CHICAGO POLICE ARREST RAPPER AND 28 OTHERS FOR 'CRACKING CARDS'

Group accused of stealing millions from banks after using video clips and social media to promise card owners easy riches. Twenty-nine people in the Chicago area have received federal and state indictments for their alleged involvement in a bank fraud scheme that was conducted over social media for several years and has cost financial institutions millions of dollars in losses. Authorities say some of those arrested were Chicago gang members who used a wide range of social networks Facebook, Twitter, YouTube, and Instagram to post homemade rap videos that served to both flaunt the spoils of their success and to recruit victims. One of those arrested is Chicago rapper Kevin Ford, 26, who records under the name Bandman Kevo and who is best known for the song “Baller In Me” featuring controversial drill music rapper Chief Keef. He also had fall tour dates with Chicago speed-rapper Twista.

Court documents say Ford used social media sites to flaunt his riches; he often posted images of himself counting money or wearing name-brand apparel like Gucci and used pictures of a Maserati he owned to convince others to participate in his scheming. Ford is also accused of printing counterfeit checks and posting a threat to law enforcement on his Facebook wall. While the method to lure victims is new, the scheme called “cracking cards” on the street is an updated twist of identity theft, but where the victims are often willing participants. According to authorities conspirators used social media and other methods to advertise quick cash returns in exchange for debit cards and pin numbers. Once obtained they would deposit fraudulent checks into the accounts through ATMs; within hours they would then withdraw the funds at another ATM, currency exchange or point-of-sale terminal at a local store such as Walmart.

The banks identified in the three-year investigation as Citibank, US Bank, JP Morgan Chase and Bank of America, did not learn of the losses until after the money was withdrawn. The majority of the defendants are from the south side of Chicago and others from nearby border communities in Indiana and downstate Illinois. All were arrested and face various federal charges of bank fraud, among other charges. Sixteen of the defendants face the possibility of 30 years in prison and a $1m fine each. None of those recruited have been charged. Four of the defendants, including Ford, were members of the “RACK Boyz”, a hip-hop crew that created rap songs that overtly referenced “cracking cards” and were often pictured on YouTube videos holding wads of cash and wearing T-shirts emblazoned with their crew name. They would then send private messages to followers encouraging them to participate in the scheme. Other members of the crew arrested are Cortez Stevens, 24, of Griffin, Indiana; Stephen Garner, 23 of Portage, Indiana; and Mikcale Smally, 21, of Chicago. “If u wanna make 1900 all u would have to do is open up a citi bank account n they will give u a temp card we would be able to do it the next day from the time u get the cards … !!! u can do this every week No BS! hit me back asap!!,” authorities say Ford wrote in one message. The crew produced videos for songs like For the Money and Money Bag that advertised easy riches through images of expensive jewelry, clothing, cars and stacks of cash. Chicago police have long said that gang members use social media to recruit new members and brag about their activities; in 2012 they said police were incorporating Twitter and Facebook monitoring into their proactive audits of gang members. Jens Ludwig, director of the Chicago Crime Lab at the University of Chicago, said gang communications had increasingly migrated from graffiti tagging in neighborhoods to social media, which aided law enforcement track in tracking their activities. But there could be unintended consequences when messages online were interpreted with deeper meaning than was intended. Ford attorney Scott King told the Chicago Tribune that his client was a rapper and that the fantasies in his lyrics did not mean he led a life of crime. “I do not know if the government has ever listened to a rap song but they are typically not describing a cub scout meeting,” he said. “Social media makes their back and forth more visible, which has the upside of making it a little easier for police to monitor, but it has the downside of making things potentially more antagonistic,” he says. “No one at this point really understands the net effect of this changing social media environment.”

Culled from Guardian

EIGHT THINGS YOUR BANK WILL NEVER ASK YOU (BUT A FRAUDSTER MIGHT)

In a bid to protect customers from fraud, the UK’s big banks have published a list of things they will never ask you to do. Sadly the list does not include “to repay your mortgage” or “to come into a branch for a ‘review’ of your needs”, but with luck it will save some from falling victim to the assorted phishing, vishing (phishing by phone) and courier (sending someone round to collect your card) scams which seem to be permanently doing the rounds. These all involve conmen pretending to be from your bank or building society or the police in a bid to get hold of your details. The British Bankers’ Association (BBA) reckons that millions of people are opening themselves up to possible fraud, while a survey by Santander found that a third of people aged over-65 were unfamiliar with the most common types of scams, double the proportion of younger people.

A leaflet and a new website, Know Fraud, No Fraud, have advice on how to avoid becoming a victim, and what to do if you get caught out as well, as well as the list of requests which should ring alarm bells. Here is the list; read it and share it with people you know who may be less clued-up on these kinds of things.

According to the list your bank will never:

·         Ask for your full Pin or any online banking passwords over the phone or via email

·         Send someone to your home to collect cash, bank cards or anything else

·         Ask you to email or text personal or banking information

·         Send an email with a link to a page which asks you to enter your online banking log-in details

·         Ask you to authorize the transfer of funds to a new account or hand over cash

·         Call to advise you to buy diamonds, land or other commodities

·         Ask you to carry out a test transaction online

·         Provide banking services through any mobile apps other than the bank’s official apps.

Culled Guardian

CYBERCRIME NOW BECOMING A SERIOUS PROBLEM FOR MANY BRITONS

Survey finds 51% victims of identity theft, hacking or abuse on social media, while losses from online fraud are £670m a year. Many Britons have been the victim of a cybercrime such as identity theft, hacking or abuse on social media, new research has found. UK losses from online fraud are now running at more than £670m a year, though with many cases going unreported, the true economic cost is likely to be significantly higher. The data, which follows the outcry over private photos of celebrities published by hackers, was produced to coincide with Get Safe Online Week, which runs until 26 October and is aimed at raising awareness of internet security issues.

 Just over half (51%) of the 2,075 people surveyed said they had been a victim of online crime, a category which includes internet-based fraud, ID theft, hacking and online abuse. Of those, 50% said they felt either very or extremely violated by their ordeal, according to Get Safe Online, an internet security awareness initiative that is a joint partnership between the government, the National Crime Agency, the telecoms regulator Ofcom, law enforcement bodies and a number of major companies including Barclays and PayPal.

However, no fewer than a third (32%) of the cybercrime victims said they had reported the incident. Around half (47%) of those affected did not know who to report an online crime to, though a spokesman for the initiative said this figure was expected to fall as a result of the ongoing work of Action Fraud, the UK’s national fraud reporting centre, and the “considerable government resources” now dedicated to fighting cybercrime. On a more positive note, those who had suffered some form of cybercrime said the experience had shocked them into changing their behaviour for the better, with almost half (45%) opting for stronger passwords and 42% saying they were now more vigilant when shopping online. Separate figures from the National Fraud Intelligence Bureau showed that for the UK as a whole, more than £670m was lost to the 10 most common online frauds between 1 September 2013 and 31 August 2014. Tony Neate, chief executive of Get Safe Online, said: “Our research shows just how serious a toll cybercrime can take, both on the wallet and on wellbeing, and this has been no more apparent than in the last few weeks, with various large-scale personal photo hacks of celebrities and the general public. Unfortunately, this is becoming more common now that we live more of our lives online.” He added: “Get Safe Online Week this year is all about ‘Do not be a victim’, and we can all take simple steps to protect ourselves, including putting a password on your computer or mobile device, never clicking on a link sent by a stranger, using strong passwords and always logging off from an account or website when you are finished. The more the public do this, and together with better conviction rates, the more criminals will not be able to hide behind a cloak of anonymity.”

If you think you have been a victim of cyber-enabled economic fraud (where you have lost money), report it to Action Fraud by calling 0300 123 20 40 or visiting actionfraud.police.uk. If you are a victim of online abuse or harassment, report it to your local police force. For general advice on how to stay safe online go to getsafeonline.org.

Culled from Guardian

‘NUMBER SPOOFING’ SCAM CAN MAKE YOU THINK YOUR BANK IS CALLING

Technology enables fraudsters to fake number they are calling from, making false number appear on person’s caller ID. Criminals are using a new scam to make people believe they are speaking to someone from their bank by fooling their phone handset into displaying the bank’s correct contact number. The scam, known as “number spoofing”, involves fraudsters cloning the telephone number of an organisation they want to impersonate and then making it appear on the victim’s caller ID display when they telephone them.

The Financial Fraud Bureau, which has issued a warning to consumers, said criminals are using number spoofing to gain victims’ trust, often by drawing their attention to the number, in a bid to make them believe they are talking to their bank. In recent years a number of criminal gangs have taken to the phones in a bid to persuade the unwary into handing over their life savings. The fraudsters call people up out of the blue and pose as bank staff, police officers or other trusted organisations to persuade their victim to part with financial and personal details; often on the pretence that fraud has been detected on their account. In many cases the criminal asks the customer to call the bank on the number on the back of the bank card the same number displayed on their handset. In fact, the fraudsters simply keep the phone line open and play a fake dialling tone down the line. The victims, who think they are talking to their bank, are then told to move their money to a secure account. In other cases, victims have been told to hand over their debit or credit cards to a courier. Victims have lost thousands of pounds, some in excess of £100,000. While the technology needed to spoof someone’s number has existed for years, criminals have only recently begun using it to defraud people.

Financial Fraud Action UK’s intelligence unit, the Financial Fraud Bureau said it has become increasingly common in recent weeks. The FFA said: “If a number appears on your phone’s caller ID display, you should not assume you know where the call is being made from. Remember that if a caller is trying to draw your attention to the number on your phone display, it is very unlikely the call is genuine as there is no legitimate reason to point it out.” He said the advice to beat the scam is simple; never assume that someone is who they say they are just because their number matches that of an organisation you know. You should be suspicious if you are asked for your four digits Pin, your full online banking passwords, to transfer or withdraw money, or to give your card to a courier. Your bank or the police will never ask you to do any of these things.

Culled from Guardian

SMARTPHONES TOP LIST OF CHRISTMAS ONLINE SCAMS, WITH CONSOLES SECOND

Barbour jackets, Ugg boots and Xbox One games consoles are among the riskiest items when it comes to online scams targeting Christmas shoppers, according to Police figures. With “Cyber Monday” on 1 December likely to be yet another record-breaking day for online Christmas shopping, cybercrime experts are urging people to stay vigilant and watch out for “too good to be true” bargains.

In 2013, reports of online shopping fraud during the Christmas period jumped 31%, leaving UK shoppers out of pocket by £9.5m, with individuals on average losing £113 each. But with recent research suggesting less than a third of people will actually report an online crime to Police, the true amount lost could be more than £28m. A list of the top five most risky items for Christmas shoppers has been issued by Get Safe Online, which is a joint partnership between the government, the National Crime Agency, Ofcom and several companies, in conjunction with Barclays and security software company Kaspersky. Smartphones top the list specifically iPhones and Samsung Galaxys, followed by games consoles, in particular the PlayStation 4 and Xbox One. Ugg boots and Barbour jackets are in third and fourth place, with iPads (including the iPad mini) taking the fifth spot. Online shopping scams can take a range of forms.

In some cases, buyers are sent fake goods or receive nothing at all. In others, purchasers are targeted by fraudsters who use their identity and other information to access their personal finances or buy goods or obtain finance from alternative sources. Tony Neate, chief executive of Get Safe Online, said: “We felt it was important to highlight the most risky items, not to deter consumers from enjoying the benefits of shopping online, but to educate them on what they can do to prevent being caught out by online scammers.”

HOW TO PROTECT YOURSELF WHILE SHOPPING

• Ensure your bank has your contact numbers so it can speak to you if it spots unusual or suspicious activity on your account.
• Make sure your computer and web-enabled phones are protected with up-to-date internet security software.
• When shopping online, always ensure that the URL starts “https” rather than “http,” or has the gold padlock icon, and use only official apps for mobile banking.
• Only ever access your internet banking or shopping sites by typing the address into your browser. Never go to a website from a link in an email and then enter personal details.
• Be cautious with online auctions. For higher value items such as cars, make sure you always see the item before sending any money, and always use the insured methods of payment for the internet site rather than direct payments to a seller.
• Log out after shopping and save the confirmation email as a record of your purchase, and make sure you have registered your cards with Verified by Visa or MasterCard SecureCode.

Culled from Guardian

ADVERTISING WATCHDOG BANS THREE 'COPYCATS' OF GOVERNMENT WEBSITES

The advertising watchdog has banned three "copycat" websites masquerading as government channels for health insurance cards, passports and birth certificates, leaving consumers thousands of pounds out of pocket. The websites; europeanhealthcard.org.uk, uk officialservices.co.uk and ukpassportoffices.co.uk duped users into thinking they were official providers of services they were offering, the Advertising Standards Authority (ASA) said. It ruled that all three websites must not appear again in their current format. It also ordered that any future versions must include prominent disclaimers explaining that they were not official channels and with full details of any additional costs. The ASA said it received large numbers of consumer complaints about websites that offered access to online government services, but which were not official channels and typically charged a premium. It said that following research about the public's experience of "copycat" websites in July; it conducted in-depth investigations to decide how such sites should present their services to avoid misleading consumers. The ASA said the europeanhealthcard.org.uk website charged for an application verification service, while the EHIC was available for free when applied for via the official gov.uk website. The uk-officialservices.co.uk website enabled users to obtain birth, adoption, marriage, civil partnership and death certificates but was not the official site. It charged a premium, in addition to costs routinely charged by the official gov.uk website. The ASA said consumers were likely to infer that a website enabling them to obtain government-issued certificates was official. The ukpassportoffices.co.uk website charged for their application verification service, yet their fees did not include the fee charged by HM Passport Office, which consumers would still have to pay directly to the government.

The crackdown follows a campaign in the Guardian's Money section alerting readers to copycat websites and revealing the tangled network of traders behind them. A parallel investigation that examined 10 websites providing services for passport applications, EHIC cards and tax return services found them to be misleading or confusing, providing poor value for money and left some consumers up to £1,000 out of pocket.

Culled from Guardian

BARCLAY'S SCAM "VICTIM’S STORY"

When Guardian Money first highlighted the HomeAway scam in April 2013, the victim Diana Cinamon, who lost over £2,600, had paid the money into a Barclays account. After running our story on the most recent victims last month, we were contacted by several more victims. Geoff Cosson, who lives in Cyprus, told how his family had almost fallen for the scam but realised just in time. Having corresponded at some length with the fraudsters, his family had all the details including the Barclays account the money was to be paid into. “When we realised, we contacted Barclays, Action Fraud and Trading Standards. My experience with all three was pretty dismal. We had an address in Acton of a named person, a bank account number and a branch address, all of which I sent direct to Barclays. I got no response at all. Presumably, the conmen must have opened accounts, and shut them pretty quickly, all on a regular basis. Is there no method of flagging up this type of unusual account activity? Maybe, if Barclays was held liable, it would be a bit more proactive,” he says.

The campaign group says several victims have pursued the bank through the courts and have been reimbursed as a result, albeit without an admission of liability, and, in some cases, the victim has been made to sign a gagging order. Last year a group of Australian tourists decided to take out a class action against Barclays after paying thousands of dollars into accounts for bookings that didn’t exist. In the end, only two complainants pursued the bank. Each was refunded, according to legal firm Edwin Coe that represented the victims.

Culled from Guardian

“OWNERSDIRECT HOLIDAY” VICTIM LOST £2,790 AFTER PHISHER HACKS INTO EMAIL

Scammer intercepted owner's reply and we have lost all our money and OwnersDirect will refund only £700. We appear to have lost £2,790 after booking a holiday villa in France using the OwnersDirect web site. This was for our main holiday for my family. We found a house we liked, used the "contact the owner" page to inquire about availability, and were pleased when we got an email from the property owner, Robin Lee, saying the villa was free. He confirmed that, if we wished to book, we would need to complete a booking contract and return this to him. Once returned, he would provide the owner's bank account details (leading us to believe he was acting on behalf of the actual owner). There was a slight delay in returning the contract and, at one point; I tried to call the contact number to confirm whether he wished to be paid in sterling or euros. He did not answer, but I left a voicemail and received an email back. I made the transfer via my online bank, and sent proof of transfer. That evening we did not feel completely at ease with having transferred such a large amount of money so we telephoned again and, again, got an answerphone. We went back to the OwnersDirect web page, linked to the property owner's web site and located a further number in France. When we rang it quickly emerged that the real owner had no booking. He said he had emailed us to confirm that there was no availability. Our inquiry appeared to have been intercepted and we had been dealing with a scam artist. The real owner said he had been called by another family that day, too, who were also going to transfer money. We completed the "online security issue form" on the OwnersDirect web page (which said we would get a response in 12 hours). It did not respond, but copied us into a general email warning of possible problems with this property's web page. Our bank has told us the money has gone.      

OwnersDirect has been less than sympathetic, keeping us on hold for half an hour, and then clearly reading from a script. It seemed to imply that it was the owner's fault that their email account had been compromised. We feel £2,790 is an extremely large amount to lose. I am thankful we did not drive all the way to the South of France to find we had nowhere to stay! JL Warwick This will come as no consolation, but we first warned about this fraud a year or so ago when another reader lost a similar sum in similar circumstances although, in their case, they had used OwnersDirect's sister site HomeAway. As in that case, OwnersDirect this week maintained that your loss is nothing to do with the company and, as a result, it will not be helping you, over and above its standard terms. It says the fraud came about because the home owner's Yahoo account was hacked in other words; the scammer intercepted your initial request, and pretended to be him. The website does offer a basic guarantee against phishing fraud, but only up to a paltry £700. That still leaves you £2,000 out of pocket. It says the refund will take six to eight weeks to process. OwnersDirect says: "Our advice for travellers to protect themselves from a phisher is to call the owner directly on the number provided on the listings and not from one provided in any correspondence. The owner should always be available for a call, and by calling them the traveller limits the risk substantially." It also says that your experience is very rare. However, if it is as rare as it suggests, perhaps the company should increase the basic guarantee to a more meaningful sum. Many of the holiday rentals listed on its sites are for much more than £700. Which leaves the final question: what should others do when booking accommodation in this way? We would be very wary of sending £2,800 to an unknown person's bank account. The OwnersDirect site offers its own insurance against fraud, but it costs 2.3% of the booking fee. That would have added more than £60 to your booking a nice moneyspinner for those behind it, but of course, it would have been money well spent in your case. The best advice is to talk to the owner on the number on the original listing, and be wary when using this site to book villas, and of any emails sent by owners. If the rental sum is large, consider paying the insurance, or agreeing half up front with the rest in cash on arrival. Better still, avoid OwnersDirect and HomeAway until they do more to resolve this problem or offer a decent insurance to bookers for free.

We welcome letters but cannot answer individually. Email us at consumer.champions@theguardian.com or write to Consumer Champions, Money, The Guardian, 90 York Way, London N1 9GU. Please include a daytime phone number                                               Culled from Guardian 

IS OPENING AN ACCOUNT AT BARCLAYS A PASSPORT FOR INTERNATIONAL CROOKS?

Barclays is being used by international fraudsters to rip off victims both at home and abroad yet it takes no action, according to a campaign group. Barclays Bank has been accused by victims of fraud of loose security procedures which have enabled international crooks to open accounts with foreign passports and then use them to fleece individuals online. The bank vigorously rejects the claims, saying it takes account security very seriously, carries out in-depth verification checks and meets all ID requirements under money-laundering rules. But an action group set up following a multimillion pound fraud against holidaymakers who booked villas and homes through the Owners Direct/HomeAway website, allege that the bank is being used by crooks in nine out of 10 cases it has seen. The holiday villa fraud reported extensively in Guardian Money in recent weeks sees holidaymakers paying what they believe to be the villa owner for their rental by bank transfer. In fact, the owner’s email address has been taken over by fraudsters who need a bank account to accept the money.

The group claims:

• Fraudsters from around the world are heading to the UK to open Barclays current accounts using foreign passports as ID. Other banks, such as Lloyds and Halifax, operate a list of countries mostly EU and other developed countries whose passports they accept, but which excludes many east European, African and Asian countries.
• Web chats with Barclays staff, where the victims posed as potential account openers, reveal that the bank encourages applications with relatively little ID, such as a foreign driving licence.
• Chasing the crooks is made difficult as they may leave Britain as soon as they have obtained the account. Once opened, it can be operated from anywhere in the world.

Barclays points out that it requires account openers to show proof of residence in the UK, such as a recent gas, water or telephone bill. But the campaigners allege that these are relatively easy to forge. The allegations come amid growing concern over the scale of financial crime. Last month, it emerged that £4m bank frauds are currently being left out of the official UK crime figures. If bank and credit card fraud were included in the annual Crime Survey for England and Wales, the estimated number of offences would jump by 50% taking the total from £7.3m to £11m a year, according to the Office for National Statistics, and puncturing the widely reported story that crime has fallen.

The allegations against Barclays have been made by Vacation Rental Scam Victims, set up by villa owners in Bali, Indonesia. They were fed up with holidaymakers arriving at their properties believing they had rented the home, only to find that they had been scammed. The group says that of the 101 victims they are aware of, 93 paid money to fraudsters using Barclays accounts. Importantly, the victims are not necessarily British. Campaigners say that the villa owner might be Australian, and the holidaymaker from New Zealand, but the account they are told to pay money into is nearly always Barclays in the UK. Could it be that there is a Mr. Big behind this particular fraud, who just happens to have used Barclays? The victims point out that the fraud requires opening hundreds of Barclays accounts. Reports in Australia allege that fraudsters switched to Barclays after Lloyds tightened up account opening rules. The campaign group is not alone in contacting Guardian Money with these allegations. An Indian businessman in Mumbai alleges rules “were flouted” when a fraudster opened two Barclays accounts in Leicester in his company’s name. He says his email account was hijacked and customers in Germany, the US and Canada made payments into the accounts, even though he has no connection with the UK. The villa owners’ campaign group says it has warned Barclays over many years that it is being used by fraudsters, but that it has not had an adequate response. It is also critical of the UK police’s response, and says reporting crimes to Action Fraud has been “a waste of time”. The Barclays website confirms that a foreign passport or driving licence can be used as ID to open a bank account, even though the documents may not be in English. In a web chat that took place last month, a Barclays employee told a member of the campaign group that she could apply for a Cash Card account and it would take “15-20 minutes in branch”. Once opened, it could be used immediately. When she asked how her documents could possibly be verified by branch staff, as they are written in Indonesian, she was told: “We have interpreters in the branch who read foreign documents, so this will not be a problem.” Barclays says that it does not open accounts for foreign nationals who are based overseas, except for very wealthy clients. Its website states that it will accept a letter or bill from a utility company as proof of a UK address, as long as it is less than three months old. Stephen Howes, a victim of the Owners Direct scam, who lives in central London, says he was amazed when he looked into the matter after losing £2,000. He made a bank transfer into a Barclays account, thinking he was paying for a villa in Italy last May. When he learned that he, and most of the other victims, had also paid their money into Barclays accounts, he decided he would take the matter up with the authorities. He claims Barclays denied all liability.

Action Fraud, he says, took the details but has told him nothing since. He says he’s been told by another victim that the Financial Ombudsman will not rule on whether the banks have failed to protect consumers’ interests in such circumstances, as it is “not in its remit”. “It’s bizarre. Millions of pounds that have been stolen from victims all around the world have been paid into accounts of one UK bank, and yet no one wants to take any action, or has shown any interest in even taking a look at it. To me it seems incredible,” says Howes. His MP, Mark Field, took up his case, and told Money that he has “been in correspondence with the police, government and a particular bank, to try to get additional safeguards put in place”. A spokeswoman for the campaign group similarly describes how the group has failed to get the bank or the police to take up the matter even after posing as renters and catching the fraudsters in the act of defrauding their next victim. “We have been campaigning to get the UK authorities and Barclays in particular, to take this seriously. We have sent them details of accounts being used but no one wants to tackle the matter it’s all being swept under the carpet,” she says. A spokeswoman for the bank says: “Barclays takes any scam issues very seriously. We want to eliminate the use of accounts for scams and appreciate any information provided to us to assist with this.” She said the bank does not accept the allegation that all Barclays accounts used for fraudulent purposes are opened using counterfeit identification. “Sample tests have shown that the majority of Barclays accounts used in scams are opened with genuine ID. We have robust identity and verification processes, complying with all regulatory requirements.” She added that HM Treasury approved industry guidance stipulates that a government-issued document such as a valid passport or national identity card is an acceptable and independent means of verifying a customer’s identity, provided that it contains the full name and photograph, and confirms either the customer’s date of birth or address. “Both the passport and the second supporting document have to be in the name of the individual. The second document has to state the UK address given as being the current address, and has to be less than three months old, not printed from the internet, not a final or closing statement etc. “The overall application is also subject to fraud screening via internal and external databases.”

Culled from Guardian

NINE WOMEN MASTERMINDED £21M SCAM THAT FLEECED 10,000 VICTIMS

 Rita Lomas (left) and Jane Smith admitted in 2012 

to promoting the £21m get-rich-quick pyramid scheme, 

called Give and Take. Photograph: Ben Birchall/PA

Get-rich-quick pyramid scheme, called Give and Take or Key to a Fortune, caused a loss to the public of about £19m. Nine women have been found guilty of running a £21m get-rich-quick scheme, fleecing at least 10,000 victims after luring them in with "champagne celebration nights" and encouraging them to "beg, borrow or steal" the £3,000 needed to invest in the scam. The victims, often vulnerable women, were told they would receive a £24,000 payout when they reached the top of their pyramid chart, with organisers promising they could not lose. The scheme, called Give and Take (G&T), spread from Bath and Bristol to the West Country and Wales between May 2008 and April 2009. Committee members at the top of the scheme pocketed up to £92,000 each, while 88% of their victims lost between £3,000 and £15,000. G&T, also known as Key to a Fortune, was kept secret as members were forbidden from writing about it to protect the organisers. But it was uncovered when an employer in Bristol complained to UK trading standards that it was being promoted in his workplace. Eleven women, aged 34 to 69, became the first in the UK to be prosecuted under new legislation in the Consumer Protection from Unfair Trading Act 2008. Six of the women have been sentenced, while three will be sentenced at Bristol crown court next month. One woman was acquitted of promoting the scheme, while two juries failed to reach a verdict for another woman on the same charge. Judge Mark Horton, who banned reporting of the case until Thursday, said: "This scheme caused a loss to the public of around £19m. A number of women suffered enormous and in some cases lifelong financial hardship due to their involvement.

 "The public need to be aware that schemes like this lead to the destruction of lifelong friendships and families and in some cases whole communities." On Wednesday scheme coordinator Mary Nash, 65, committee secretary Susan Crane, 68, and games coordinator Hazel Cameron, 54, pleaded guilty to charges of operating and promoting the scheme. The women had been due to face a retrial, after a jury last year failed to reach verdicts in their cases. In 2012 Sally Phillips, 34, and Jane Smith, 50, both of Bristol, and Rita Lomas, 49, of Whitchurch, Somerset, admitted promoting the scheme. The three received suspended sentences: Phillips three months, Smith four months and Lomas four-and-a-half months. Following a five-month trial in 2012, chairman Laura Fox, 69, treasurer Jennifer Smith-Hayes, 69, and venue organiser Carol Chalmers, 68, were convicted of operating and promoting the scheme. Fox, of East Harptree, Somerset, Smith-Hayes of Bristol, and Chalmers, of Weston-super-Mare, were jailed for nine months. They have now served their sentences. The scheme operated on 15-space pyramids, each space filled with a participant who paid £3,000 and introduced two friends who paid the same amount. Once the chart was filled, the eight people on the bottom paid their £3,000 to the person at the top, called the "bride". Payouts were collected at champagne parties, where "brides" were asked a series of simple questions before being handed the £24,000 on a silver plate. Questions included "what is the name of the tower in Paris" and "what type of animal is a great dane", with the option to ask a friend if the "bride" did not know the answer. Then £1,000 was deducted from the payout, with £600 shared between charities and £400 used to pay committee costs. Around £19m of the £21m scheme was lost on the charts, while the remaining £2m was paid out to the "brides". Miles Bennett, who prosecuted both trials, told how parties took place at the Battleborough Grange Hotel in Burnham-on-Sea, owned by Chalmers. Mobile phone footage from one party showed Fox shouting: "We are gambling in our own homes and that's what makes it legal." Bennett described the evenings as a "commercial practice", with minutes from committee meetings showing how £240,000 in cash was paid out one evening. "This wasn't a kitchen hobby, this was a scheme that sucked in a lot of people and which worked on the promise of them receiving riches way beyond their initial investment." Bennett added: "It is clear that, blinded by the possibility of riches and quick bucks, people were quite prepared to ignore the bleeding obvious pitfalls of a pyramid scheme."                   Culled from Guardian

“THE PENSION CROOKS WHO WANT TO GET THEIR HANDS ON YOUR PENSION POT”

One in eight employees aged 50 or over has been the target of fraudsters promising to release their pension savings.  Workers in their 50s are being warned that they are the primary target for scamsters who are using dramatic changes in the pensions system to try to part them from their retirement pot. Changes from April 2015 mean that retirees can, for the first time, use the money as they wish instead of having to buy an annuity. The first 25% of this will be tax-free. They will be able to use the money to pay down debts, for example, invest outside the pension, or simply enjoy life – even blowing the lot on a sports car, according to the pensions minister.“ This is great news for pension savers,” says Gareth James, from DIY investor platform AJ Bell. “But a dangerous combination of excitement and confusion could see those unsure of the rules lose the lot.” Research from Fidelity last week showed that around one in eight people aged 50 and over have been approached by fraudsters, promising to release more than the 25% lump sum, or to gain access to pension savings earlier than the minimum age of 55. Many of the companies contact people via unsolicited phone calls or text messages, offering a “free review”. Others specifically target those on public bankruptcy lists, while some approach people via official-looking “financial advisers”.

 The majority of those approached are between 50 and 59 – just when many are starting to think about retirement. More than one in 10 of those approached by these so-called “pensions liberation firms” trusted the advice given to them, said Fidelity. This has partly been driven by a significant lack of understanding around the new pension rules – two thirds of the over-50s don’t understand them, it said. “Some understand the rules as equating to immediate access without any caveats and can become very frustrated when they view providers as ‘holding on’ to their money unfairly,” said Alan Higham, retirement director at Fidelity Worldwide Investment. “Fraudulent organisations have capitalised on this, encouraging consumers to hand over their savings without fully understanding the tax penalties.” HMRC will hit those who cash in their retirement fund before the age of 55 with a charge of at least 55% of the sum released (or 70% if they fail to report it). And with the changes to pensions rules coming in next year, fresh scams are expected to surface encouraging the over-55s to take large chunks out of their pension to pile into dodgy investments offering staggering returns, paying lots of tax in the process. “Whatever the law is, fraudsters will seek to exploit it – so we expect the scams to continue to evolve under the new regime,” says a spokesman for the pensions regulator. Phil Ireland, 64, who is self-employed and runs a print finishing business, thinks the new freedoms are a “great idea”. He has been offered a “free review” several times through unsolicited emails and texts. “I haven’t taken these up yet, thankfully – and now I realise they’re a scam. I know there are several official services I can go to for guidance.” He adds: “Having said that, the change is very welcome, as it’s good to have choice and I need to work out what to do with my money. It’s really hard to know. I’ve done some research, and calculated the return from an annuity on £100,000 – I was bitterly disappointed.” He has a self-invested personal pension (Sipp) and a pension from previous employment. “My mortgage will still need to be paid off, but I’ve got an endowment for that,” he says. “I want professional advice on what to do with the pensions, but trying to work out which adviser is kosher is hard.” If you are in any doubt about the credentials of an adviser, you can look them up on the Financial Services Register and check they are qualified to advise on all aspects of pension planning. You can also check that any company you are dealing with is registered with the Financial Conduct Authority (FCA). “This means that the investment firm has been stamped by the industry ‘kite mark’ and will ensure that you always have a full recourse to the compensation scheme if something goes wrong,” says Chris Williams from online advisory service Wealth Horizon. You should expect to pay at least a few hundred pounds for professional advice. The Pension Income Choice Association has a comprehensive list of IFAs who are retirement specialists and can give you information on alternatives to annuities, such as drawdown.

Investment firms, such as Fidelity, have launched specific retirement services enabling investors to do it themselves, or buy advice in the areas they may need it. Independent bodies such as the Money Advice Service and the Pensions Advisory Service are there to answer general questions, but it’s expected they will be flooded with inquiries ahead of the rule changes. They won’t provide advice – simply guidance. Even those who do intend to make use of the new rules should exercise caution, stress advisers. While the first 25% of pension cash may be tax free, any remainder will be taxed at your personal rate – which may be 40%. Pensioners are free to draw down the money as they feel fit, but will want to withdraw at a rate that keeps them inside the 20% tax band. “Drawing out all your pension and paying the top rate of tax during the first year isn’t a good idea if you can stage it over a few years,” says pensions adviser Yvonne Goodwin. For most, a blend of options at retirement will likely be the best approach. This could include keeping some money in cash, leaving the rest invested in a mix of bonds, equities, and property, wrapping as much as possible in a tax-free Isa. You could, for example, buy an annuity to cover essential outgoings, and invest the rest. “An annuity will still be a suitable choice for many people, especially for those who want the certainty of a sustainable lifetime income and aren’t prepared to take additional risks,” says Patrick Connolly from independent financial adviser Chase de Vere.

NEED TO KNOW   

You are free to take your pension savings in cash when you reach age 55 (or 57 from 2028). You are not allowed to access your pension before this age. If you do, you risk at least a 55% tax charge.

1. The first 25% of pension cash is tax free. The rest will be taxed at the individual’s marginal rate – so many people could face a 40% charge.
2. You do not have to buy an annuity, but can use your money however you like.
3. If you have already bought an annuity or gone into drawdown in retirement, you cannot take advantage of the new rules.
4.  If you are in a final salary scheme that promises a regular income at retirement, you will probably want to stay put. However, you will be able to switch into a defined contribution (DC) scheme if you wish and withdraw your fund.
5.  Schemes for public sector workers, including doctors, nurses and firefighters, come with different rules. They will not be able to access the cash in these “unfunded” schemes. However, if it’s “funded” - such as local authority workers and the universities scheme – it can be transferred into a DC scheme and the money made accessible.

Culled from Observer