"Congratulations! You’ve won the National Lottery! To claim your prize, just send us cash to pay the taxes in advance."

Sound familiar? It’s a classic Nigerian letter scam - originating in Spain - that bilks thousands of people around the world out of an estimated $24 million a year and opens the door to future identity theft.

How does the scam work? The names and addresses of targets - all outside of the named country - are collected through the Internet. Then you, the target, get a letter from the National Lottery claiming you’ve won about a few hundred thousand dollars in a special promotional lottery. An estimated six million letters are sent a year. The letters look legitimate, complete with official logos and contact information. They also include a form from the bank where the money is supposedly being held. You might even receive follow-up faxes and phone calls.

Then the hook: all you have to do is pay taxes from the country - between 0.5 percent and 2 percent of the winnings - to get the money. Just fax your completed claim forms with personal and banking information and wire the money within a couple of days. If you take the bait, chances are you’ll be asked to cover other expenses, too.

The Spanish National Police (SNP) has relentlessly pursued criminals in their country who has behind such a scheme. In July last year, they launched a massive crackdown that resulted in 300 arrests, 150 searches, and the seizures of nearly 2,000 cell phones, hundreds of computers and fax machines, plenty of fake documents, and $265,000 in cash.

This is truly a 21st century concept of policing: working internationally to protect you in your community.

You cannot win money or a prize in a lottery unless you have entered it yourself, or someone else has entered it on your behalf. You cannot be chosen as a random winner if you don’t have an entry.

Many lottery scams try to trick you into providing your banking and personal details to claim your prize.

You should not have to pay any fee or tax to claim a legitimate prize. Don’t be fooled by claims that the offer is legal or has government approval - many scammers will tell you this. Instead of receiving a grand prize or fortune, you will lose every cent that you send to a scammer. And if you have provided other personal details, your identity could be misused too.

A fake prize scam will tell you that you have won a prize or a contest. You may receive a phone call, an email, a text message or see a pop-up screen on your computer. There are often costs involved with claiming your prize, and even if you do receive a prize, it may not be what was promised to you.

The scammers make their money by making you pay fees or taxes, call their premium rate phone numbers or send premium text messages to claim your prize. These premium rate calls can be very expensive, and the scammers will try to keep you on the line for a long time or ask you to call a different premium rate number.

Avoid from getting scammed by these and similar frauds? Here’s an good advice:

• NEVER give personal information over the telephone, mail, or Internet unless you initiated the contact.
• Do NOT wire money to strangers.
• NEVER send money to collect a prize if a fee is required.
• If you think you’re being targeted, contact your local authorities.

Advance fee fraud gets its name from the fact that an investor is asked to pay a fee up front or in advance of receiving any proceeds, money, stock or warrants in order for the deal to go through.  The fee may be in the form of a commission, regulatory fee or tax, or some other incidental expense. These secondary "advance fee" schemes work very similarly to boiler room operations, the difference being that an advance fee scheme generally targets investors who already purchased underperforming securities, perhaps through an affiliated boiler room, offering to arrange a lucrative sale of those securities, but first requiring the payment of an “advance fee.”

With other words an advance fee scheme occurs when the victim pays money to someone in anticipation of receiving something of greater value - such as a loan, contract, investment, or gift - and then receives little or nothing in return.

The variety of advance fee schemes is limited only by the imagination of the con artists who offer them. They may involve the sale of products or services, the offering of investments, lottery winnings, “found money,” or many other “opportunities.” Clever con artists will offer to find financing arrangements for their clients who pay a “finder’s fee” in advance. They require their clients to sign contracts in which they agree to pay the fee when they are introduced to the financing source. Victims often learn that they are ineligible for financing only after they have paid the “finder” according to the contract. Such agreements may be legal unless it can be shown that the “finder” never had the intention or the ability to provide financing for the victims.

Tips for Avoiding Advanced Fee Schemes

If the offer of an “opportunity” appears too good to be true, it probably is. Follow common business practice. For example, legitimate business is rarely conducted in cash on a street corner.

• Know who you are dealing with. If you have not heard of a person or company that you intend to do business with, learn more about them. Depending on the amount of money that you plan on spending, you may want to visit the business location, check with the Better Business Bureau, or consult with your bank, an attorney, or the police.
  
  
• Make sure you fully understand any business agreement that you enter into. If the terms are complex, have them reviewed by a competent attorney.
  
  
• Be wary of businesses that operate out of post office boxes or mail drops and do not have a street address. Also be suspicious when dealing with persons who do not have a direct telephone line and who are never in when you call, but always return your call later.
  
  
• Be wary of business deals that require you to sign nondisclosure or non-circumvention agreements that are designed to prevent you from independently verifying the bona fides of the people with whom you intend to do business. Con artists often use non-circumvention agreements to threaten their victims with civil suit if they report their losses to law enforcement.

When you send money to people you do not know personally or give personal or financial information to unknown callers, you increase your chances of becoming a victim of telemarketing fraud.

Every year, thousands of people lose money to telephone scams - from a few dollars to their life savings. Scammers will say anything to cheat people out of money. Some seem very friendly - calling you by your first name, making small talk, and asking about your family. They may claim to work for a company you trust, or they may send mail or place ads to convince you to call them.

If you get a call from someone you don’t know who is trying to sell you something you hadn’t planned to buy, say "No thanks." And, if they pressure you about giving up personal information - like your credit card or Social Security number - it’s likely a scam. Hang up and report it to the governemnt authorities.

Here are some warning signs of telemarketing fraud - what a caller may tell you:

• “You must act ‘now’ or the offer won’t be good.”
  
  
• "You've been specially selected (for this offer)."
  
  
• “You’ve won a ‘free’ gift, vacation, or prize." But you have to pay for “postage and handling” or other charges.
  
  
• "You trust me, right?"
  
  
• "This investment is low risk and provides a higher return than you can get anywhere else."
  
  
• “You must send money, give a credit card or bank account number, or have a check picked up by courier.” You may hear this before you have had a chance to consider the offer carefully.
  
  
• “You don’t need to check out the company with anyone.” The callers say you do not need to speak to anyone including your family, lawyer, accountant, local Better Business Bureau, or consumer protection agency.
  
  
• “You don’t need any written information about their company or their references.”
  
  
• “You can’t afford to miss this ‘high-profit, no-risk’ offer.”

If you hear these or similar “lines” from a telephone salesperson, just say “no thank you” and hang up the telephone.

How They Hook You

Scammers use exaggerated - or even fake - prizes, products or services as bait. Some may call you, but others will use mail, texts, or ads to get you to call them for more details. Here are a few examples of “offers” you might get:

• Travel Packages. “Free” or “low cost” vacations can end up cost­ing a bundle in hidden costs. Some of these vacations never take place, even after you’ve paid.
  
  
• Credit and loans. Advance fee loans, payday loans, credit card protection and offers to lower your credit card interest rates are very popular schemes, especially during a down economy.
  
  
• Sham or exaggerated business and investment opportunities. Promoters of these have made millions of dollars. Scammers rely on the fact that business and investing can be complicated and that most people don’t research the investment.
  
  
• Charitable causes. Urgent requests for recent disaster relief efforts are especially common on the phone.
  
  
• High-stakes foreign lotteries. These pitches are against the law, which prohibits the cross-border sale or purchase of lottery tickets by phone or mail. What’s more, you may never see a ticket.
  
  
• Extended car warranties. Scammers find out what kind of car you drive, and when you bought it so they can urge you to buy overpriced - or worthless - plans.
  
  
• “Free” trial offers. Some companies use free trials to sign you up for products - sometimes lots of products - which can cost you lots of money because they bill you every month until you cancel.

Tips for Avoiding Telemarketing Fraud

It’s very difficult to get your money back if you’ve been cheated over the telephone. Before you buy anything by telephone, remember:

• Don’t buy from an unfamiliar company. Legitimate businesses understand that you want more information about their company and are happy to comply.
  
  
• Always ask for and wait until you receive written material about any offer or charity. If you get brochures about costly investments, ask someone whose financial advice you trust to review them. But, unfortunately, beware-not everything written down is true.
  
  
• Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, state attorney general, the National Fraud Information Center, or other watchdog groups. Unfortunately, not all bad businesses can be identified through these organizations.
  
  
• Obtain a salesperson’s name, business identity, telephone number, street address, mailing address, and business license number before you transact business. Some con artists give out false names, telephone numbers, addresses, and business license numbers. Verify the accuracy of these items.
  
  
• Before you give money to a charity or make an investment, find out what percentage of the money is paid in commissions and what percentage actually goes to the charity or investment.
  
  
• Before you send money, ask yourself a simple question. “What guarantee do I really have that this solicitor will use my money in the manner we agreed upon?”
  
  
• Don’t pay in advance for services. Pay services only after they are delivered.
  
  
• Be wary of companies that want to send a messenger to your home to pick up money, claiming it is part of their service to you. In reality, they are taking your money without leaving any trace of who they are or where they can be reached.
  
  
• Always take your time making a decision. Legitimate companies won’t pressure you to make a snap decision.
  
  
• Don’t pay for a “free prize.” If a caller tells you the payment is for taxes, he or she is violating federal law.
  
  
• Before you receive your next sales pitch, decide what your limits are-the kinds of financial information you will and won’t give out on the telephone.
  
  
• Be sure to talk over big investments offered by telephone salespeople with a trusted friend, family member, or financial advisor. It’s never rude to wait and think about an offer.
  
  
• Never respond to an offer you don’t understand thoroughly.
  
  
• Never send money or give out personal information such as credit card numbers and expiration dates, bank account numbers, dates of birth, or social security numbers to unfamiliar companies or unknown persons.
  
  
• Be aware that your personal information is often brokered to telemarketers through third parties.
  
  
• If you have been victimized once, be wary of persons who call offering to help you recover your losses for a fee paid in advance.
  
  
• If you have information about a fraud, report it to state, local, or federal law enforcement agencies.

Matrix schemes use the same fraudulent non-sustainable system as a pyramid. Here, the participants pay to join a waiting list for a desirable product which only a fraction of them can ever receive. Since matrix schemes follow the same laws of geometric progression as pyramids, they are subsequently as doomed to collapse.

Such schemes operate as a queue, where the person at head of the queue receives an item such as a television, games console, digital camcorder, etc. when a certain number of new people join the end of the queue.

For example, ten joiners may be required for the person at the front to receive their item and leave the queue. Each joiner is required to buy an expensive but potentially worthless item, such as an e-book, for their position in the queue. The scheme organizer profits because the income from joiners far exceeds the cost of sending out the item to the person at the front. Organizers can further profit by starting a scheme with a queue with shill names that must be cleared out before genuine people get to the front. The scheme collapses when no more people are willing to join the queue. Schemes may not reveal, or may attempt to exaggerate, a prospective joiner's queue position which essentially means the scheme is a lottery. Some countries have ruled that matrix schemes are illegal on that basis.

Be aware that the easiest way to avoid being caught up in the Matrix scam is to not get involved in the first place. Any setup requiring one to buy overpriced merchandise in order to get a free gift is only out for one objective – to sell overpriced merchandise to as many people as possible. You also run the risk of alienating your friends and family buy trying to get them to make these purchases. The most important point is, there is no such thing as getting something for nothing; keep that in mind and you can protect yourself from most scams. If you do get victimized by this scam, contact the Better Business Bureau and report the company for unfair business practices and making false claims.

More information about matrix schemes can get found at:

• Wikipedia
• Scam Detector