That sinking feeling: What to do if you fall for a scam

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When it comes to scams, we see a lot of coverage focused on prevention: how to spot a scam (like this piece from this very newsletter), how to stop your relatives from being scammed, and various horrific news stories about unfortunate people who’ve fallen victim to a scam and lost thousands.

Australians lose hundreds of millions of dollars every year to scams.Credit: Michael Howard

These constant reminders about the perniciousness and prevalence of scams are important given we’re still losing roughly $20 million a month to various investment, romance, and phishing schemes run by cybercriminals, according to the ACCC’s Scamwatch division. And obviously, prevention is better than the cure, as they say.

What’s the problem?

But for the thousands of people getting scammed each month, what comes next? Being scammed can be devastating, and, unlike lightning, scams can strike twice. The ACCC reports one in three victims have been scammed more than once, often by fraudulent companies who claim to be able to help you get your money back.

Beyond this, losing your life savings in a scam can be mentally and financially debilitating. A study of Australian fraud victims from 2016 found the majority of respondents reported “profound emotional and psychological impacts” following their victimisation. Many also reported significant financial impacts, though the results varied, with some being worse off than others.

What you can do about it

If you fall victim to a scam, here are some steps to follow:

• Act fast: Before considering anything else, as soon as you get scammed, report it to your bank or other relevant financial institution. Ask them to stop all transactions and look into recovery. If you move quickly enough, there is a chance of getting at least some of your money back, albeit a low one, and it’s worth noting banks in Australia are not obliged to compensate customers for scams. After you’ve done this, put in a call to identity theft and cyber support service IDCARE on 1800 595 160. They can help you take action and put a plan into place to limit any further fallout.

• Watch out for follow-ups: As mentioned, it’s common for scam victims to be targeted twice, as cyber criminals will view them as an easy target. Data stolen during a scam such as phone numbers and other identifying information can be used to formulate new, more sophisticated scams so it’s important to stay vigilant. The ACCC specifies to watch out for people offering to help recoup your money – there are companies out there that claim to be able to assist with this, but in reality there’s little they can do that you can’t just do yourself, and you could find yourself victim to another scam.

• Plan for financial recovery: Once you’ve come to terms with your situation (and found out if there’s any chance of getting your money back), it’s time to think about how you can rebuild your finances, says financial advisor Helen Baker. Your ability to do this will depend heavily on your age and the amount lost, she says, as no amount of savvy budgeting will matter if you’ve remortgaged the house or if you’re retired and no longer earning consistently. “This could involve tweaking the household budget, adjusting investment strategies (e.g. changing your risk weightings or selling well-placed assets to unlock capital), accessing equity in your home, delaying retirement, or temporarily taking a second job to boost your income,” Baker says. This can feel like an insurmountable task, so it may be wise to see advice, either from a planner, or from somewhere like your superannuation fund, to see what options are available for you. It’s also important not to beat yourself up too much – many people fall victim to scams, what’s important is moving on.
• Tax and other options: While you can’t, generally, claim money lost to a scam as a loss for tax purposes, in some limited situations you may be able to. According to the ATO, if the nature of the scam was an investment one, where you owned assets such as shares or cryptocurrency which were then somehow lost due to a scam or fraud, then you may be able to claim those assets as a capital loss. However, you can’t claim a loss on something you never actually owned, which may exclude many scams. Best to get advice on this from an accountant.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.