If you have been a reader of this blog for any time you know about the Fraud Triangle….Pressure, Opportunity and Rationalization. If the scammer is under financial pressure and sees an opportunity to relieve that pressure (and can rationalize doing so) the likelihood of fraud to occur is much greater.
There a couple more components that, if present in your life, may make you more likely to be a victim of fraud. They are Greed and Envy. Here is an example from real life.
Before I was a teenager I remember my father talking frequently about avoiding taxes. We were the definition of a “typical” family in the 1960’s. I was the oldest of three children, our dad worked full-time as a financial analyst in a factory and mom stayed at home….we would probably have been considered lower middle class at the time. Dad finally saved enough to be able to invest some money and he decided to buy municipal bonds. His reasoning was that the interest was not taxable so he would have income that he would not have to share with the IRS.
He bought a $1,000 municipal bond with the interest rate around 3%. He earned $30 of interest on the bond annually and, in his tax bracket, meant he saved less than $7 on the taxes. He was proud of legally beating the IRS out of some taxes and equated what he was doing with how “the rich” handled their fortunes. I finally understood that he was envious of those who had more money than he did and this purchase was an attempt to match how the “rich” invested their funds.
Looking back I realize that if my father had been approached by a scam artist offering a “tax shelter like the rich use” his envy would have made him susceptible to the con. He might have been taken in and lost all of our family’s savings.
The moral of this family saga is that we all need to be aware of our attitudes around money, savings and what we think about those who have more money than we do. Envy and greed may prevent us from thinking rationally when approached by someone offering to make us rich. Greed and envy blind us to the underlying risks of an offer that is too good to be true.
My dad undoubtedly thought he was doing the right thing for the family. A better investment would have been something that would grow over time. His need to beat the IRS outweighed more rational thoughts about how to invest for the future. He could have invested a small amount in a blue chip stock which would have appreciated and paid dividends as well. Index funds did not exist in 1965 but if he could have invested the $1,000 in one then (and reinvested dividends) it would be worth almost $150,000 in 2018 (pre-tax). The muni bond he bought paid the $30 in interest every year and matured with a value of $1,000.
Remember that being envious of others financial position and wanting to catch up immediately makes you a good mark for someone seeking to scam you out of everything. Better to educate yourself on finances and take the slow steady route than try to get rich quick (with the help of a stranger) and possibly lose everything. The fraudster already has rationalized why it is acceptable to take your money….don’t make it easier for him. Healthy skepticism is good for your peace of mind and for your finances.
If you or your company has been a victim of fraud let me know if you are willing to discuss it with me. It would be helpful to others to hear about real life examples of fraud, loss and recovery.
Let me know what you think………