What would you do if you received an official looking that informed you that you won $8.75 million dollars?  What if the letter had a copy of a cashier’s check written to you?

Don’t be fooled.  The lottery scam begins with a bold announcement.  Victims are contacted by telephone, email or mail.  (A sample of a letter is provided below).  The pitch is convincing.  The con artists are polished and will pretend to be bank officers, IRS employees, law enforcement and company officials.  There are numerous variations of the scam and they generally take on several phases which may be as follows:

Phase 1:  The Hook

The initial pitch will go something like this:

We are so very pleased to inform you that you have won the XYZ Lottery.  We have $8.75 million ready to disburse to you.  We just need to have you pay the taxes so that the funds can be sent. …

The victim is instructed that before the prize can be collected that taxes must be paid. Various methods of transferring the money are used.  Here are a few of them:

• Use a money wiring company to send the taxes.  Once the money is sent by this method the criminals can pick up the money anywhere.
• Wire money from your bank.  Again, once money is sent it is almost impossible to recover.  Typically the recipient will immediately withdraw all of the money from their account.
• Send cashier’s checks.  They may be told that the person is a transfer agent or official who insures that the money will be held in trust.
• Purchase prepaid credit cards and send them the card information.
• Send cash in envelopes.

Legitimate sweepstakes do not require winners to pay any taxes, fees or costs in advance.   If a victim falls for an initial scam another fee, charge or tax is sure to follow.  They will apologize for forgetting a fee, charge, another tax or other reason to send more money.  It is not unusual for victims to repeatedly send money.

Criminal Busted! A rare victory.

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The Boost:

On rare occasions the criminals may return some money only to keep their prey playing along.  A return of a small portion of the money lost can help regain credibility of the swindlers.  One incident involved a victim who had given hundreds of thousands of dollars to the charlatans.  The crooks sent the target first-class tickets to Spain.  The gentleman was taken to a room with piles of money and told he would take as much as he wanted.  He took a couple of thousand and was told how the money would be “invested” to claim the winnings.  He returned to the United States and sent the bad guys hundreds of thousands more.

Phase 2:  So Sorry, But We Can Help

Once the victim refuses to cooperate by sending more money the con artists may change tactics.  Sometimes a new “representative” will be assigned to fix the problem. The new fraudster will explain that certain fees or taxes were missed.  At other time law enforcement officers will be impersonated.  The fake cops may ask for money to pay costs or may encourage the victim to cooperate with the new representative.  These criminals have been known to use the names of real police officials then set up a telephone number which appeared to be a local number.  A technique known as caller id and location spoofing.  The criminal can create an account that provides a false area code or caller id.

Again, the fraud involves convincing the victim that the money previously lost can be recovered.

Phase 3:  Blackmail, Threats and Intimidation

If the victim steadfastly refuses to send additional funds the con artists may pretend to be law enforcement and threaten to arrest if he refuses to cooperate.  They may claim that a warrant has been issued for their arrest but they can post bail to avoid going to jail.  There may be a threat of turning the victim over to the authorities unless demands for payment are made.  There may be threats of violence against the target as the CBS news story shows.

Phase 4:  Account Takeover and Identity Theft

People who fall into the traps of these thieves often find their bank accounts taken over.  The villains are not shy about stealing from bank accounts, diverting social security payments or identity theft.  With information they obtain it is easy to impersonate their prey.

How to fight back.

• Knowledge, be wary of any transaction with strangers. Seek legal advice from a trusted attorney or financial advice from a certified public accountant.
• Change telephone numbers, this may seem difficult but it is one of the most effective ways to prevent contact.  But remember, never call any number to check on “refund” or “winnings”.  Crooks may call neighbors or family members in order to get in touch with their targets.
• Work with banks and credit card companies to change compromised telephone number.
• If you experience telemarketing fraud of any type, report it online to the FTC or call toll-free, 1-877-FTC-HELP (1-877-382-4357).

Here is an example of a lottery scam letter:

Bank of America did not have anything to do with the scam.  The criminals impersonated bank officers and used BOA’s logo and materials to create the forgery.