Lottery Scams on the Rise — Watch for Red Flags

Earlier this year the U.S. Department of Justice announced that eight Jamaicans were extradited to North Dakota for using a lottery scam to bilk at least 90 people out of more than $5 million dollars. Unfortunately, this laudable law enforcement success — the result of years of work by the FBI, the U.S. Postal Inspection Service, and the government of Jamaica — has impeded only a handful of perpetrators. Jamaican scammers make nearly 30,000 phone calls a day to American lottery “winners,” according to AARP. Reported losses from similar rip-offs total over $1 billion a year.
 
So how can you know if that phone call, email, or letter is a legitimate prize notification or a ploy to steal your money? Watch for these red flags.
 

Large Winnings Scam Red Flags

• Pay now to collect your prize. It’s the oldest ploy in the book. The fraudster tells you that to get your lottery winnings you must first send money, preferably by wire transfer. They request funds this way so it can’t be traced or recovered. The scammer might claim that the fee covers insurance costs, government taxes, or courier charges. Creative fraudsters have invented a plethora of fictitious charges, such as U.N. transfer fees, consignment fees, deposit fees, security fees, and safekeeping fees, to name a few. If you’re required to pay for your prize, it’s a scam.
   
• You don’t remember entering the contest. That’s because you didn’t. The con artist has culled your name and phone number from the phone book, off the internet, or from a list of potential victims purchased from a partner in crime. To win a legitimate lottery, you have to buy a ticket. No exceptions.
   
• “Skill contest” requiring no skill. Can you name the capital of the United States? Probably. There are scams that will request that you answer this type of question, but the real purpose of the scam is to collect entry fees and personal information. Legitimate contests ask for your name, address, and phone number. Identity thieves ask for more. They might request your social security number, driver’s license number, or bank account information — a sure sign that it’s a scam.
   
• Use of a famous name. Some of these scammers will promote a lottery sponsored by the Sultan of Brunei, or a similar name. They may claim that Bill Gates or some other well-known billionaire is backing their lottery. It’s a ploy to lend legitimacy to a fraud. Don’t fall for it.
   

Stay alert of these scams and educate older, more vulnerable adults you know. Scammers specifically target these victims, because they are less likely to question the legitimacy of the contest or lottery they supposedly won. If you or someone you know falls victim to this kind of scam, file a complaint with the Federal Trade Commission at www.ftc.gov.
 

Turn to your CPA

According to Manager Chris Cicalese, CPA, MSTFP, one should turn to their CPA for assistance in identifying a scam or even if you’re fortunate to have actual lottery winnings.
 
“As with any lottery winnings or prizes, it is important to reach out to a CPA prior to claiming your prize as there can be big tax implications. More often than not, a CPA can identify if something does sound like a scam and will be able to request the right information from the lottery to verify the validity. “
 
“Some losses may be deductible on your federal tax return as a theft loss, but it should be evaluated by a CPA to determine how much could be deductible if any. Theft losses are deducted when discovered rather than when they have occurred.”
 
Contact your South Jersey Alloy Silverstein CPA for guidance in your individual situation.
 
 

How to spot scams & cons

If it sounds too good…

 
According to the FBI, there are over 14,000 scam artists at work on any given day. Perhaps the information presented here will help you avoid becoming a victim. If you have questions, please call us. Remember, if it sounds too good to be true, it may well be a scam.