Top ten scams to look out for

At the launch of a month-long campaign, the OFT identifies the top ten scams targeted at UK consumers to alert the public to the swindles that may part them from their money.

UK consumers lose an estimated £1 billion per year (see note 1) to a variety of scams which exploit low-cost, mass-marketing techniques to target recipients. Many of these scams originate from overseas, making detection and prosecution more difficult. The OFT has joined forces with law-enforcement agencies in over 30 countries to tackle scams which originate outside the UK borders. In October 2004, for example, OFT co-operation with partner agencies in the United States and Canada, such as the FBI and the Royal Canadian Mounted Police, helped lead to over 100 arrests in the US and 35 in other countries for telemarketing scams.

Consumers need to be on the alert for the following approaches:

Telephone lottery scams – these include the Canadian lottery scam and the El Gordo Spanish lottery scam, which deceptively uses the name of a genuine lottery. People respond to an unsolicited mailing or telephone call telling them they are being entered into a prize draw. They then receive a telephone call congratulating them on winning a big prize in a national lottery – but before they can claim their winnings, they must send money to pay for taxes and processing fees. The prize doesn't exist.

Prize draw, sweepstakes and foreign lottery mailings - many typical scams take the form of prize draws, lotteries or government payouts. Most appear to be notification of a prize in an overseas draw or lottery in return for administration or registration fees.

Premium rate telephone number scams – notification by post of a win in a sweepstake or a holiday offer includes instructions to ring a premium rate 090 number to claim your prize.

Investment related scams – an unsolicited telephone call offering the opportunity to invest in shares, fine wine, gemstones or other soon-to-be rare commodities. These investments often carry very high risk and may be worth a lot less than you pay. The shares are not quoted on any stock exchange and you will not be able to sell them easily afterwards. 'Solid' valuable investments, such as gem stones, are often said to be stored in secretive Swiss bank vaults, so you can never see your investment.

Nigerian advance fee frauds – an offer via letter, email or fax to share a huge sum of money in return for using the recipient's bank account to permit the transfer of the money out of the country. The perpetrators will either use the information given to empty their victim's bank account; or convince him or her that money is needed up front for bribing officials.

Pyramid schemes – offer a return on a financial investment based upon the number of new recruits to the scheme. Investors are misled about the likely returns as there are not enough people to support the scheme indefinitely – only the people who set up the scheme are able to make any money.

Matrix schemes – are promoted via websites offering expensive hi-tech gadgets as free gifts in return for spending £20 or similar on a low-value product such as a mobile telephone signal booster. Consumers who buy the product join a waiting list to receive their free gift. The person at the top of the list gets their free gift only after a prescribed number – sometimes as high as 100 – of new members join up. In reality, the majority of those on the list will never receive the expensive item they expect.

Credit scams – another advance fee fraud, originating in Canada. Advertisements have appeared in local newspapers offering fast loans regardless of credit history. Consumers who respond are told their loans have been agreed but before the money can be released they must pay a fee to cover insurance. Once the advance fee is paid, the consumer never hears from the company again and the loan never appears.

Property investment schemes – would-be investors attend a free presentation and are persuaded to hand over thousands of pounds to sign up to a course promising to teach them how to make money dealing in property. Schemes may involve the opportunity to buy properties which have yet to be built at a discount. A variation is a buy-to-let scheme where companies offer to source, renovate and manage properties, claiming good returns from rental income. In practice, the properties are near-derelict and the tenants non-existent.

Work-at-home and business opportunity scams – often work by advertising paid work from home but which require money up-front to pay for materials; or by requiring investment in a business with little or no chance of success.

Christine Wade, director of consumer regulation enforcement at the OFT, said:

'Scammers are resourceful, enterprising, and manipulative. By exploiting the same routes to market as legitimate business, they damage not only individual consumers, but the interests of fair-trading businesses as well. We will continue to work with our partners within the UK and overseas to enforce the law against perpetrators of these misleading and fraudulent schemes; and to provide the public with the knowledge and skills they need to recognise these scams.'

NOTES

1. Estimate of the loss to UK consumers is based upon data from a variety of sources. These include PhoneBusters, the Canadian national call centre for reporting telephone scams; seizures from PO boxes by enforcement bodies; complaints to ICSTIS about unexpected premium-rate call charges; and statistics provided by the National Criminal Intelligence Service.

2. For action taken by the OFT against deceptive telemarketing see press releases 208/04, 125/O4, 63/04, 156/03 and 116/03.