How to Identify and Avoid Financial Fraud 1.0

Episode 1: Of Financial Fraud, Scams and Ponzi Schemes


Money, as we all know, is a well sought-after necessity.

While many are willing to work hard for money and make it legally, some want to get it by begging and others by defrauding unsuspecting victims.

Over the next few days I will be taking us through a new Financial Intelligence series on “Financial fraud”.

If you are like me, you have probably worked hard for your money and you don’t want it flushed down the drain because of your ignorance of the devices of con artists.

Financial Intelligence requires that you not only know how to make and multiply money, but also how to keep it (from yourself and fraudsters) and make it work for you.

Before we delve into the details of this very wide subject, I’ll like to begin with an introduction to the core terms we’ll be using in this discourse.


★1. Scam

Scam is an illegal plan for making money, especially one that involves tricking people.

It could also be a fraudulent scheme performed by a dishonest individual, group, or company in an attempt obtain money or something else of value that is based on deception, dishonesty and false claims.

There are many kinds of scams both online and offline. Some typical examples from “ScamWatch” are explained below .


Phishing scams are attempts by scammers to trick you into giving out personal information such as your bank account numbers, passwords and credit card numbers.


Hacking occurs when a scammer gains access to your personal information by using technology to break into your computer, mobile device or network.

*Identity theft

Identity theft is a type of fraud that involves using someone else’s identity to steal money or gain other benefits.

*Remote access scams

Remote access scams try to convince you that you have a computer or internet problem and that you need to buy new software to fix the problem.

*Wills and Legacies

A letter or email is sent to you claiming that someone has died and had mentioned your name in his will.Usually the scammer will claim to be the deceased’s legaladvisor and may claim an advance fee.

*Online shopping scams

Online shopping scams involve scammers pretending to be legitimate online sellers, either with a fake website or a fake ad on a genuine retailer site.

*Investment scams

Investment scams involve getting you or your business to part with money on the promise of a questionable financial opportunity.

*Betting & Sports investment scams

Betting and sports investment scams try to convince you to invest in ‘foolproof’ systems and software that can ‘guarantee’ you a profit on sporting events.

*Inheritance scams

These scams offer you the false promise of an inheritance to trick you into parting with your money or sharing your bank or credit card details.

*Malware & ransomware

Malware tricks you into installing software that allows scammers to access your files and track what you are doing, while ransomware demands payment to ‘unlock’ your computer or files.

*Threats to life, arrest or others

Threats to life, arrest or others involve demands by scammers to pay money that you supposedly owe and threats if you do not cooperate.

★2. Financial Fraud

Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain.

It is any intentionally deceptive action designed to provide the perpetrator with an unlawful gain, or to deny a right to a victim.

Fraud is a deceitful and sometimes illegal practice that consists of a misrepresentation of a material fact that is relied upon by another party to his or her detriment.

Basic types of Financial Fraud in business include Embezzlement, Skimming, Internal theft, Payoffs and Kickbacks.

★3. Ponzi Scheme

This is a type of scam in which a gullible group is enticed with the promise of very high returns in a very short time, but is based on paying off the early ‘investors’ from the cash from (hopefully ever increasing number of) new ‘investors.’

The whole structure collapses when the cash outflow exceeds the cash inflow. The originators of the scheme, however, usually disappear with large sums a few days before the crash.

It is named after Charles Ponzi (1882-1949), an Italian immigrant to the US who, during 1919-20 collected more than $15 million from some 40,000 eager people by promising to double their investment in 90 days.

In Nigeria, this sounds a lot more like the MMM, Twinkas, Ultimate Cycler, Get Help Worldwide, Clarittas, NNN, iCharity, eCooperative and many other money doubling and peer-to-peer donation platforms that reigned supreme in 2016-2017.

Have you ever been a victim of any of the types of Financial Fraid listed above?

Do you wonder why on Earth you were so gullible and couldn’t heed the warning signs?

Do you want to remain financially wise so you never fall victim in the nearest future?

Then watch out for the next episode of this series as I take you on the psychology behind financial fraud.

Got questions or suggestions? I will like to hear and learn from you in the comments section below.

If you are very excited about this enlightening series, just type “Hoolala” ????



Time to take the bull of your personal finance by the horns. Have you gotten your sample copy of my book How To Save Like A PRO yet?

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