Top Scams of 2011 and 2012

Check out our annual top scams countdown: Internet Scambusters #472

theft and malware are in crime rankings. They head up the charts for both 2011 and 2012.

But below the surface, other threats are starting to re-emerge — things like online romance scams.

And the threat to our privacy and security through hack attacks looks like it’s on the rise, as we explain in this week’s report on 2011 top scams and 2012 predictions.

And now for the main feature…

Top Scams of 2011 and 2012

There’s some good news and bad news sprinkled around our annual look at the top scams of the past and coming years.

The good news is that, according to the most recently available research, the number of identity theft and fraud victims in the US has dropped sharply.

The bad news is that, on average, the out-of-pocket cost to individual victims went up, and identity theft remains in the number one slot in our top 10 scams list both in 2011 and 2012.

One other bit of disappointing news: Just as we were all wising up to the “lost inheritance” or money-smuggling types of Nigerian scams, a massive new wave of bogus online romance tricks is pushing them back up the charts.

And, oh yes, lotteries. When will we ever learn that you don’t win lotteries that you didn’t enter and that you should never pay money to collect your supposed winnings? It seems there’s a never-ending supply of victims.

Other notable trends for 2011 and 2012 — the continuing growth of social networking scams (despite efforts to beef up security and privacy) and hacking-related data breaches. Expect to see more of these.

Results for 2011

There’s never pleasure in saying “we were right” when it comes to looking back at our 2011 top scams predictions.

We made a couple of small adjustments to the final outcome, but according to the feedback we get from thousands of subscribers and readers, plus our own in-depth research and monitoring of surveys and crime reports, we were pretty close to the mark.

As we see it, this is the way things turned out.

Top Scams of 2011

10. Travel and vacation scams (Predicted #10). Each year, we hear of a new crop of travel tricks but timeshare-related scamming is a hardy annual. Also in 2011, global travel was hit by a volcanic eruption in Iceland. As well as triggering seismic activity, it sparked a number of scams including bogus claims of being stranded and a phishing scam based on a phony compensation offer to travelers.

9. Doorstep scams (Predicted #8). This is a catch-all term covering bogus contractors and crooks trying to talk their way into victims’ houses or collect for non-existent charities. Natural disasters, like hurricanes, push up the incidence of this scam and 2011 was not as dramatic as some previous years. So, the scam came in one place lower than we forecast — but it’s still a “top-tenner.”

8. Investment scams (Predicted #9). After the Madoff scandal, we thought we’d seen it all but more and more Ponzi schemes (albeit not as big as Madoff’s) surfaced. And with low interest rates, the hunt for better returns lured more and more investors into dubious, too-good-to-be-true schemes.

7. Skimming (Predicted #7). The practice of stealing credit and debit card numbers has become more widespread. ATMs used to be the sole target but we increasingly receive reports of skimming devices being used at gas stations and by restaurant servers using pocket-sized skimming devices.

6. Nigerian scams (Predicted #4). Those Nigerian tricksters seemed to be down on their luck in 2011. Most people no longer fall for those poorly-worded messages saying we inherited a fortune or asking us to help smuggle out government cash. But advance fee type scams, where victims have to wire cash to scammers after receiving a bogus check, are still going strong.

5. Lottery scams (Predicted #5). You won — you really did! Oh no, you didn’t. Despite their implausibility, phony lottery win notifications continue to hoodwink hundreds, if not thousands of victims, especially among vulnerable groups like seniors. The tragedy is that the amount of money some victims hand over in response to repeated requests from the crooks often runs into five or even six figures.

4. Internet sales (Predicted #6). Online scams based on bogus for-sale items soared in the past year as more of us turned to the Internet for our shopping. We’ve noticed a particular rise in reports about scam sales on Craigslist (despite the company’s repeated warnings to users) and a surge in the setting up of spoof shop-window websites. They sell fakes at designer-label prices, poor quality products or, worst of all, non-existent items.

3. Economy-related scams (Predicted #3). You didn’t have to be a crystal-ball gazer to see that economic recovery was going to be a struggle in 2011, and it was. With unemployment figures remaining stubbornly high and many Americans battling to keep their heads financially above water, bogus jobs and foreclosure scams abounded.

2. Malware (Predicted #2). One of the biggest ever organized malware scams surfaced towards the end of the year when 4 million PCs were found to be infected with a virus that redirected users’ shopping searches to particular retailers. The alleged perpetrators were said to have earned $14m from the scam. And that’s just one example of how malware continues to dominate Internet crime.

1. Phishing and Identity Theft (Predicted #1). The 2011 Identity Fraud Survey by Javelin Strategy & Research randomly polled 5,000 adults and found 466 — or just less than 1 in 10 — had been ID fraud victims. This was considerably lower than the previous year, which had been exceptionally high. Even so, Americans collectively lost more than $30 billion to ID crooks.

Predictions for 2012

As consumers become more aware of risks, especially online, crooks are turning to more sophisticated technology to steal information from places over which we have no control and to target vulnerable groups like seniors.

The older age group are particularly at risk from scams on the Internet because they represent possibly the fastest-growing section of users. Most other age groups have been online for years and, with the exception of very young users, are tuned in to many of the security risks. Not so with older folk.

One worrying trend that will help keep ID theft at the head of the top scams list is the growth in data breaches — loss of personal information over which we have no control. For more on this, see our earlier report, What to Do If You’re a Data Breach Victim.

Against that background, here’s our top scams forecast for 2012.

10. Travel scams. Timeshare schemes will be with us of course, but look out for a surge in free flight and vacation scams — telephone and snail-mail offers front-loaded with service charges. After you pay, you find the offer has expired. The London 2012 Olympics likely will also be a magnet for ticket scams.

9. Money-for-nothing scams. This is our new catch-all label for doorstep and charity scams. You pay money to a charity collector — on your doorstep, in the mall or online — often after a natural disaster, but your cash ends up in the collector’s pocket. Also on your doorstep: bogus and crooked contractors who take your money for work you didn’t need or which they don’t bother to do.

8. Economy-related scams. Times are still uncertain, but other, more lucrative scams will likely push this group of con tricks that includes bogus job schemes further down our top 10 scams list. Foreclosure scams might start to cool off but other fee-laden loan modification and bogus grant tricks will persist.

7. Investment scams. We haven’t seen the end of crooked Ponzi schemes yet, and with low interest rates, high precious metal prices and turbulent markets, scammers have latched on to gold, copper and currency trading as a lure to investors. Anything that pushes up oil prices will also boost bogus energy-saving products.

6. Lottery scams. Despite stacks of media publicity and tragic reports of huge financial losses, people continue to be hoodwinked by emails and letters saying they’ve won a fortune on a lottery. Scammers use celebrity or official-sounding names to make their claims more credible and keep lotteries at the halfway point in our top scams list. Once a victim is hooked with a small initial “processing” payment, the scammers just keep coming back for more.

5. Skimming and ATM scams. We’ve broadened this top 10 scams category slightly to include tricks that not only steal card information but also block ATMs from paying out. The crook returns to take your money after you’ve left to complain. This crime is seriously on the rise because it’s so easy. See this earlier report, ATM Theft: 8 Tips to Protect Yourself From the 5 Most Common ATM Scams.

4. Nigerian scams. Well, what do you know… now that everyone knows they haven’t inherited a fortune, Nigerian scammers have plunged into the lonely-hearts market to make up for lost “business.” They frequent online dating agencies, especially targeting older age groups, but also send out emails on-spec, claiming to have fallen for their victims (whom they’ve never seen!). Romance ensues, followed by a request for money for an air ticket. This and ongoing advance fee scams will push this scam back up our top scams chart.

3. Internet sales. Scammers will try to keep one step ahead of law enforcement and security software, especially with scam shopping websites. These tricks also include bogus shopping comparison sites that pretend to be giving impartial reviews, phony online pharmacies, and “free trial” sites that trick victims into unwittingly signing up for recurring credit card or cell phone charges.

2. Malware. Law enforcement agencies and software companies have been moderately successful in shutting down botnets, used for spamming, and fake anti-virus alerts that trick victims into paying to supposedly secure their PCs. But the scale of the malware industry is phenomenal. Add in the “gray” area of adware we unknowingly allow to install on our PCs, and we can’t see any chance of this PC hijacking moving down our top scams rankings.

1. Phishing and identity theft. As we said earlier, our biggest concern is the amount of information hackers have shown themselves capable of stealing by breaking into the networks of firms that hold our personal records. We think this will continue to grow, along with persistent attempts to capture our confidential information through phishing tricks via spoof sites, emails and cell phone text messages.

What our annual list of top scams shows is that crooks continuously change and refine their techniques in their efforts to outwit us all. No doubt they will continue to do so but the decline in identity theft crime gives us some hope that perhaps advances in security technology or just plain user wariness can help protect us.

It’s probably too much to hope that we can ever turn the tide against the scammers but by knowing what the top scams are, you can at least reduce your chance of becoming a victim.

That’s all we have for today, but we’ll be back next week with another issue. See you then!