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How safe is your money?

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Economist Priya Desai suggests ways to counter cybercrime and keep your finances safe

Rarely a day passes without news of a financial scam or an ingenious fraud. With new and advanced technologies being put to use in the financial world, the skills and finesse of conmen have also evolved, finding newer ways to deceive the gullible. In fact, financial thefts, cheating and frauds have become the order of the day. And statistics reveal that silvers rank high among targets for fraudsters.

New day, new con

Just the other day, I chanced upon a news article about a silver being conned of ₹ 35,000 by an impersonator. The latter presented himself as a State Bank of India executive trying to help with a credit card problem, seeking details including an OTP (one-time password). The gentleman realised he had been duped only when he received an SMS notification informing him that the card had been used to make a purchase.

In fact, banking institutions have been regularly sending out awareness messages informing account holders not to part with any card-related details and passwords. Unfortunately, most people don’t pay heed.

The vulnerable lot

Silvers as a demographic are prone to financial frauds owing to many factors. Though they have savings stashed in different forms, most aren’t adept at managing their own financial affairs because of reasons such as:

  • Rapid transformation in the financial landscape
  • Technological advancements
  • Constantly evolving regulatory environment
  • Tedious paperwork.

Moreover, they are fearful of the fact that their oversight or ignorance will lead to mistakes that will prove costly. All these factors create a medley of fears, resulting in a dependence ethos when it comes to financial issues.

The physical limitations of advancing age also lead to dependency, impelling silvers to seek financial guidance from their near and dear ones. This creates fertile ground for scamsters on the lookout for victims. It becomes nigh on impossible for silvers to identify these glib talkers with confident body language and perfectly honed presentation skills as scammers.

Tech issues

The world of finance and technology has undergone a sea change. Most silvers are unable to understand the technology involved in the financial world and find themselves at a loss when it comes to keeping pace with these changes. There has also been a significant change in requirements for different types of investments and the fine print is just that—it’s too fine to read or understand. In their post-retirement phase, most silvers struggle to find safe and suitable investment avenues for the money they have accumulated over the years.

Tread care fully

Today, there are a many investment potholes where your money may just languish, not fetch the desired returns and become permanently lost. Here are some of them:

Ponzi schemes

Most silvers prefer to invest their money in fixed deposits. Ponzi schemes that promise phenomenal returns and offer future interest payment cheques exploit this trait. Conmen convince unsuspecting silvers that these cheques are the surety. But it doesn’t take long for the initial hefty payments to turn into a trickle and then nothing at all. The phoney company does a vanishing trick, leaving investors high and dry.

Sahara (₹ 36,000 crore), Saradha (₹ 20,000 crore) and Rose Valley Chit Fund (₹ 60,000 crore) are just a few of the sharks in the deep, dark waters of Ponzi schemes. These schemes have stripped many silvers of their lifetime savings. The Government has now approved the Banning of Unregulated Deposit Schemes Bill 2018 to plug the loopholes in existing laws against these schemes.

Mutual funds

Mutual funds (MF) trumpet attractive features such as tax-free dividends and investment growth. The variety of MFs can easily baffle investors, especially silvers, resulting in mis-selling. Brokers taking high net-worth silvers for a jolly ride is by no means an exception.

Seniors are easily cheated into investing in MFs that provide fat commissions to brokers but are a low-value investment for them. Keep in mind that mutual funds are never a guarantee of return on investment. They expose investors to the capital market, misguiding them with a grand vision of inflated returns. Most silvers are unable to manage these funds smartly. They eventually find themselves dealing with declining net asset values that wipe out their interest earning potential as well as capital investment.

Mediclaim policies

One of the inescapable features of ageing is the need for health insurance or mediclaim policies. It becomes the perfect avenue for exploiting silvers and there is rampant mis-selling of policies. Not only is the fine print metaphorically so, but it is also literally impossible for seniors to read. It’s also why buyers eventually end up placing their trust in individuals that sell these policies.

There are a number of options to choose from and only an expert would be able to find something that’s best suited for silvers. Many seniors are sold policies with inadequate cover. What exacerbates the situation is that seniors also find themselves forking out rapidly increasing premiums with each passing year. In the recent past, a leading bank was accused of mis-selling an insurance policy, leading the customer to believe he was investing in a fixed deposit.

Credit cards

Credit card cloning has defrauded many thousands of rupees from the bank accounts of silvers. The grievance redress process is ill-regulated and poorly implemented, doing nothing to alleviate the hassles one goes through. A credit card is like a double-edged sword; while it’s a useful product to have in your financial armoury, the risk aspect makes it unsuitable for most seniors in our country.

Vishing (VoIP/Voice phishing) is a ‘social engineering’ technique where fraudsters call you and extract personal information. This information is then used to access and use your accounts. In fact, some fraudsters also use it to assume your identity and open new accounts.

Play smart

Indeed, the world of finance is never bereft of risks. Yet like soldiers navigating through minefields, silvers must learn to master tactics that will help them counter the phenomenal rise in cybercrimes today. According to a recent report, senior citizen cybercrime fraud cases account for 10 per cent in Pune, 20 per cent in Bangalore and 20 per cent in Kolkata. Here are some precautions to keep in mind:

  • Adopt financial decision-making as a responsibility.
  • Obtain and analyse information proactively to arrive at a decision to invest or buy a financial product.
  • Treat institutions and individuals from the finance world as strangers and approach them with a measure of scepticism.
  • Maintain complete privacy of financial information like credit/debit/ATM cards, bank accounts, bank locker, insurance policies, etc.
  • Do not discuss financial problems with strangers and in public places with friends.
  • Update bank passbooks regularly and scrutinise credit/debit entries to identify and avoid fraudulent debits.
  • Free advice from brokers or agents can prove costly as they have a different agenda than an investor.
  • Treat unsolicited emails and calls related to your financial matters as trash and do not respond.
  • Allowing others to handle financial documents like unsigned cheques, forms and filling details can result in mistakes and is an open invitation to frauds.
  • Be alert about bank messages and take quick action in case you sense something is amiss.
  • Many financial frauds go unreported and unpunished. Do not be embarrassed to report them.
  • In view of the growing number of cybercrimes, Internet users must use cyber protection such as firewalls.

The only way forward is alertness and knowledge upgradation. Being open to the use of technology and gaining a better understanding of safer transaction methods will help reduce the possibility of being defrauded. Awareness and presence of mind are the keys to keeping your finances safe.

The author is an economist based in Mumbai

Photo: iStock
Featured in Harmony — Celebrate Age Magazine
May 2018