The top 10 scams of 2011



Consumers are being ripped off to the tune of £7bn a year by sellers of defective goods, dodgy doorstep traders and online fraudsters.

These shocking statistics, from the government public accounts committee, show the systems to fight scams are grossly under funded. So what scams have parted consumers from their cash during 2011?

1. Land banking
Rogue property developers selling land that they claim has great investment value, when there is little or no chance of it ever being developed, are on the rise. Investors who have purchased a stake in plots of land that turned out to be worthless have lost an estimated £200 million.

Land banking involves plots of land offered for sale, often online, with the promise of sizable returns when planning permission is approved for housing or other development. Yet often the land is located in areas protected from development by planning law.

The companies involved soon disappear with investors' money and as the firms are not protected by the Financial Services Authority, their funds are not covered by the Financial Services Compensation Scheme.

2. Money mule
Cases of money mule fraud have soared during 2011, according to figures from CIFAS - the government's fraud prevention agency - which show an increase in the number of both knowing accomplices and innocently duped individuals.

The misuse of facility fraud, which involves an account or policy that has been legitimately opened but is later used fraudulently, rose 12% in the first ten months of 2011. CIFAS reports that a large proportion of the frauds display the hallmarks of 'money mule' activity; where a fraudster recruits another (often innocent) party and uses their account to launder money on their behalf.

Fraudsters recruit unknowing accomplices through email under the guise of offering employment, seeking a personal favour, or through internet shopping sites. The recruits are persuaded into receiving what are essentially fraudulent payments and then passing funds on. The 'mules' are frequently offered a small financial incentive to encourage involvement and face difficulties in proving their innocence when the fraud is discovered.

CIFAS Communication Manager, Richard Hurley explains: "It often leaves the innocent victim who acted as the mule needing to prove that they were duped. This can be a truly traumatic experience for the mule victim: committing fraud can have some very serious consequences, as businesses have a regulatory and commercial requirement to suspend or close accounts that are involved in fraud."

3. Carbon credit fraud
Between July and September 2010 the Financial Services Authority reported a ten-fold increase in carbon credit fraud, which lures investors in with the promise of steady returns and a tug on their eco-friendly conscious.

The scams claim to offer people the chance to profit from carbon credits. Under regulations that permit businesses to emit a tonne of CO2 – the companies claim to offer investment in green projects like a forestry scheme or a solar panel project, which generates carbon credits that are then sold on to heavy industry.

A flashy brochure or website tells of a reliable 'government-backed' scheme which provides reliable returns for investors. Such a scheme doesn't exist however – a reality investors only discovered when they have parted with their cash and the company is untraceable. As with land banking, fraudulent companies are not covered by the FSA so victims have no course for recompense.

4. HMRC phishing scam
Receiving an email from the taxman saying you are owed a payment may seem like a nice surprise, but it is actually from fraudsters trying to relieve you of your cash instead.

HM Revenue & Customs (HMRC) has confirmed that reports of fraudulent 'phishing' emails have risen by 300% over the last year. Almost 24,000 such emails were reported to HMRC in August alone and the office is currently helping to shut down around 100 scam websites a month.

The emails provide a "click-through link" to a cloned replica of the HMRC website. The recipient is then asked to provide their credit or debit card details - all the information the criminals need to clear your account, and sell on your personal details.

HMRC warns anyone receiving an email claiming to be from them telling the taxpayer they are due a tax repayment not to follow the email's instructions. HMRC says it will never email or telephone taxpayers about refunds and only write to inform by post.

The top 10 scams of 2011

The top 10 scams of 2011

5. Disappearing loan scam
This scam targets vulnerable people who are in financial difficulty and unable to access credit through regular channels like overdrafts and credit cards. The fraudsters advertise loans and those that sign up are asked to pay an upfront 'arrangement' fee of around £60-£70 fee before the loan is approved. Borrowers pay the fee only for the 'loan providers' to disappear without a trace.

In truth, due to poor credit history or lack of income, the applicants are unlikely to be approved for a loan in the first place, but the fraudsters have no intent in pursuing the application anyway.

This scam has been in operation for some time but the Office of Fair Trading is warning that the number has risen dramatically. There were just over 2,000 complaints about them two years ago. However, last year, the number soared, with well over 3,000 complaints. The OFT has now issued a warning to tell consumers to give these criminals a wide berth.

6. Crash for cash scams
While honest motorists battle rising insurance premiums, those to blame for the price hikes continue to undertake fraudulent claims. Insurer Direct Line reported a hike in the number of 'crash for cash' scams this year – where fraudsters fake accidents by making unnecessary emergency stops at busy roundabouts or slip roads, forcing motorists to crash into them. They then make bogus claims to the innocent motorist's insurer, often including fictitious injuries and passengers.

In August a pair of brothers were convicted of masterminding a £12m crash for cash scam. Rezwan and Rehan Javed paid drivers up to £500 a time to stage accidents that would then lead to a series of bogus insurance claims. Their company, North West Claims Centre, would create invoices for such things as car recovery, salvage and car hire, which they would then pass onto the motorist.

The costs would be covered by the insurance companies of the innocent motorists, and the pair raked in hundreds thousands of pounds in the process. The scheme was uncovered after one of the drivers they paid to stage accidents repeatedly used the same roundabout for his crashes. Nearby workers recognised the man as the same driver involved in multiple accidents and reported him.

7. Driving school scam
Learner drivers have been taken for ride by being unknowingly taught by trainee instructors. An investigation by the AA found up to 27,000 extra driving tests have been failed in the last year because one in 10 learner drivers are unwittingly taught by an instructor they do not know is learning on the job.

With research showing much lower pass rates among trainee instructors, they have cost learners over £1.7 million in additional test fees over the past 12 months, with millions more believed to have been spent on extra lessons needed to reach test standard.

The AA findings followed an expose by BBC One's Rip Off Britain revealing that some major driving schools are charging pupils full-price for lessons without telling them their instructor is a trainee.

The number of trainee instructors has soared in recent years - more than doubling in two years, to more than 7,600 by June 2010 - according to Driving Standards Agency data. This means one in seven instructors is now a trainee.

The AA is lobbying ministers to introduce new rules requiring driving schools to tell learners, at the time they book lessons, if their instructor will be a trainee.

8. One man mail scam
July saw the arrest of a Leicester postman who stole £46,686 worth of mail over two-and-a-half years. Yogeshbhai Patel, 38, was jailed for two years for stealing mail including 2,000 DVDs and 2,250 games along with CDs and other electrical equipment. He intercepting the valuable packages and spent the money on living a luxury lifestyle including helicopter rides and a trip to Las Vegas.

It is reported that while his bosses thought he was a model employee as he arrived an hour early for work at the delivery office every day, he was actually looking for packages to steal.

Leicester Crown Court heard he then ensured the valuables, destined for other postal rounds, went into his own sack of mail. Patel was caught when investigators received an anonymous tip-off that a postman was selling a large number of games and electrical items to a store in the city centre, where they found a special previously marked X-box game, out of its wrapping, on sale for £1.50.

9. Smart meter scam
The nationwide roll out of smart meters is intended to help households save money by becoming more informed about their energy usage – but fraudsters have been quick to relieve people of their cash instead.

The Trading Standards Institute reported over 200 cases where elderly homeowners have been targeted by telephone cold callers, purporting to be from their energy supplier and offering energy saving devices which could cut their bills by 40%.

The TSI tested the devices in homes where owners had fallen for the scam, only to find they both failed to satisfy electrical safety standards or deliver any tangible energy savings.

"The number of complaints we are currently dealing with is bound to be only the tip of the iceberg," said Ron Gainsford, Trading Standards Institute chief executive. "Unscrupulous criminals are using the rising energy prices as an opportunity to lure in cash strapped consumers - elderly people seem to have been deliberately targeted.

10. Thermal camera fraud
As consumers become more savvy at cashpoints by covering the keypad when entering their PIN and avoiding any machines that look suspect – so do the the fraudsters in stepping up their game to grab our cash.

Thermal cameras that track ATM pin numbers are the latest weapon in their arsenal and US scientists have warned it is the next threat for this form of crime. Researchers at the University of California at San Diego found that up to 45 seconds after a person types their pin code into an ATM machine or door entry pad the numbers and even the sequence are still readable by thermal cameras.

The thermal scam is said to be more advanced than traditional ATM machine fraud techniques, which typically involve a thief attaching a card 'skimming' reader to the ATM machine along with a pinhole camera, strategically aimed at the key pad – making it useless if the key pad is covered. With a thermal camera the sequence is recorded regardless, as the heat from a person's fingertips remains on the key pad.

The biggest threat to personal safety is likely to be use of the technology to record a door entry code - allowing thieves to come and go as they please once the image is captured.

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