This Diwali Beware Of These Financial Scams

While festive times like Diwali usher in a lot of joy and togetherness, it also brings in fear of darkness, scams, and fraud-related activities. This is the time when people eagerly await the entire year to make their purchases and buy all their favorite things. The scamsters exactly leverage this exact euphoria and enthusiasm to defraud people. 

“Beyond the technical aspects of scams, these criminals' psychological tricks are particularly insidious. They exploit human emotions, cognitive biases, and social behaviors to deceive even the most vigilant individuals. From creating a false sense of urgency to manipulating trust through impersonation, fraudsters use a variety of psychological tactics to persuade their victims to part with their money,” says Adhil Shetty, CEO, BankBazaar, a fintech firm. 

In the research report by Bankbazaar, Fear, Fraud, and Finances: 6 Ways Scammers Prey On Your Mind And How You Can Defend Yourself, here are scams you must watch out for during Diwali. 

Impersonating Trusted Figures: Scammers pose as credible figures like banks or government officials to gain trust. They replicate authentic emails, websites, or calls to appear genuine. A scammer poses as a bank official, sending Deepika an email that looks identical to her bank’s authentic communication. The email claims there’s a critical issue with her account and instructs her to click a link to verify her details. Trusting the official-looking email and fearing account issues, she follows the instructions and provides her personal information. Consequently, her bank account is compromised, and her savings are stolen.

What To Do: Verify the caller independently. Do not share any personal or financial information. Recognise the red flags - urgency. 

Faking Testimonials, Claiming Shared Interests, And Flattering Victims: Scamsters often use fake testimonials or success stories to encourage victims to follow others. They pretend to share a background or interest with the victim to build trust. They often complement the victim’s judgment to lower defenses.

For example, Anjali receives an email about an investment opportunity in a new tech startup. The email includes glowing testimonials from "satisfied investors" who supposedly made significant profits. The sender pretends to share Anjali's interest in technology and praises her judgment for being ahead of the curve. Flattered and influenced by the false success stories, Anjali decides to invest a substantial amount. Later, she discovers the startup was a scam, and loses her investment.

What To Do: Verify the website's legitimacy, domain, and contact details before trusting it. Research the company independently through reviews on external platforms. Avoid rushing decisions due to urgency; consult trusted advisors. Confirm regulatory registration and beware of unrealistic returns. Cross-check any celebrity endorsements to ensure authenticity. Use secure payment methods with fraud protection.

Creating A False Sense Of Urgency And Scarcity: In this case, the scamsters create a false sense of urgency and scarcity, pressuring victims with deadlines to prompt hasty decisions. They create a sense of urgency or limited availability, pressuring victims to act quickly. They impose deadlines to make it seem like delaying will result in missed opportunities. 

For example, Vikram receives an email from a popular shopping site offering a "special discount" for two hours, with limited product availability. Fearing he’ll miss out, he hastily clicks the link and enters his credit card details. It’s only later he discovers that the email was a phishing scam, and his account has been drained.

What To Do: Verify the sender’s email, address, and domain with the official site. Never click email links; visit the official website directly. Beware of urgent, time-sensitive offers pressuring immediate action. Spot phishing signs like spelling errors and suspicious URLs. Enable two-factor authentication (2FA) for extra security. Use credit card fraud alerts or virtual cards for online purchases. Contact customer service to confirm offers.

Exploiting Psychologically And Escalating Demand To Manipulate Victims: The scamsters induce fear by claiming accounts have been compromised. They exploit guilt, particularly in charity scams. They use love, sympathy, or greed to cloud judgment. They start with small requests and escalate demands to create a sense of obligation. 

For example, Priya receives a call from someone posing as her bank, claiming her account is at risk. The scammer, exploiting her fear, gradually asks for sensitive information under the guise of protecting her. In the end, Priya unknowingly shares her full banking details, falling victim to the scam.

What To Do: Confirm account issues directly with official sources before taking action. Verify charity legitimacy before donating, especially if contacted unsolicited. Stay rational and verify offers before acting on emotional appeals. Resist small requests and scrutinize any escalating demands.

Confusion And Cognitive Manipulation: Victims believe they’re less likely to be defrauded, overlooking red flags. Scamsters bombard victims with excessive information or jargon to overwhelm and confuse them. They mix real and fake information to blur the lines between genuine and fraudulent activities. They mimic the victim’s tone or mannerisms to build rapport and create a sense of familiarity. 

For example, Madhuri receives an urgent email that appears to be from her bank, claiming there’s a critical security issue with her account. The message, filled with complex jargon and a mix of real and fake details, urges her to act quickly to prevent account suspension. It includes a link to a convincing but fraudulent website that mimics her bank's design. The email plays on her optimism by promising a quick resolution and reinforces her confirmation bias with fake testimonials praising the bank’s swift security response. Feeling overwhelmed and pressured, Madhuri follows the instructions and enters her personal information on the site. Later, she discovers her account has been drained, revealing the scam's deceitful tactics.

What To Do: Remain skeptical of unsolicited offers; verify independently. Cross-check information with multiple trusted sources. Simplify and review information carefully. Verify communications using known contact info. Be cautious with familiar language; confirm identity.

Financial Manipulation: The scamsters offer something free to make victims feel obligated to return the favor. They make victims feel responsible for giving something in return after receiving small favors. They promise huge financial returns or exclusive deals. They prey on individuals in financial distress with quick fixes. 

For example, Karan, struggling financially, receives a “free” gift from a scammer claiming to offer an exclusive investment deal with huge returns. The scammer uses the gift to make Karan feel obligated. As he contemplates the tempting returns, the scammer pressures him for a “small investment” to unlock the deal. Feeling both desperate and guilty, Karan invests, only to realize the opportunity is a scam.

What To Do: Be wary of unsolicited gifts and offers. Don’t feel pressured to reciprocate unsolicited favors. Verify promises of high returns or exclusive deals. Avoid rushed decisions in financial distress; seek trusted advice.