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Kentucky Residents: Beware of Financial Fraud in the Wake of Natural Disasters

When natural disasters occur, scammers try to take advantage of the situation. The tips below will help you stay protected.

Financial fraud routinely follows natural disasters. Be on the lookout for these three common disaster-related financial frauds:

1. Upfront fee frauds

These are scams that charge you — often, in advance — to claim benefits, access services or apply for a disaster-related loan. Check first with your state and federal government emergency service providers. You are generally able to receive their services for free. Government employees never charge to help you obtain benefits or services.

TIP: Compile a list of emergency contacts including emergency service providers and financial service providers. Check with the Better Business Bureau to research any businesses or charities that approach you in the aftermath of a natural disaster.

2. Phishing scams

These are ploys to get you to provide sensitive personal information such as your bank or investment account information, credit card numbers or Social Security number. Phishers might impersonate government agencies or financial regulators to build credibility. They may demand account information to deposit funds from an insurance claim, a government-issued check or settlement money. Never give out personal or financial information to people you do not know — and proceed with caution if someone requests sensitive personal information. Most legitimate agencies will not ask for this information via phone or email.

TIP: Check for slight email address irregularities. Scammers like to "spoof" reputable businesses or government organizations by creating email addresses that are close but not identical to legitimate email addresses. An extra number or letter in an email address with the organization's name in it, for instance, is a red flag.

3. Stock pump-and-dump scams

These shams tout stocks and other investments with the promise of huge gains—but as the price peaks, the scammers sell their shares, pocketing the profits and leaving other investors with losses or worthless stock. The scammers who run these frauds will use any hook, including disasters, to build demand. Be wary of unsolicited phone calls, emails and text messages, including from messaging apps, about investments linked directly or indirectly to a recent disaster.

TIP: Never rely solely on information you receive in an unsolicited email, text message or cold call from a smooth-talking "analyst" or "account executive" promoting a stock. Use FINRA BrokerCheck® to verify registration status and additional information on investment professionals and firms. Check the SEC's EDGAR database to find out whether the company whose stock is being pitched files with the SEC. Be extremely wary of buying unregistered products from unlicensed professionals.

Red Flags of Fraud

Pay attention to tactics that may signal financial fraud:

  • High pressure: No reputable financial professional should push you to make an immediate decision, or tell you that you must "act now." If someone pressures you to decide immediately on a financial opportunity, or directs you to pay an upfront fee to receive disaster-related financial assistance, steer clear. Even if no fraud is taking place, this type of pressure is inappropriate.
  • Guarantees: Be highly suspect of anyone who guarantees that a financial offer "can't miss" or will perform a certain way. All investments carry some degree of risk.
  • Unregistered products: Many financial scams involve unlicensed individuals selling unregistered investments—ranging from stocks, bonds, and oil or gas deals to fictitious instruments, such as prime bank investments. Here is how you can Ask and Check about investments and investment professionals.
  • Scarcity: Fraudsters know how to create a false sense of urgency by claiming limited supply or time, or suggesting exclusivity. Phrases such as "limited time offer," "supplies are limited," or "you've been specially selected" are designed to provoke your emotions and make you act without reviewing an offer carefully.

You can use the FINRA Scam Meter to help spot red flags of financial fraud.

Get Assistance

If you aren't sure whether a financial offer is legitimate, or if you think the claims might be exaggerated or misleading, call the FINRA Securities Helpline for Seniors at 844-57-HELPS (844-574-3577).

Report Fraud

The National Center for Disaster Fraud, part of the U.S. Department of Justice, was established in 2005 following Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region. The Center stands ready to receive complaints related to financial fraud following U.S. disasters. Call (866) 720-5721.

Additional Resources

  • A wealth of investor information and tools, including resources to recognize and avoid fraud
  • BBB Scam Tracker: An online tool to help you spot and report financial scams
  • Ask CFPB: Ready answers to a range of questions about personal finance, including questions about disaster-related fraud
  • FEMA: How to get help following a major disaster; navigate to "disaster fraud"
  • Kentucky Department of Financial Institutions: Consumer-friendly resources and advisories

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