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The incidence of financial fraud in the United States is on the rise.
Americans submitted more than 1.5 million complaints about financial and other fraud in 2011 – a 62 percent increase in just three years – according to the Federal Trade Commission’s (FTC) annual
“Consumer Sentinel Network Data Book” the most comprehensive database of U.S. fraud trends (see Figure 1).
Joe Borg, head of Alabama’s securities commission and a leader among state securities regulators, agreed there is a proliferation of fraud, and he largely blames the Internet. His agency had an unprecedented 31-case backlog of criminal trials involving financial fraud in September 2011. “It’s
not unusual to have 20-25 convictions a year, but when we have 31 backed up – and we’re trying them as fast as we can – the trend is up,” he said.
Borg ticks off the reasons: “Downturn in the economy. Fear among the public. The idea that the government can’t protect them anymore. Medical costs are going through the roof. Those are fears.
The Internet is the vehicle. The Internet’s a big, big factor.”
Neil Power, supervisor of the FBI’s Economic Crimes Squad in Boston, said the public is not fully aware of how pervasive fraud is, because only the most prominent cases, such as Bernard L. Madoff’s
$50 billion Ponzi scheme, are covered by the media. The vast majority of cases fly under the public’s radar. “There is a substantial amount of fraud being addressed that’s not being covered,”
he said. Many more scammers are never caught by a regulatory system rife with staff shortages and inadequate resources. For example, the Securities and Exchange Commission (SEC) admitted in April 2010 that it has never examined some 3,000 registered U.S. investment advisers, Investment
News reported. In Canada, only a small percentage of total fraud is reported to law enforcement: one in three Canadians has been targeted by a scammer, yet only 14 percent of fraud attempts are reported to authorities, according to a 2006 online survey by the Canadian Securities Administrators.
While the Internet has made financial fraud more pervasive, law enforcement said most online scams are not much different than those employed by snake oil salesmen in the 19th century and Florida swamp-land salesmen in the 1960s. Unsuspecting consumers are deceived over and over
again with the same schemes, failing to realize that scammers are infinitely creative in making them
believe they’re offering something new and lucrative. Scammers may be difficult to recognize, because they constantly alter their disguises. A primary goal of this report is to provide insight into the disguises con men use to perpetrate their standard fraud schemes and to recruit victims who may be retirees, members of the military, college students, the unemployed, homebuyers, investors, low-income families, and others.
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