financial services industry and approved by all the major international life companies. With the assistance of other dishonest legal practitioners nearly all the money invested was misappropriated. Seven British solicitors were struck off for their part in the fraud.
And now a new opportunity for scammers
My last article related to cryptocurrencies including Bitcoin and I suggested caution on their use. Ironically, during the few days between my submitting the article and its publication the government ruled that use of a cryptocurrency contravened the law as the Rupiah is the only recognised currency for transactions within Indonesia. There were reports that Bitcoin was being widely used in Bali, albeit mainly by foreigners. So now it is quite clear that it is outlawed in Indonesia as well as several other countries.
But this has not killed the enthusiasm for the currency elsewhere. As I mentioned last month, Bitcoins are created by ‘mining’ them on computers. The reward for ‘miners’ is that they can share in the lucrative ability to charge transaction fees as they become effectively the ‘bankers’ of the system. But successfully ‘mining’ the coins requires a huge amount of computing power and hence a lot of money to cover the amount of electricity needed. Hence we are now seeing advertisements on the Internet offering to pay people for use of their computers during the hours of non-use. I am not saying this is a scam but one needs to question what impact the ‘mining’ will have on the computer and the security of personal data.
Even more interesting are the advertisements appearing on the Internet inviting investors to support ‘mining’ ventures. One ad I saw offered a quick return on investment of 200%. On pressing various buttons I saw that the company’s operation was in Eastern Europe and that it had contact addresses in Russia and China. Genuine opportunity or a quick way to lose money? I don’t plan to find out.
While ‘blockchain’ technology is gaining the interest of larger players there are clearly many potential pitfalls for the unwary. At the end of the day, the old formula still holds: the higher the expected return, the higher the risk. Time is another factor. Stocks and property are better investments than cash in the bank, but only for sure in the long term. Get-rich-quick schemes often do work – but only for the promoters, not the investors!
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at email@example.com or +62 21 2598 5087.
You can read all past articles of Money Matters at www.BaliAdvertiser.biz Copyright © 2018 Colin Bloodworth