Sunday, October 23, 2016

4 Awful Money Scams Singaporeans Keep Falling For

(Singsaver.com.sg, Singapore's leading personal finance comparison platform, provides free and easily accessible resources such as its up-to-date credit card product page and the latest personal loan packages available in real-time.)

If it’s too good to be true, it probably is. Protect your savings and watch out for these money scams in Singapore. We can all be thankful that Singapore is low on crime. It’s unlikely that someone will pick your pocket or rob you with a knife. But that doesn’t mean we lack criminal elements. Crooks in Singapore are simply smarter, and they know what makes us tick. Here are the common scams in Singapore today, and why smart Singaporeans fall for them.
 
Scam 1: Internet Love Scams
According to the Singapore Police Force, internet love scams have almost doubled (98.7 per cent increase) between 2015 and 2016. We’ve gone from 150 reported cases in January to June 2015, to 298 reported cases in the same period for 2016. In an Internet love scam, a stranger forges an intimate relationship with you online. They then offer promises of sex, or a visit, or ask for financial help due to personal problems. This leads to the scammer asking you to transmit money to them, often in the form of gift cards (gift cards such as Alipay cards or iTunes cards are the preferred medium, as it is harder to trace where the money goes without a bank transaction). The biggest reported loss was by a 58-year-old woman, who transferred a jaw-dropping S$1.2 million to a scammer. The scammer had convinced her he was wealthy and wanted to invest S$6.8 million in Singapore, but his funds had been “impounded” in Malaysia.
 
Why Do Singaporeans Fall For This?
Quite often, the victims do have a suspicion that they are being scammed. They willingly choose to suspend that instinct, however, on the hope that they may be wrong. This isn’t “stupid” or “weird” at all: even in real relationships, people stay on despite knowing that their partner cheats, is abusive, is not sincerely concerned about them, and so on. The victims are too emotionally invested to quit. In the case of sham prostitution (the scammer just offers sex), the victims expect clandestine transactions because such arrangements are illegal. So they don’t question the odd requests. They are also too embarrassed to ask for help later and could become blackmail targets. If they want to try and cancel the deal, for example, the scammer can simply threaten to expose them.
 
Scam 2: Online Shopping Scams
This should be a thing of the past, given the layers of security involved in online shopping (and peer reviews). The problem is, a number of Singaporeans still shop on unverified or dubious websites. The other half of the problem involves auction sites, such as eBay or Carousell. Despite the site administrators’ best efforts, scammers will always be trying to use the system. The promise of anonymity (and lack of legal consequences) is too tempting for crooks. In some cases, victims click on an ad that promises free iPads, laptops, vacation tickets, etc. for “filling in a survey”. Once they “win”, all they need to do is pay for shipping.
 
And then pay for tax.
And then they find out it’s a one-for-one deal, so while one iPad is free, they need to pay for the other one. It just keeps dragging on, payment after payment, while nothing arrives. For auction sites, it can be hard to distinguish between a true scam and a dispute. Sometimes, when items are not what they expect, it prompts the buyer to launch a police report against the seller. However, there are also outright scammers on auction sites. In May this year, a group of Singaporeans teamed up to take down rogue accounts on Carousell. Most of the scammers simply didn’t mail the goods after taking the money.
 
Why Do Singaporeans Fall For This?
For the people lured by fake ads, it is simple sunk cost fallacy. Once they have paid a few hundred dollars for two or three transactions, it seems a waste to stop paying. So they allow losses to accumulate, before they finally give up. For auction site scams, it’s because most of the time transactions are safe. This lulls the users into a false sense of security. While they may be smart online shoppers, they may still get lazy eventually, and not want to take steps like physically meeting the seller to exchange cash.
 
Scam 3: Free Algorithm Trading
Algorithmic trading is a real thing. This is when computers run applications that track price movements, and buy and sell according to programmed parameters. Large banks and funds use them all the time. Needless to say, the workings behind such an algorithm are top secret. They are money making machines, which financial institutions may spend millions to develop or buy. But you can get one for free off the internet! Just run it on your computer, and it will trade for you. This gives you the same incredible advantage that financial institutions fork out tons of money for! Obviously, it doesn’t work. The free algorithm does have a cost: the scammers that gives it to you will want a small cut of any winning trade. To use an analogy, this is like allowing someone to play jackpot with your money. Whenever they win, they take a small cut of it. Whenever they lose, it’s your money. The algorithms are often nonsensical, and do nothing but make random frequent trades. Out of 100, at least six or seven might win by luck and make the scammer some money. You, on the other hand, will probably find your account run to the ground.
 
Why Do Singaporeans Fall For This?
It sounds clever, and the victims can tell their friends they are engaged in algorithmic trading. In some cases, the victims may also be spurred on by a temporary lucky streak. To those who are not financially savvy, they may think “free” means a total lack of cost. They think that, since a cut is only taken on a win, they are “not paying anything”.
 
Scam 4: Exotic and Unregulated Investments
Recently, 20 Singaporeans just lost S$1 million in an investment scam, which involved sports betting. Earlier in the year, we heard about investments in Aquilaria trees that went sour. Go back even further, and we can see gold buyback schemes got a lot of attention. These unregulated investments are sometimes outright scams, and sometimes due to someone having a plan that doesn’t work out. Either way, it boils down to the same thing: someone wants to a run a risky business, but they want to do it with your money. Put it this way: if you want to set up a business tomorrow, it’s safer to convince investors to give you the money you need (you can also pay yourself a salary out of their funds), than to mortgage your house and start one.
 
Why Do Singaporeans Fall For This?
The first batch of investors often do get paid. Most often, a ponzi structure is used, in which money from the second batch of investors is used to pay off the first. Now because the first batch of investors sees the investment is “working”, they will attest to it and rope others in to join them. Even smart people can be drawn in, when they receive word of mouth proof from a friend or relative. As for the original investors, many will double down. If you find an investment that really does seem to work, chance are you’ll invest twice as much at the next opportunity.

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