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Financial literacy

How to beat these four scams making the rounds

From peddling shady investment schemes to posing as grandchildren in distress, fraudsters are always finding new ways to trick their victims

Old man sitting at table using cell phone The emergency scam, which makes targets believe a loved one is in immediate need of cash, is especially prevalent among seniors (Getty Images/Westend61)

Fraudsters are constantly dreaming up new ways to trick their targets, and too often, they are successful. According to CPA Canada’s annual fraud survey, almost half of respondents (46 per cent) reported having fallen victim to financial fraud at some point in their lives.

These days, most scams have a technology or online component. As Sgt. Guy Paul Larocque, CPA, acting officer in charge of the Canadian Anti-Fraud Centre (CAFC), points out, a full 70 per cent of the financial losses reported in 2022 are related to emails, social media or the internet. This general trend is one that was also confirmed by the CPA Canada survey.

“Canadians, especially younger Canadians, are increasingly turning to online services and personal devices to carry out daily activities, making it more important than ever to safeguard private financial information,” says Doretta Thompson, CPA Canada’s financial literacy leader. “The more we’re online, the more we’re opening ourselves up to smart scammers, so extra diligence is required.”

Here are some of the scams that are currently taking the greatest financial toll on Canadians—and how to protect yourself.

1. INVESTMENT FRAUD

This is by far the most financially devastating type of fraud, with losses almost doubling from $164 million in 2021 to $308.6 million in 2022, according to the CAFC.

“Most of these scams are related to cryptocurrency investment platforms,” says Larocque. “Individuals often start off with small investments that quickly seem to generate huge profits. They then invest much more—even their entire life savings in some cases. Unfortunately, the platform is entirely controlled by a fraudster who disappears with their money or charges them huge withdrawal fees.”

HOW TO PROTECT YOURSELF

  • Do your homework, says Mario Malouin, CPA, a professor at the Université du Québec en Outaouais (UQO) and associate professor at the INRS-UQO Joint Research Unit in Cybersecurity. “In the crypto world, people often let themselves be led by the euphoria of the moment and the lure of gain, rather than choosing established platforms that produce audited reports,” he says.
  • Check if the investment platform or seller is on the Canadian Securities Administrators’ “Are They Registered?” list, and if it is on your provincial securities regulator’s list of unlicensed firms.
  • Be reasonable with your expectations. “No investment can guarantee mind-boggling profits, especially if it is presented as risk-free and short-term,” says Larocque.
  • Never hand over control of your electronic devices to a stranger.
  • Watch out for other variations on this scam: fixed income investment schemes, franchise and business opportunities, gem scams, initial token offerings, pyramid schemes.

2. ONLINE DATING SCAMS

With these scams, which accounted for $59 million in losses in 2022, the perpetrator generally creates a fake profile on social media or dating sites, then starts showing interest in a target. Once a relationship develops, they start asking for money, whether it be for travel, a medical emergency, family assistance or other reasons.

HOW TO PROTECT YOURSELF

  • Look out for red flags. As the CAFC points out, you should be suspicious if someone you’ve never met professes their love for you; if that person always has an excuse not to meet in person; if they try to “guilt” you into sending them money; and if they ask you not to talk about them with family and friends.
  • Always avoid sending money or personal information to someone you haven’t met in person.
  • Be especially vigilant if you belong to the most targeted demographic. “Victims are often single people, aged 40 and over, who have cash on hand or the ability to easily convert an asset into cash when needed,” says Larocque.

3. EMERGENCY SCAM

While the scam isn’t new, it is on the rise ($9.4 million in financial losses for 2022). The goal here is to make targets believe that a loved one is in urgent need of money because they are injured, have been arrested, need to pay bail, etc. While the scam isn’t new, it is on the rise ($9.4 million in financial losses for 2022). “It’s especially prevalent among seniors, who are told that one of their grandchildren needs to be rescued,” says Larocque.

Often, fraudsters will call on accomplices (fake police officers, court agents, lawyers, etc.) to make their stories more credible, says Larocque. “They might even send an accomplice to collect the money from the victim, which can be very dangerous.”

HOW TO PROTECT YOURSELF

  • Be wary of calls from someone saying they need money immediately. They want to create a sense of urgency, but you need to take a step back and find out the facts for yourself.
  • If the caller claims to be a law enforcement official, hang up and call your local police directly, using a phone number from a reputable source.
  • Be especially vigilant if you are in the prime target group for this scam. Canadians aged 60 and over account for nearly 30 per cent of the financial losses reported by the CAFC.

4. IDENTITY THEFT

Again, while not new, this is one of the most frequently reported scams (almost 20,000 reported incidents in 2022).

Young people are particularly vulnerable, with more than three out of five (63 per cent) 18-to-34-year-olds saying they have experienced at least one type of financial fraud in their lifetime, compared to 39 per cent of those aged between 39 and 54 and 31 per cent of those 55 or older, according to a CPA Canada’s annual survey.

HOW TO PROTECT YOURSELF

  • Stay alert. As Thompson puts it, “We have to be very cautious and mindful of pitfalls when we use the internet.”
  • Respect certain basic rules of cyber hygiene. As Malouin suggests, use strong passwords, activate multi-factor authentication (MFA) and check your credit rating regularly as well as your credit and debit transactions Don’t share your entire life on social networks (especially in public mode) or connect to an unsecured network. “People are not aware of this, but for $150, anyone can buy a device that will redirect all traffic from that public network to their device,” he says.
  • Stay up to date with your apps. Malouin recommends uninstalling apps or software that have not been used for more than two months or that are no longer updated by their developer.
  • Report it. As always, if you suspect fraud, you can report it to your local police or the CAFC (1-888-495-8501).

USER-FRIENDLINESS OFTEN TRUMPS SAFETY

As Malouin points out, many of the techniques you can use to protect yourself from scams—especially when they have a technology component—may seem obvious. “But user-friendliness and safety don’t always go together,” he says. “What is user-friendly is not always safe, and vice versa. But most of the time, people will take the easy way out and choose user-friendliness over safety. That’s why there is still a lot of awareness work to be done.”

STAY CYBER-SECURE AND FRAUD-WARY

Dive deeper into CPA Canada’s annual fraud survey, and find out why Canadians may not be doing everything they can to protect themselves. Refer to this guide on how to protect yourself against fraud and identity theft, and learn how to protect yourself when buying property.