Consumer Fraud Flashcards
In a/an _____________ scheme, the company that initially conned a consumer contacts that consumer and offers to help retrieve the lost money. However, the investigation requires an upfront fee and the consumer is swindled again.
A. Advance-fee
B. Double-hustle
C. Retrieval
D. Scavenger
The scavenger or revenge scheme involves the company that initially conned the consumer. Using a different company’s name, the outfit contacts the consumer again and asks if he would like to help put the unethical company out of business and get his money back. Naturally, an upfront fee is required to finance the investigation.
Advance-fee swindles, debt consolidation schemes, and diploma mills are all examples of confidence schemes. T/F?
A. True CORRECT
Confidence schemes involve a range of fraudulent conduct usually committed by professional “con artists” against unsuspecting victims. The victims can be organizations, but more commonly are individuals. Con men usually act alone, but they might group together for a particularly complex endeavor.
Some examples of confidence schemes include advance-fee swindles, debt consolidation schemes, directory advertising schemes, merchandising schemes, personal improvement frauds, and diploma mills.
Telemarketing schemes target individuals, not businesses. T/F?
False
Telemarketing offenses are classified as consumer fraud, yet many businesses are affected by office supply and marketing services scams. The hit-and-run nature of phone rooms, the geographical distances between the crooks and their victims, and the resources and priorities of law enforcement agencies all make enforcement efforts difficult
Which of the following statements is TRUE with regard to factoring companies?
A. Factoring companies in Asian and European countries tend to charge more for their services than factoring companies in the United States.
B. Factoring is illegal in the United States.
C. Factoring companies approach banks on a telemarketer’s behalf in order to secure credit card processing services.
D. Factoring groups buy credit card receipts from telemarketing operations at a discount.
D. Factoring groups buy credit card receipts from telemarketing operations at a discount.
Telemarketing operations commonly engage factoring companies. These groups buy credit card receipts from telemarketing operations at a discount, and then use their merchant bank accounts to convert the receipts into cash. Some factors charge as much as 30 percent of the receipts’ gross value to launder the slips. Factoring is illegal in some states, though perpetrators find ways to slip through loopholes or disguise their alliances.
Factoring through Asian and European merchants is becoming increasingly common. Factoring companies in these countries tend to charge a lower price for their services than some other countries—between nine and ten percent of the gross.
The type of fraud that targets groups of people who have some social connection, such as neighborhoods of racial minorities or immigrant groups, is known as:
A. Reloading
B. Consolation
C. Affinity fraud
D. None of the above
C. Affinity fraud CORRECT
Affinity fraud targets groups of individuals who have some social connection. Neighborhoods chiefly populated by racial minorities, especially immigrant groups, are often the site of affinity frauds. Religious and professional ties are often exploited.
The most common giveaway scam, in which a postcard arrives in the mail telling the receiver he has already won a prize such as a new luxury vehicle or cash, is known as:
A. The “1-in-5”
B. The “Fly and Buy”
C. The “Bait and Switch”
D. None of the above
A. The “1-in-5” CORRECT
The most common giveaway scam is known as the “1-in-5.” A postcard arrives in the mail telling the receiver he has already won a prize. A new luxury vehicle tops the list, along with cash, jewelry, a living room set, and gift certificates. The odds of winning any of the prizes are astronomical. Victims are given trinkets or coupons redeemable only for the company’s own shoddy merchandise.
A Ponzi scheme can best be described as an illegal business structure that might offer merchandise or services, but generates almost all of its revenues from the relentless recruitment of new members. T/F
B. False
A Ponzi scheme is generally defined as an illegal business practice in which new investors’ money is used to make payments to earlier investors. The investment opportunity is typically presented with the promise of uncommonly high returns. While the scam is presented as a legitimate investment, there is little or no actual commerce involved.
In contrast, an illegal pyramid scheme is unique in that the more members that are recruited, the higher the investor is purported to rise in the ranks of the enterprise, and the more money he is supposed to make.
In a telemarketing scam, the person who reads vague words about the deal and records the victim’s agreement is known as the:
A. Fronter
B. Closer
C. Verifier
D. None of the above
The caller is passed to a verifier, who reads some vague words about the deal and records the person’s agreement. These recordings are intentionally vague, leaving out the pitch and key details, essentially recording only the customer’s consent. Verifiers also stall customers who call back to complain (heat calls), finding reasons why a little more patience will solve the problem, and in some cases, convincing the person to send a little more money to help the process along.
Boiler rooms, fronters, closers, and verifiers are all terms associated with which of the following?
A. Telemarketing scams
B. Bribery and corruption
C. Financial institution fraud
D. Money laundering
Terms in the telemarketer’s vocabulary include banging, or nailing, the customer (i.e., closing the deal), as well as the following:
• Boiler room staff—Work in a boiler room is shared by fronters, closers, and verifiers.
• Fronters—The fronter calls victims and makes the initial pitch. This low-level worker is usually breaking into the business and reads from a script to the prospective customer. Fronters seldom see the merchandise or know the full extent of the operation. Keeping fronters in the dark, at least in theory, limits what they can tell investigators and protects them in the event of prosecution.
• Closers—The closer is a veteran. Fronters pass an interested caller to their closer, identified as the firm’s “manager,” who convinces the person to buy.
• Verifiers—Next, the caller is passed to a verifier, who reads some vague words about the deal and records the person’s agreement. These recordings are intentionally vague, leaving out the pitch and key details, essentially recording only the customer’s consent. Verifiers also stall customers who call back to complain (heat calls), finding reasons why a little more patience will solve the problem, and in some cases, convincing the person to send a little more money to help the process along.
_________ provide telemarketing scammers with the autodialers, phone lists, credit card receipts, and merchandise they require to operate.
A. Factoring companies
B. Turnkeys
C. Fronters
D. Closers
Turnkeys comprise an industry of their own by providing the collateral a telemarketing scam needs—turnkeys launder credit card receipts and checks, sell autodialers and phone lists, and provide the merchandise portrayed as valuable prizes.
