For this two-part article, we explore the subject of scams, make a quick glimpse of the most common and ubiquitous types, proceed to indicate the ones which OFWs should be most wary about and suggest simple ways to avoid such scams.
The origin of scams is difficult to trace but it is probably almost as old as mankind itself. Scams started to appear practically as soon as humans learned to trade goods with each other and particularly after gold money was invented as a medium of exchange.
In the Babylonian parables from the 1926 investment classic The Richest Man in Babylon, a story is told of a prodigal son of sorts (not to be confused with the Biblical story of the prodigal son) who, having been bequeathed a bag of gold by his wealthy father to be able to chart a destiny of his own, journeyed in a caravan to a bustling place called Nineveh.
Along the way, two glib-talking men befriended the young man and persuaded him into betting a big part of his small fortune on a prized white horse they brought along, which they assured to be so swift and so sure a winner in a race against a famed unbeaten racehorse owned by a wealthy man in Nineveh. The “assured-winner” white horse lost badly in the race and the poor lad lost the big part of his small fortune.
Later, the lad learned that the two con men and the wealthy owner of the unbeaten racehorse were partners in the con venture and it has been the modus operandi of the con men to ride along caravans looking for prospective victims.
In the modern day, there are scams galore and they come in all shapes and sizes. Modern technology has ironically spawned the biggest proliferation of scams in history. We hardly need to mention the text scams; they have become so trite nobody can be conned by them anymore.
The internet however is a different matter. It has become an ocean where sharks of scams surf and worm themselves through millions of email messages around the world. These scams swarm around inboxes of emails with vicious regularity that it has become almost futile to try to prevent them from entering your inbox.
The most notorious of the email scams are the Lottery Winning Scam and the Nigerian scam. I will not dwell on these scams since there is an overabundance of information in the internet explaining them. Many internet users were probably conned by these scams the first times they burst into the scene. Nowadays they are so common, so overused and so exposed that probably only the complete novice internet user can be conned by them. For those innocent and novice few who encounter such scams, a quick search at Google would be more than enough for them to wise up and dismiss such scams.
Apart from the above scams, the internet scene is further muddled by the millions of information and other products being peddled, running the whole gamut from promising miraculous cures for obesity to proprietary methods of exercising without sweating, to becoming so successful in ones career, attracting and manifesting wealth, winning a mate or just about anything desirable. You name it, the web has it.
Many of these are, of course, legitimate products providing real value to consumers. Others are just overhyped marketing pitches on dubious products next to useless. Some are downright scams. As useful and wonderful as the internet is, it has however spawned all sorts of these scams and overhyped products bordering on scams.
Most OFWs can easily take care of themselves and easily avoid these scams. If they are duped once, the harm or damage may likely be negligible and would not make them lose the shirts on their back.
We are more concerned and, therefore, now turn to the most important ones – those scams that can potentially wreck havoc on the OFW’s precious savings or lead the latter direct to the poorhouse.
The most vicious and prevalent of these are the Ponzi pyramiding scams. This is so important a topic that I prefer to devote a separate posting or two for these type of scams. We therefore skip this in the meantime and turn to the other types.
Boiler Room Scams
A few years ago, while I was still working in the Kingdom, a close friend and community leader who was President of one of the largest OFW community groups in Riyadh, approached me to ask my advice on an investment he was about to make with an investment company which has been vigorously pursuing him from Manila.
The friend handed to me a bunch of sleek and glossy documents sent to him from what, purportedly, was a mutual fund based in Makati. No indications or information about when the company was registered, who the principals were or what the core principles or investment policies were. Just sweeping pronouncements that the company knows the markets, have access to market information the world over, have excellent worldwide reputation, and so forth. The friend’s application was already filled in and what was lacking to consummate the transaction was just to send or fax the application and send the initial placement of US$1,000.
After 3 days, I called up the friend and told him not to invest because the scheme was a big scam. The company, which looked registered, was not a legitimate mutual fund but was a fraud out to run off with his money. The friend thanked me and followed my advice. Hardly a week passed when Arab News picked up a news release from the Philippines that the investment company was exposed as a scam, the “identified” principals had disappeared and authorities were then in hot pursuit .
Months later, I learned that the identified principals barely escaped a raid in their office in Hong Kong by the Chinese authorities. I knew then that, after having been exposed in Manila, the scammers promptly shifted to Hong Kong to do their thing again, got exposed once again and eluded arrest just at the nick of time (still lucky, but I guess by now luck must have already run out of such rascals).
The modus operandi is for the scammers to quickly set up what purports to be an investment company in a city like Manila or Hong Kong, vigorously pursue innocent investors with high pressure tactics assuring investors of once-in-a-lifetime opportunity for big investment gains, and so on. Then, as soon as many investors get convinced and join the fray, the operators suddenly disappear without a trace – the poor investors hopes of big gains turning into dust. The operators move to another place/country, relax and lay quiet for a while then move again for a repeat performance.
The scheme is called “boiler room” operations, named after boiler rooms of merchant ships which are always hot and bustling with activity.
Special targets are OFWs and retirees particularly those who have already accumulated substantial sums from years of diligent saving.
There is one immediate and tested way to deal with boiler room type solicitations. Consult with people who know about investment. The community leader mentioned above got spared from a surefire loss through a last minute simple consultation with a friend who knows.
Other than that, one has to study and be literate in investment himself. It is not so difficult and this blog is a modest attempt to help along this line.
(To be continued. Next type of scam: Scams by legitimate entities. Stay tuned for next week’s concluding part in this two-part article.)