Five Common Charity scams & Its Prevention

715 min


2046
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Charities, like all industries, are vulnerable to fraud and can make good targets for thieves. The kindness and trustworthiness of many volunteers associated with a charity and the high volume of cash flow make it difficult to notice suspicious transactions. Other than that, the absence of efficient audit mechanisms at some organizations and other factors contribute to charity fraud. Different scams can affect charities of all shapes and sizes, and new schemes are constantly emerging. Some of the most regular types of charity scams include the following:

Internal theft

Misuse of donations

Although it is never comfortable to consider that employees at your nonprofit organization could commit fraud, the truth is that more and more businesses are experiencing this. Misusing funds can take many forms, such as cash theft and fraudulent usage of charity credit cards. Regular audits of finance departments and the person administering them is necessary to prevent this.

Fabricated costs

Claiming excessively inflated, fictitious, or inappropriate expenses or overtime is another typical internal fraud technique. Ensure all expense claims are presented promptly, are accurate, and include the receipts required by law.

External fraud

False billing

Outside con artists use false invoices to steal money from charity. These fraudulent invoices frequently use incorrect purchase orders and supplier names to collect payment for goods or services that haven't been delivered. Unfortunately, charities of all sizes are susceptible to this kind of scam, and staff frequently pay these invoices because they believe they must have gotten the items or services.

All invoices should have an owner who can confirm that the products or services have been received and consult the owner before the invoice is paid to prevent false invoicing fraud. 

Additionally, charities should know that internal risks, such as dishonest employees paying their false invoices, threaten invoice fraud. Unfortunately, the frequency of this kind of claim has been rising steadily.

Unauthorized fundraising

It is a con that solicits people to donate money to a cause by preying on their compassion and kindness. Most frequently, the request will be connected to a well-known incident, such as a flood or earthquake. Fraudsters will ask for money via various channels, including email, a collection box in a public place, or a credit card payment page. They misappropriate the names of other charities more frequently than not before keeping the donation money. The Organization Commission advises trustees to take the necessary actions to halt unauthorized fundraising (including legal action if required) and ensure that all donations are given to their charity.

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Credit card phishing

The Charity Commission warned organizations about a credit card scam last year in which con artists claim to want to donate a substantial amount of money but only provided the organization pays a sizable portion (often 50%) of this money to their other preferred charity.

The "gift" is being made using a credit card that has been stolen, and these bank details are those of the fraudster's account. As a result, charities need to look for unusually high donations and complicated terms and restrictions.

How to prevent them

Before donating to a nonprofit organization, it's crucial to conduct some investigation, particularly if you get an unexpected email or phone call from a total stranger.

The following are some suggestions to keep in mind when giving to a cause:

  • The easiest way to donate or offer assistance is to speak with a charity directly.

  • If you are unfamiliar with the company, look them up online and do some research.

  • Ask them if your friends, relatives, or coworkers have heard of the group.

  • Verify a company's credentials. A registered charity must be legitimate.

  • Obtain the company's name, address, and phone number.

  • Never provide online account information, personal information, or currency. It is preferable to pay by check rather than credit card for security and tax reasons.

  • Never open emails from charities that seem strange or unexpected. You might unknowingly install harmful software if you click on a link or attachment.

Conclusion:

The FBI cautions that while charity fraud schemes can happen at any time, they are more common following well-publicized catastrophes and disasters. Through emails, social media posts, crowdfunding websites, or cold calls, charity scammers solicit money. The FBI advises exercising caution and conducting research before charitable donations because scammers target weak spots.

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2046
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