NEW YORK (MainStreet) -- Financial fraud is common, costly and frequently unreported. Announcing the results of a new survey, the FINRA Investor Education Foundation also says many investors are unable to recognize the signs of a potential scam.
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Money hustles are nearing epidemic proportions, costing Americans over $50 billion a year. More than 8 out of 10 of survey respondents said they had been pitched a fast one, with 11% admitting they had lost a "significant amount of money" on such swindles.
"When it comes to financial fraud, America is a nation at risk," says FINRA Foundation President Gerri Walsh. "Fraudsters are very effective at reaching and enticing vulnerable populations into turning over their money, and far too few Americans are able to detect likely fraudulent sales pitches."
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The survey of nearly 2,400 U.S. adults age 40 and older revealed that over 40% of those surveyed cannot identify some classic warning signs of financial fraud, including unrealistic returns and "fully guaranteed" investments. Senior Americans are most likely to be targeted by fraudsters and 34% more likely to lose money than respondents in their 40s. Common cons included: 67% of survey respondents said they had received an email from another country offering a large amount of money in exchange for an initial deposit or fee. 64% had been invited to an "educational" investment meeting that was likely a sales pitch 36% had received a letter stating they had won a lottery in another country, including a cashier's check as an advance payment. 30% had received recommendations to purchase a penny stock. 24% had been cold-called by a stranger offering an investment opportunity. 18% had been asked to participate in an investment that offered a commission for referring other investors.
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Although 11% of those surveyed lost money in a likely scam, only 4% admitted to being a victim of fraud when asked directly -- an estimated under-reporting rate of over 60%. When asked why fraud victims did not report the fraud, the most cited reply was "would not have made a difference" (53%), followed by "didn't know where to turn" (40%), "wanted to put it behind me" (32%), and "was embarrassed" (27%). Most shakedowns are initiated through mail or Internet solicitations with free lunch seminars the most effective manner used to engage prospective victims. --Written by Hal M. Bundrick for MainStreet
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