Last year's Atlantic hurricane season saw 15 named storms slam the East Coast and Gulf states—including mammoth Florence and Michael. It may not be possible to predict when or where the storms of 2019 will take place, but one thing you can count on is that when they hit, scammers will try to take advantage of the situation.
First things first. If you don't have an overall disaster plan, get started on the planning process by going to the Department of Homeland Security's Ready.gov website. Next, pack a financial emergency kit. Kit essentials include ready cash, keys and a list of emergency financial contacts such as banks, credit unions and brokerage firms where you have money.
Continue Reading Below
And if disaster strikes, be on the lookout for these three common disaster-related financial frauds.
Upfront fee frauds. These are scams that charge you—often, in advance—to claim benefits, access services or apply for a disaster-related loan. If you are looking for a loan, check first with your state and federal government emergency service providers. You are generally able to receive their services for free. And remember: Government employees never charge to help you obtain benefits or services. If someone is looking to charge you, it could be the sign of an upfront fee fraud.
TIP: Check with the Better Business Bureau to research any businesses or charities that approach you in the aftermath of a natural disaster.
Phishing scams. These are ploys to get you to provide sensitive personal information such as your bank or investment account information, credit card numbers or Social Security number. Phishers might impersonate government agencies or financial regulators to build credibility. They may demand account information to deposit funds from an insurance claim or a government-issued check. Never give out personal or financial information to people you do not know—and proceed with caution if someone requests sensitive personal information. Most legitimate agencies will not ask for this information via phone or email.
TIP: Check for slight email address irregularities. Scammers like to "spoof" reputable businesses or government organizations by creating email addresses that are close, but not identical, to legitimate email addresses. An extra number or letter in an email address with the organization's name in it, for instance, is a red flag. When in doubt, you can hang up with a caller or respond to an email by calling the alleged agency directly.
Stock pump-and-dump scams. These shams tout stocks and other investments with the promise of huge gains—but as the price peaks, the scammers sell their shares, pocketing the profits and leaving other investors with losses or worthless stock. The scammers who run these frauds will use any hook, including disasters, to build demand. Be wary of unsolicited phone calls, emails and text messages, including from messaging apps, about investments linked directly or indirectly to a recent disaster.
TIP: Never rely solely on information you receive in an unsolicited email, text message or cold call from a smooth-talking "analyst" or "account executive" promoting a stock. Use FINRA BrokerCheck® to verify registration status and additional information on investment professionals and firms. Check the SEC's EDGAR database to find out whether the company whose stock is being pitched files its financial and operational documents with the SEC. Be extremely wary of buying unregistered products from unlicensed professionals.
Red Flags of Fraud
Pay attention to tactics that may signal financial fraud.
High pressure: No reputable financial professional should push you to make an immediate decision, or tell you that you must "act now." If someone pressures you to decide immediately on a financial opportunity, or directs you to pay an upfront fee to receive disaster-related financial assistance, steer clear. Even if no fraud is taking place, this type of pressure is inappropriate.
Guarantees: Be highly suspect of anyone who guarantees that a financial offer "can't miss" or will perform a certain way. All investments carry some degree of risk.
Unregistered products: Many financial scams involve unlicensed individuals selling unregistered investments—ranging from stocks, bonds, and oil or gas deals to fictitious instruments, such as prime bank investments. Here is how you can Ask and Check about investments and investment professionals.
Scarcity: Fraudsters know how to create a false sense of urgency by claiming limited supply or time, or suggesting exclusivity. Phrases such as "limited time offer," "supplies are limited," or "you've been specially selected" provoke your emotions and can make you act without reviewing an offer carefully.
Use the FINRA Scam Meter to help spot red flags of financial fraud. FEMA can also help. In addition to providing assistance following a major disaster, FEMA maintains helpful information on its website to help citizens avoid disaster fraud.
Subscribe to FINRA's The Alert Investor newsletter for more information about saving and investing.