Sweepstakes, Lottery and Prize Scams

Sweepstakes, lottery and prize scams are among the most serious and pervasive frauds operating today.  While the scams’ roots go as far back in the culture as gambling, the fraud continues to evolve with the times. The scheme currently involves scammers telling people they have won a large amount of money in a lottery or sweepstakes, sometimes by misusing the established name of Publishers Clearing House Sweepstakes. Victims send money, purportedly for taxes or other costs that must be paid before receiving a prize. Unfortunately, the winners don’t receive the promised prizes.

Nearly 500,000 people have reported this fraud to enforcement agencies in the U.S. and Canada over the last three years, and reported losses in 2017 alone totaled  $117 million. The actual number of victims and losses is likely much larger, as many victims are too embarrassed to report it.

In 2017, 2,820 individuals reported sweepstakes and lottery scams to Better Business Bureau (BBB) Scam Tracker, an online tool for tracking scams, with a median loss of $500. The most frequent method of payment was wire transfer.

BBB found these frauds concentrate disproportionately on older people, who suffer the largest losses by far. A vast worldwide industry of sweepstakes mailings specifically targets older victims. Major law enforcement efforts are focused on the millions of deceptive mailings that have flooded the mailboxes of seniors across the country. In addition to money loss, victims often are emotionally devastated when they realize they have been defrauded. Some have even resorted to committing suicide.

Sweepstakes frauds involve different actors, and the methods used to contact victims have evolved from direct mail to cold calling to social media.

  • BBB discovered Jamaica is a major source of “cold calls” to victims who are told they have won money. Similar calls come from Costa Rica.
  • Sweepstakes/lottery fraud has become a major problem on social media. The FBI’s Internet Crime Complaint Center (IC3) says about one-third of the complaints it receives about sweepstakes/lottery fraud occur over social media. BBB receives many complaints from victims who were contacted through Facebook.
  • Some fraudsters contact victims on their phones, using text messages or pop-ups on the phone browser claiming people have won large gift cards or new smartphones. The goal of this type of fraud is to gather information to sell to other scammers, and to get people enrolled in “free trial offers.”
  • Another major set of fraudulent actors send mailings to victims telling them they have won a large sum of money and need to send a small amount, typically $20, to receive their winnings.
  • Mail also is used to tell people that they have won and need to call a number to learn more about their winnings. These letters also may include counterfeit checks that will supposedly cover the “fees.”

Jamaica is a major player, not only for the huge numbers of U.S. and Canadian victims, but also for the effects this is having on the people of Jamaica itself. The massive amounts of money coming into the island from lottery fraud has resulted in gang wars between rival fraud groups, who use the money to buy guns and drugs. Jamaica has about the same population as Chicago, but had more than twice the number of murders in 2017 (650 in Chicago, 1,616 in Jamaica). As a result of these problems, a State of Emergency has been declared for a large part of Jamaica, including Kingston and Montego Bay.

It’s important to note sweepstakes and lotteries differ in that to enter a lottery, one must pay money to take part by buying a lottery ticket. Lotteries are illegal in the U.S. unless authorized by law. Sweepstakes, on the other hand, do not require any payment to obtain a prize. They mainly are regulated by state law. That’s why most sweepstakes specifically state “no purchase required.”  One of the largest sweepstakes operating is Publishers Clearing House, where there is no required cost to participate. Any program that requests or receives money to award a prize, for any reason, will be considered a lottery, and therefore is illegal.

This study covers:

  1. Introduction
  2. How big is the problem?
  3. Who are the victims of sweepstakes/lottery fraud?
  4. Who are the primary scammers?
    1. Calls from Jamaica
    2. Calls from Costa Rica
  5. How do the scams work?
    1. Lottery fraud online and on social media
    2. Sweepstakes fraud via text message or mobile browser pop-up
    3. Sweepstakes prize mailing fraud
    4. Sweepstakes fraud by phone call
  6. Payment
  7. What’s being done about it?
  8. Recommendations & Tips

 

 

 

Readers also will learn about red flags and actions to take to prevent this type of fraud. For example, no real lottery or sweepstakes will ever request money for taxes, fees, or any other purpose. BBB suggests those who think they may have won a lottery or sweepstakes do a quick internet search before proceeding. Some fraud can be avoided by simply strengthening the privacy settings on social media platforms such as Facebook.

 

 

How big is the problem?

Complaints about sweepstakes/lottery fraud

Lottery and sweepstakes fraud is one of the most common consumer frauds operating today. Per the Federal Trade Commission’s (FTC’s) Consumer Sentinel Netword (CSN) Data Book, sweepstakes/lottery/prize fraud was the third-most common type of fraud reported behind imposter claims (such as bogus calls from the IRS), and complaints about telephone and mobile services. For 2017, this was the third-most common complaint to the Senate Aging Committee, behind IRS impersonators and robocalls. This was also number four among the top reports to BBB Scam Tracker, following phishing emails, online purchase fraud, and IRS impersonators.

Together the FTC, Internet Crime Complaint Center (IC3), and Canadian Anti-Fraud Centre (CAFC) received nearly 150,000 complaints about sweepstakes/lottery fraud in 2017, and nearly 500,000 over the last three years. Reported losses by victims totaled $115 million in 2017 alone.

However, previous FTC studies have found less than 10 percent of fraud victims ever complain to BBB or law enforcement, meaning the actual level of fraud may be at least 10 times larger than these numbers reflect.

Many people believe this fraud is rare. But these numbers demonstrate sweepstakes/lottery fraud is incredibly common. BBB Scam Tracker allows consumers to view a heat map showing how many sweepstakes/lottery/prize fraud complaints have been made in any area in the U.S. and Canada. Consumers can see how their local areas are affected by these and other frauds.

Scope of Jamaican sweepstakes/lottery scams

How many of these complaints involve Jamaica?  Typically, consumers may know they are dealing with schemes originating in Jamaica two ways: if they send money directly to Jamaica or if they capture a caller ID that shows the call came from area code 876. It is very difficult, however, to determine the true source. Not everyone has caller ID, and many frauds “spoof” the phone number to make it appear the call is coming from elsewhere. The Las Vegas area code 702 is a particular favorite of schemers in Jamaica.

Both Western Union and MoneyGram have made serious efforts over the last several years to combat frauds using their systems to send money directly to Jamaica.

2015 Complaints 2015 Losses 2016 Complaints 2016 Losses 2017 Complaints 2017 Losses
FTC 151,154 $102,946,857 159,502 $97,361,757 142870 $95,000,000
IC3 5324 $19,365,223 4321 $21,283.77 3011 $16,835,001
Canada 3723 $6,888,364 2157 $3,111,867 2,026 $2,884,332
Total 160,201 $129,200,444 165,980 $100,494,907.77 147907 $114,719,333

 

For these reasons, there has been a recent reduction in complaints tied directly to Jamaica. Law enforcers working in this area, however, have not detected any lessening of lottery fraud activity emanating from Jamaica.

The statistics show that consumer sentinel complaints in Jamaica increased regularly for many years, declining only recently – and again, only for the reasons outlined above. More than 95 percent of reported fraud in Jamaica involves lottery or sweepstakes scams.

Reported losses to frauds in Jamaica in 2015 amounted to over $38 million.                            

 

Who are the victims of sweepstakes/lottery fraud?

We know from law enforcement efforts that mass prize mailings and Jamaican lottery frauds concentrate on older people, and the available complaint data supports the thesis that this scheme disproportionately targets older populations. In addition, the FTC has found several other characteristics common to sweepstakes/lottery fraud victims.

IC3 said for those filing complaints who reported their age (they are not required to provide this information), 42 percent were over 60, but  they represented 82 percent of the total losses. The CAFC in Canada also found 57 percent of complainants were over 60, representing 61 percent of total losses in 2017.

 

COURTESY: BBB

Categories: Alabama News, Georgia News