James Randi and Fraud Prevention IX

Notice the flow of the sentences in the last posting.  Like with any cold reading, the person doing most of the talking is the cold reader and the person giving the information is the mark.

     Why is it important that the cold reader is barraging the mark with so many questions?

    We will explore tommorrow the difference between the stated goals of a financial professional and a fraudster.  It has to do with the type of information that is elicited by an actual financial professional vs. a fraudster.

Have a great and fraud free day.

http://www.tauskvega.com

----------->>>>>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention VIII

Cold reading example involving financial fraud:

Reader: "So, tell me about your kids' college investments."

Mark: "Well, they're not in college yet."

Reader: "So it is important to you to get your kids college investments in order?"

Mark:  "Yeah, of course.  We want to be able to make sure they get their degrees."

Reader: "So, how much money can we expect to save monthly?"

Mark:  "Well, we put aside $100 per month for each kid."

Reader: "So, you can only put aside $100 per month.  So, we need an investment with a little higher rate of return to make certain the kids can go where they want?"

To be continued.

Have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention VII

Cold reading - the art of getting information from a person by getting the person to volunteer the information, usually by asking multiple, rapid-fire questions which elicit the information.

     What does this have to do with fraud?

     In the case of people who wish to get marks to invest in fraudulent or questionable investments, the fraudster needs to convince the mark that he can help the mark achieve his goals.  In this case, the goals are financial goals.  The fraudster wants to convince the mark that he can help the mark reach his financial goals, in other words, to make the mark wealthy though giving the money to the fraudster.

     No sane or rational person would willingly give a person money if the investment was a Ponzi scheme or a Pyramid scheme.  Who wants to hear that "yes, you will get your investment back and interest by getting other people to invest in my scheme."  So, the fraudster has to convince the mark that it is NOT a Ponzi or Pyramid scheme.

   How to do this - cold reading is one method.

As always, have a great and fraud-free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention VI

OK, so the cold reader we now know uses a barrage of questions, far more than the "20 questions" game we played as kids to elicit a response from the mark.  Eventually, these questions will start to hit home and the cold reader will be able to "hone in" on the responses, even the unconcious responses, of the mark.  The mark, even unknowingly, will be giving information to the cold reader.

     In scams such as "talking to the dead," the cold reader will be able to answer seemingly unknown or unknowable answers about the person who has passed on.  The deceased's name, hobbies, loves, interests, likes, dislikes, phobias, favorites....all is revealed to the cold reader with enough time.  And, since the cold reader does not really need a great deal of time to get the necessary information, it seems that the cold reader is indeed getting information from a mysterious source.

     Add all of these together, with a gullible mark, and the cold reader can make quite an impression.

     Note when I say that the mark is gullible, by the way, I am not suggesting that the mark is stupid.  What usually happens is that the mark is at an emotionally vulnerable point, such as after the death of a loved one, and the mark is being preyed upon by a professional who knows how to read cues that other people might miss, and with this combination, the cold reader is getting information faster than he would be with a person who might be thinking critically.

     Cold reading techniques are the hallmark of fraudsters as well.  Think about it - unless you believe in "psychic" powers (and although it is not the point of this blog to debunk "psychics," it is clear from my use of James Randi what I think of such "powers"), a cold reader is passing himself off as someone who has special skills that he does not have in reality.  So, when used improperly, cold reading can in and of itself be fraud.

     In our next segment, we will explore the use of cold reading techniques for financial fraud.

As always, have a great and fraud-free day.

http://www.tauskvega.com

----------------->>>>>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention V

OK - we've reviewed the videos and articles of "cold reading."  What is the common element to cold reading?

     As we saw, cold readers basically ask the mark a barrage of questions.  Cold readers take advantage of human psychology in that after being battered with so many questions, the cold reader is bound to score a "hit" and the mark will remember the one hit and forget the multiple misses.  Look at the video again of cold readers - they will ask the barrage of questions, far more than in a normal conversation.

     This is essentially a variant of "twenty questions," a child's game.  The one child will think of something and the other child will have up to twenty questions to guess what is the object.

     As it turns out, the game of twenty questions has a great deal in common with fraud schemes.

As always, have a great and fraud free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>gene

James Randi and Fraud Prevention IV

OK - here is one more article on cold reading before we expand our discussion this week.

Please read.

http://www.randi.org/library/coldreading/

Have a great and fraud-free day.

http://www.tauskvega.com

-------------->>>>>>>>>gene tausk

James Randi and Fraud Prevention III

So - what does talking to the dead have to do with fraud?

     As we saw in the previous post, "talking to the dead" is really nothing more than the con artist (psychic) asking a barrage of questions to get information from the mark.  This is known as a "cold reading."

     Here is a definition of cold reading: http://en.wikipedia.org/wiki/Cold_reading

We will discuss this more.  In the meantime, please read the article.


Have a great and fraud-free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention II

Whoops - here is the link

http://www.youtube.com/watch?v=2EBqlpJb1Xg&feature=related

James Randi and Fraud Prevention II

Some people think they can talk to the dead.  They get on TV or, better yet, get some grieving victim to pay them $$$ and claim that they are talking to a victim's dead relative or loved one.  They say they can answer questions "from beyond."

     Is this for real?  Can a person with special powers really talk to the dead?  Can a loved one who has passed on give answers to the grieving survivors?

    What does this have to do with fraud?

    Think about it for a moment.  Let's just stick with the topic at hand.  A "medium" claims they can talk with the relatives or loved one of someone who has passed on.

   Here is a quick video which exposes this scam.

We will discuss more later.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention

We are going to spend the next few weeks exploring the connection between critical thinking and fraud prevention.  I use the headline "James Randi" for this series of posts because, as we will see, there is a connection between thinking critically and avoiding fraud.

     For those who do not know, James Randi is a professional magician but is better known as  debunker of psychics and would-be charlatans who claim that they have psychic or otherwordly powers.  Randi has a standing challenge of $1 million dollars to anyone who can prove they have these powers.  To date, no one has claimed the money.  Randi has also tirelessly pursued con artists who claim that they have mysterious powers and use their con artist skills to cheat people out of their money.  The best example is Randi's expose of Peter Popoff, a televangalist who claimed that God talked to him at revival meetings.  "God" turned out to be Popoff's wife with a walkie-talkie.

     Randi is the first to state that a little critical thinking goes a long way.  We will take a skeptical approach to avoiding fraud (that is to say, we will use a bit of skeptical thinking in learning how to spot fraudsters) as we continue our discussions.

In the meantime, have a look at Randi's EXCELLENT website:  http://www.randi.org/site/

As always, have a great and fraud-free day.

http://www.tauskvega.com


------------>>>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? XII

So - we have found the "secret" if we can even call it that to money laundering - the wealthier the nation, the more money laundering is attractive as a criminal enterprise.  If money is laundered through the American or British or Monacan financial system and emerges "clean," then it will be easier to take this money out of the country and use it for legitimate (or illegitimate) purposes.  If "cleaned" money is taken from America, it will more likely be accepted into the world's banking and financial system as legitimate.

     By comparison, if money is "laundered" through a country such as Haiti, it will still be suspect.  One million dollars laundered through Haiti, even if it comes from "clean" businesses such as restaurants, will never be as fully accepted as one million dollars from the U.S.

     This is one of the (many) reasons why money laundering is a problem for wealthy nations.  If money laundering is left unchecked, then soon even wealthy nations will have their currency suspect and their international reputations besmirched.

   We will move onto another topic tomorrow.

As always, have a great and fraud-free day.

http://www.tauskvega.com

---------------->>>>>>>>>>>>>>gene tausk

Money Laundering - So What? XI

OK - back to the topic at hand.  We have seen how money laundering affects rich as well as poor nations.  So, what is the issue if a nation is rich?  We can obviously see the problem if a nation is poor - money laundering creates more social instability and chaos that poor nations (such as Haiti and Moldova/Romania) do not need.  But, what about Monaco and Lichtenstein?  They are doing fine.

     Well - here is the conundrum for rich nations and money laundering - it affects rich nations more directly and harshly than poor nations.  This is a rich nation's problem more so than a poor nation's problem. Strangely enough, this is one of the few types of crimes that will affect nations with a more stable and effective banking system and monetary currency than one that is affected by corruption and instability.

     As we have seen in this brief survey, the issue with poor countries and money laundering is that while it is much easier to launder funds through poor countries with ineffective legal systems and high rates of corruption, the money coming from these countries is automatically more suspect.  If someone brings $1million out of Haiti vs. bringing $1million out of the U.S., which is bound to raise more eyebrows?  Be honest.

    So, we have this is the "so what" about money laundering.  It may affect rich countries and the wealthy nations may treat it differently, but it paradoxically debases their monetary system.  The more money laundering is allowed, the more the nation that allows money laundering becomes suspect and, the more suspect, the more debased becomes the currency.

We will conclude this discussion tommorrow.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>gene tausk

Interludes - Money Laundering III

We'll get back to the money laundering issues tommorrow, but this Amish fraud matter is just too good to pass up.

Here is some more info.

http://www.cbsnews.com/8301-504083_162-20107551-504083.html

As always, have a great and fraud free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>>>>gene

Interludes - Money Laundering II

We'll get back to finishing up our series on how money laundering damages nations tomorrow.  This is an important article from Cleveland, Ohio, however:

http://blog.cleveland.com/metro/2011/09/amish_investor_charged_with_de.html

Fraud strikes ALL communities, including the ones you would least expect, such as the Amish.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------>>>>>>>>>>>>>gene tausk

Interludes - Money Laundering

For those who get "The History Channel" there is a new series starting called "Scammed" which discusses scams and frauds.

http://www.history.com/schedule

Looks good so far.  In any case, any program that educates people about frauds and scams is always welcome.

As always - have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? X

Well - we've done a survey of a few countries where money laundering is an issue.  There are hundreds of nations and we can spend a great deal of time covering all of them.  But, this brief survey shows three main themes:

1.  Money laundering affects all types of nations - rich, poor, those with a weak central government and a great deal of corruption (Haiti) and those with a strong central government with the rule of law (Monaco).

2.   Money laundering in wealthy nations with the rule of law has a great advantage in that the currency of these nations is sought and therefore they are an attractive target for launderers.  Money laundering in Monaco is valued because the money that is laundered will come out as a currency that is valued worldwide (the Euro) and therefore the end goal is the receipt of this money.

3.   Money laundering in poor nations with a weak central government and no rule of law is not has highly valued because the currency is worthless outside the country itself (Haiti).  However, because the institutions are weak, it is easy to filter money through the system and such laundering serves as a base for other operations.

We will continue this discussion tommorrow.

As always, have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? IX

Sorry for not posting the past two days - I was away at a conference and there were connection issues.  So - back to work.

NORTH KOREA

     I fully admit I place this country on this list for one reason - there is nothing to say about it.

     North Korea (officially the Democratic People's Republic of Korea) is probably, for all intents and purposes, the most repressive regime on Earth, an Orwellian nightmare on steroids.  Volumes have been written about its human rights violations and the entire country is virtually a slave society to the despotic whims of its "Dear Leader" - Kim Jong Il.  The previous leader, Kim Il-Sung, although dead for almost twenty years, lives as the "President for Eternity."

      This country has an economic system in ruins.  As a result, its' currency, the North Korean won, has no value outside of the country (other than for collectors).  There is no possibility of using North Korean institutions to launder money because every institution of any value (whatever little their is) is controlled by the State.  Possession of foreign currency is illegal for most North Korean citizens.  There is literally no way that any money laundering can occur.

     This has led, however, to the North Korean government using illegal means to raise hard currency, including the forgery of U.S. money.  But, this is another story.

As always, have a great and fraud-free day.

http://www.tauskvega.com

---------------->>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? VIII

NIGERIA

     Well, there is no way around this one.  Nigeria has been on this blog once before and will be again.  Nigeria's problems extend far beyond money laundering, but money laundering is an issue.

     With a weak central government, 419 fraud being the national sport and the country on the verge of a civil war between the largely Christian north and Muslim south, not to mention massive disparities in wealth because of oil wealth and corruption that is off the scale, it is not surprising that money laundering is an issue here as well. Like Haiti, however, the internal problems mean that very few people actually want to use Nigeria to deposit large amounts of cash because these can be traced by criminal and governmental authorities.

     The money laundering that does occur, therefore, is usually on a smaller scale.  Paradoxically, once again like Haiti, although the corruption and weak central government means that money laundering is easier than it would be in countries with a strong legal system and strong government, it is also far more risky.  This means that money laundering is mainly done on a smaller scale to avoid detection.  Usually detection by the government is not so much the issue as detection by gangs and criminal organizations, which will demand a cut of the action and a loss to the money launderers.

     Also, the money coming out of Nigeria is suspect in many law enforcement organizations anyway, so it does not make sense to engage in large scale operations in Nigeria.

As always, have a great and fraud-free day.

http://www.tauskvega.com

Money Laundering - So What? VII

MOLDOVA/ROMANIA

     Well, let's get back to a country, or in this case countries, with a weak central government, high crime rate and effusive corruption.  Moldova and Romania (two countries, but both hangovers from Communism, both share the same language and religion and both are, for all intents and purposes, the same country but history has divided into two separate nations with no basis other than an accident of politics) have extremely high corruption rates and, not surprisingly, money laundering problems.

    The high corruption rates of these countries mean that most monetary transactions are suspect.  Both countries have issues with money laundering from both organized criminal organizations and, it is suspected, international terrorist groups.

     Of the two, Romania is making some attempt to come into compliance with international standards because of its membership in the EU.  Moldova is embroiled in a intra-state issue with the country's large Russian population having an autonomous territory which is, in many ways, independent from the capital.  However, the proximity of the two nations, as well as the shared history, means that Moldova's problems will continue to be Romanian problems.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? VI

MONACO

     OK - keeping our theme of the moment of microstates that have had "issues" with money laundering, let's look at the second smallest country in the world.  You can literally walk across it in less than an hour.  Monaco has about 30,000 citizens who mainly live there because it is a tax-free zone.  It's banking system, along with it's racing and casino, are its main attractions.  Like the old Swiss bank accounts, it used to be a tax haven and an investment haven, with no questions being asked and no answers given.

     However, once again, Monaco has had to get in line with the 21st century following the tragedy of 911 and the realization that Islamic (and other) terror groups use money laundering operations as a way to fund their activities.

     Monaco still has a way to go.  A small county with no natural resources except to offer wealthy people a tax haven will always have an issue with transparency.  But, as with Liechtenstein, it is an example of how effective a government can be in ordering transparency.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? V

LIECHTENSTEIN

     During our last conversation, we were talking about how important it is for a government to become involved in fighting back against money laundering.  Yes, there is a connection between wealthy countries and a strong central government in successfully fighting money laundering (Finland) and a poor country with a weak central government in allowing money laundering to occur (Haiti).  Yet, sometimes a strong central government can choose to "look the other way."

     Liechtenstein is one of the world's smallest countries renowned for its banking systems.  Unfortunately, until recently, it was documented as "non-cooperative" by many law-enforcement agencies for its refusal to cooperate in financial transparency.  This was one thing when it simply involved wealthy people looking for tax evasion; it became something else after 911 when it was found that Al-Qaida was using Liechtenstein for money laundering purposes.

     Liechtenstein has improved its cooperation over recent years, but it took the threat of international terrorism for it to "come around" to fight this issue.

As always, have a great and fraud-free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>>>>gene tausk

Money Laundering - So What? IV

Well, we had a look at a great country which is a law and order civilization (Finland) which is a success story in fighting money laundering, despite its proximity to Russia which is rife with money laundering problems as well as issues with the rule of law.

     Unfortunately, it is time to move to a country which is the "poster child" for abject poverty and an example of a country with no government of which to speak.  This leads to money laundering as one of its endemic problems.

     I am speaking of the poorest nation in the Western hemisphere: Haiti.

     Haiti has a tragic history from its very beginning.  The nation started off with promise, being one of the few countries to actually fight off its colonial master (France) with a revolt started by slaves (rare enough in itself).  However, the nation went downhill.  It shares the island of Hispianola with the Dominican Republic.  The environmental degradation of the country is so great that it is easy to see from space where Haiti ends and the Dominican Republic begins.

    Haiti has a very poor banking system, which makes it easy to launder money.  Not a great deal of money is laundered into Haiti because no one really wants to attract attention by placing large amounts of money into the country's banks.  As a result, Haiti is used as a transit point for money laundering.

     By now a pattern should begin to emerge - when a government takes little interest in money laundering, it can be a problem.

As always, have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>gene tausk