Aug. 20, 2018 Love Hurts: Understanding the Red Flags of a Romance Scam
According to the FBI, victims of romance scams are generally women ages 50 and older, but anyone could become a target. What follows is one client’s story. Please note that the names and some aspects of the situation have been changed to protect privacy.
Ann, a 57-year-old professional woman who had recently lost her husband of 30 years, was friended on Facebook by Jon, a 52-year-old U.S. Department of Defense contractor working in Afghanistan. The two began commenting on each other’s posts and were soon exchanging e-mails, which then progressed to texts and phone calls. Ann found that they had so much in common, it was almost uncanny. After four months of e-mails and phone calls, Jon professed his love for Ann and proposed they get married in two months, after he returned home from his current assignment.
Ann was completely swept off her feet, and accepted Jon’s proposal. Shortly thereafter, Jon told her that he had received gold bars from a prince in gratitude for saving the prince’s life during an assignment earlier in the year. The gold was worth more than $1 million and, because the assignment was classified, Ann couldn’t tell anyone about it. Moreover, Jon could no longer keep the gold bars because of government regulations, so he wanted to send them to her. She could sell the gold, and they could use the proceeds to start their new life together.
Jon e-mailed Ann paperwork showing he transferred ownership of the gold to her. His assets were tied up while he was out of the country, and he asked if she could pay the $30,000 shipping charges to send the bars to the U.S. Ann wired money from her savings using e-mail instructions from what appeared to be a reputable shipper. A few weeks later, however, the shipper claimed that, due to unforeseen circumstances, the gold would have to be shipped through Dubai, resulting in an additional fee of $50,000.
At this point, Ann contacted her financial advisor to arrange for a short-term loan from her IRA, ostensibly to help a family member. She said she would redeposit the $50,000 in the account within 60 days. The funds were sent via EFT to her bank account; from there, she wired the funds to the shipper. Soon after, Ann and Jon received an e-mail from a Dubai official with a copy of a $75,000 tax bill that would have to be paid before the Dubai government would release the bars.
To pay the taxes, Ann agreed to take out another loan. After all, she believed that she and Jon would be together in less than two months. Additionally, Jon had promised to pay her back, he’d transferred ownership of the bars to her, and she would soon have more than $1 million in gold.
The shipper sent “confirmation” that the gold had been sent to the U.S. But, three days later, Ann received another e-mail, purportedly from U.S. Customs, saying that the bars could not be sent until she paid $135,000 in taxes to the U.S.—right away.
At this point, she felt she didn’t have much choice, as she’d already invested so much money in getting her gold to the states, and Jon was counting on her. So, Ann contacted her advisor to withdraw the $135,000 from her IRA. Ann’s advisor became concerned and asked her if she was alright. Ann wouldn’t explain in detail why she needed the funds, stating only that she had to have the money quickly and that she would return the money to her account within 60 days. Because Ann’s behavior was uncharacteristic, her advisor reached out to the Commonwealth home office for assistance.
All That Glittered Certainly Wasn’t Gold
Needless to say, there were no gold bars. There was no Jon. There would be no marriage. And Ann’s money was gone. She was the victim of an online romance scheme.
Thanks to the collaboration of her financial advisor, a Commonwealth AML team member, and trusted family, Ann came to understand that she had been victimized by a criminal organization. The Commonwealth AML team member provided recommendations and best practices for getting the right folks involved, including law enforcement and Ann’s bank, in an effort to recover the funds and report the criminals to the proper authorities. But for Ann, the damage to her finances was far less traumatizing than the damage to her emotional well-being.
Why These Schemes Are So Successful
Typically, the perpetrators of romance scams are scattered in one or more countries. They target divorced or widowed women who may be more emotionally vulnerable than other people.
The fraudsters begin their scheme by using the information posted on a targeted individual’s social media or dating website profile to ingratiate themselves to the individual. Over the course of several months, they charm the target, gaining her trust. The grooming process involves developing an intense relationship, and, as in Ann’s case, sometimes even proposing marriage.
To make themselves seem legitimate, these criminals use the stolen identities of real individuals, corporations, or government officials, often spoofing their e-mail addresses. To the criminals, these schemes require little effort and involve low risk, and the paydays can be hundreds of thousands—if not millions—of dollars.
From the outside looking in, it’s sometimes hard to imagine that a person could fall for one of these scams—especially when there are no apparent signs of diminished capacity. The situation seems so far-fetched. But to the victim, the perpetrator is someone whom she has not only come to trust but also with whom she believes she is in love. Remember, the criminal’s job is to separate the victim from her money, and he or she will use all manner of deceit to achieve that goal. And, sometimes, the victim does indeed begin to suspect that something isn’t quite right. But she is convinced that, if she doesn’t continue to send money, she won’t be able to recoup the funds she’s already sent.
Red Flags—How to Spot a Romance Scam Early On
Most often, a client won’t disclose to her family or financial professional that she has a new love interest because part of the scheme involves keeping the romance a secret. But behaviors that might alert you or your advisor that a client is the target of a scam may include:
- The client’s behavior is uncharacteristic of her (or him).
- The first- or third-party distributions that the client requests increase over time.
- The client is evasive or unwilling to disclose the purpose for the increasing number of withdrawals from his or her accounts.
- The requests for funds are consistently urgent in nature.
- The client’s explanations for the frequent withdrawals may, on a one-off basis, seem plausible. But when you step back, they don’t seem reasonable given what you know about the client.
- The client is taking short-term loans from an IRA for an “investment.”
Your Responsibility as a Staff Member
You are on the front lines; you know your clients and are in a good position to spot unusual activity. Be alert to the potential red flags. Be sure you understand the purpose for the withdrawal and are documenting that information in your CRM system. It is important to communicate any uncharacteristic behavior or unusual requests to your advisor.
If your office has suspicions that a client is the victim of fraud, contact the Commonwealth Legal or Compliance department immediately. This is especially important when the client is requesting a withdrawal. When you reach out to us, we may ask that your advisor complete and submit a Suspected Financial Exploitation Attestation form.
Tip: When working with a client who has been the victim of a romance scam, keep the embarrassment factor in mind. You may still wonder how the individual could have been taken in by one of these schemes. Well, as previously noted, at times the victim’s suspicions could indeed have been raised. But she might have been ashamed to tell anyone that she had fallen for what in hindsight was clearly a scam. Such feelings could have led to a delay in asking for help. Be as understanding and compassionate as possible.
How Commonwealth Helps
Within the past year, the Commonwealth AML team has seen an increase in referrals from advisors with clients who have been the victims of romance scams. One recent victim sent almost half a million dollars to a fraudster, with most of the funds sent from her bank account before she attempted to access more money from her investment accounts. Fortunately, her advisor recognized the red flags and was able to get her family involved. With all parties working together, the client came to understand that she had been victimized.
Fraud is a predicate crime to money laundering. Once you have alerted Commonwealth to any red flags, if we reasonably believe that your client has been the victim of fraud, we may place a temporary hold on a requested withdrawal to protect the client while we further investigate our concerns.
During our investigation, we will partner with you to help the client. This may include having a member of the AML team speak with the client to obtain additional details and provide guidance on any next steps to try to recover the client’s money and report the fraud to appropriate law enforcement agencies.
Sadly, as with most frauds, it is often difficult to recover the money. The more time that passes between when the funds are sent and when the crime is reported significantly decreases the odds for recovery. The criminal organizations that perpetrate these frauds have multiple members residing in different countries. They use technology to conceal their true locations during phone calls and e-mail exchanges. Apprehension and punishment are challenging, which is why it is incredibly important to report these scams not only to local law enforcement but to the FBI. The more people who report the crimes, the more information law enforcement will have to help them bring the criminals to justice.
We hope this piece helps you understand the signs of a romance scam, so you can be better prepared to alert your advisor and protect your clients. For additional resources on these crimes, and to listen to victims recount their stories, visit the FBI website.