There are so many deserving causes out there, with charities across the globe helping people from all walks of life, as well as aiding animals, our environment, and more. And thankfully a huge number of warm-hearted people are willing to donate their hard-earned money to enable these charities to carry out their work. Unfortunately, a few people see charities as opportunities to take some cash for themselves.
The internet is rife with all manner of scams and hoaxes, many of them preying on people’s willingness or desire to donate to charities. Whether it’s via a fraudulent website, a fake story on a legitimate site, or a phishing email, crooks are ready to tug on those heartstrings to make a quick buck. To avoid becoming the next victim of charity fraud and ensure your money goes to a worthy cause, it’s important to know what to watch out for.
In this post, we discuss some of the most common charity fraud schemes making the rounds and provide tips on how to securely donate online.
Types of charity fraud
Most charity scams simply play on the emotions of victims to persuade them to hand over donations to fake charities and organizations. Communication might take place via email, social media, text message, or phone.
Fraudsters use a range of supposed causes as fronts for their schemes, but will often go for something that has broad appeal, such as helping sick people, seniors, children, or animals. For example, in 2018, the Federal Trade Commission (FTC) started cracking down on fake charities for veterans, with one alleged scam group having brought in $20 million between 2014 and 2017.
Charity scams often make some excuse as to why the matter is urgent, and fraudsters can sound very convincing. Aside from requesting money directly, the scammers might persuade victims to hand over banking information, credit card details, and other personal information.
Here are some of the common charity scams you or a loved one might be confronted with:
Phishing scams involve the perpetrator duping you into handing over some type of information. For example, they could be looking for your banking details to steal funds directly from your bank account or they might attempt to steal a username and password to access a social media or other type of account.
One way criminals can glean this information is by posing as a charity. Some charity scams that involve phishing will simply ask you for a donation and request your banking information. A criminal will impersonate a genuine charity that you’re familiar with or perhaps purport to be from an organization you’ve never heard of.
In other types of phishing scams, an email might include a link to a phishing site. This is a fake website that mimics a real one in order to dupe you into entering personal information such as login credentials or payment information. When you click the link and enter information, your details are harvested and used to make purchases or sold to someone else.
These types of scams are especially prevalent (and more successful) after a natural disaster, such as an earthquake, hurricane, tsunami, or during a major event, such as Movember, Pinktober, or International Charity Day. Christmastime also offers opportunities for criminals, as people are often looking to donate at this time of year.
Some phishing attacks are targeted at a specific individual or group of individuals. This is referred to as spear phishing and typically involves the criminal already knowing some information about you, perhaps gleaned from a prior phishing attack or through social media.
In the case of charity hoaxes, the fraudster can use personal details about you to decide how best to request money or information from you. For example, if your social media page is plastered with images of you and your ten dogs, then an email purporting to be from a local humane society might be just the ticket.
Other information that can be used in charity scams include your religion, whether or not you have children, health issues you or your loved ones have faced, and so on.
Similar to spear phishing, affinity fraud involves using information about the victims to develop trust. Affinity fraud schemes are are investment schemes but they prey on identifiable groups such as the elderly or a religious community. They may also target charitable organization or groups associated with certain charities. Those committing the fraud will often pose as a member of the group in order to persuade others to join an investment scheme. Many of these are “Ponzi” or pyramid-style schemes where the first investors recruit the next wave and so on.
This charity hoax is a twist on a traditional phishing email and plays doubly on your conscience. Instead of asking you directly for a donation, the fraudster will thank you for already having made one. By thanking you for something you didn’t do, the hope is that you will feel guilty and respond with a pledge. The original sender then takes your payment details and accepts your money or uses your information in other crimes.
Inflated or recurring payments
Some charity scammers will not only accept your donation but will take more money than you’ve pledged. Once you’ve decided to hand over a small sum, they will use your payment information to take a much larger sum.
Others are a bit more sneaky: realizing that you will likely notice a large sum withdrawn from your account, they set you up for recurring payments of the original amount, and hope that you don’t notice.
Charity tax shelter schemes
Who wouldn’t jump at the chance of a significant tax break? Abusive charity tax shelters (or gifting tax shelters) basically promise inflated tax receipts in return for donations. The idea is that you donate a specified amount, often $1,000, but get a tax receipt for a much larger amount, say $5,000. Once you’ve claimed this on you tax return, it would leave you better off than when you started, making a profit.
The masterminds behind these schemes are very persuasive and share elaborate stories to make their propositions sound legitimate. Indeed, there are some pretty complex versions of this scam and they be very large in scale.
These schemes sound too good to be true and they are. The US Internal Revenue Service (IRS), the Canada Revenue Agency (CRA), and tax agencies in other countries have caught on and are not accepting these types of claims in tax returns. Tax shelter schemes are a huge problem in Canada, and by 2018, the CRA had reviewed more than 200,000 returns and denied over $7 billion dollars worth of tax credits due to such schemes.
Bear in mind, not only are you handing over money to a scammer, you will also be conducting tax fraud if you submit the forged receipt. In most cases, after reassessment, the gift is deemed to be zero, and you have to pay any outstanding interest and penalties on the amount you would have owed.
Fake crowdfunding stories
GoFundMe, FundRazr, and similar sites are crowdfunding websites where just about anyone can set up a page and request online donations that are handled through the site.
Some pages request help for things like planning celebrations and special events, while others involve sending donations to help people in need. For example, if a family has lost their home in a fire, neighbors might set up a GoFundMe page to ask the public to help by donating.
While there are vetting processes in place and most pages are legitimate, there are a few people that damage the reputation of others by making up stories just to get money. In one notable 2018 case, a New Jersey couple and a homeless man were accused of fabricating a feel-good story that prompted them to raise $400,000 in donations. In another case, parents reportedly faked their child’s serious illness in order to raise thousands of dollars.
GoFundMe has a dedicated page with advice to help you determine if a GoFundMe page is safe to donate to. It will also refund donors if a campaign is found to be fraudulent. These scams are so prevalent that someone even set up a dedicated site (gofraudme.com) to notify people about fraudulent campaigns.
Tips for donating securely
Now that you know about some of the scams to watch out for, here are some tips to ensure that your generosity isn’t taken advantage of and your money ends up in the right place.
1. Don’t respond to solicitations for donations
The best way to ensure you don’t get caught out is to simply not respond to any solicitations for donations. However, we’re not saying you shouldn’t donate to charity at all. Instead, you should think carefully about what causes you would like to donate to, find related charities, and then go directly to their website or office to make a donation.
2. Do some thorough research
When you’re looking for a worthy cause to donate to, it’s worth doing plenty of background research. In many countries, charities are required to register before they can accept donations. You can check that a charity is registered by visiting the appropriate site for your country:
- US: In the US, you can use the Tax Exempt Organization Search, although bear in mind this only tells you if your donation to a certain charity is tax deductible. You can find out more about specific charities in each state by contacting the appropriate state charity regulator.
- UK: There are several UK sites for searching for registered charities, split by region. The Charity Commission covers England and Wales, but you also have the Scottish Charity Regulator, and the Charity Commission for Northern Ireland.
- Canada: Registered Canadian charities can be found on the Government of Canada website.
- Australia: For Australian charities, you can visit the Australian Charities and Not-for-profits Commission (ACNC) Charity Register.
Even if you’ve found a charity you think is legitimate, it might still be worth doing some further digging just in case. For example, you can enter the charity name into a search engine along with “review,” “scam,” or “complaint” to yield some potentially interesting result.
Bear in mind that even charities that are legitimate might only give a small portion of your money to the cause. A 2013 report claimed that America’s 50 “worst charities” devoted less than 4% of donations to cash aid for their cause. For example, a diabetes charity raised almost $14 million, with just $10,000 going to patients. In many cases, people running the charities will pay their own companies (or those of family members) exorbitant rates for services like consulting or marketing.
Clearly, it’s worth doing some research into where the money is allocated. A worthy charity should be able to tell you exactly where donations are going and how they will be used. In the US, a few sites tell you how charitable organizations conduct business and spend money. BBB Wise Giving Alliance, Charity Navigator, CharityWatch, and GuideStar are just a few.
3. Look out for phishing links and sites
If you are intrigued by a particular email and want to learn more, then it’s important to proceed with caution. Look out for phishing links which could lead you to a fake website. If it’s a familiar charity, make sure that the spelling of the name is correct. Or if it’s unfamiliar, do some background research online to see if it’s legitimate.
If there’s a link in the email, hover over it to see the URL (where it’s going to direct you). Be especially suspicious if the URL has no relation to the email topic. It’s actually best to avoid clicking links in these types of emails altogether. Instead, try to visit the charity website by searching for it in Google.
If the email includes a signoff with someone’s name and title, you can check the charity website to see if they’re listed, or even go to a site like LinkedIn and search for them. Better still, you can call the charity directly to ask if the email is legitimate. Just remember to go directly to the charity site for contact information. A number on an email or a linked site could well be a fake and part of the scam.
4. Don’t send banking information or mail cash
Virtually every legitimate charity these days will provide a secure means to donate, such as through an online payment platform like PayPal or some other secure credit card payment platform. If they’re asking you to send banking details via email or to call and provide them, this should be a big red flag.
Similarly, requests to send cash or checks should be treated as suspicious. Checks are still fairly commonly used for legitimate charities, especially in the US, but if someone asks you to make out a check to an individual rather than a charity, this is a big no-no. Of course, never arrange to meet with someone in person to hand over a donation as you could be putting yourself at risk of physical harm.
One more thing you should watch out for is a charity that refuses to send an official receipt. With charity tax receipts being commonly used for tax credits, it’s pretty much a given that donations over a certain amount will warrant a receipt. Also, check that the receipt actually has the charity’s name and tax number on it and is not just a random letter.
5. Discuss charity scams with friends and family
Scammers often target vulnerable people, especially seniors, and even children, who they think will be more likely to hand over their cash or personal information. Talk to your friends and family regularly about these types of scams and what to look out for.
New scams surface all the time, so keep abreast of them in the news so you know what and who to be wary of.
How to report charity scams
If you suspect a charity scam, or any other type of online fraud scam, you can report it to the authorities listed below.
- US: Federal Trade Commission (FTC) Complaint Assistant
- UK: Action Fraud
- Canada: Canadian Anti-Fraud Centre
- Australia: Scamwatch
Note that if you or a family member have fallen victim to one of these scams, and for example, have lost money or become the victim of another crime such as identity theft, then you should report it to your local police.
Image credit: “For the Poor Charity Box” by Steven Depolo licensed under CC BY 2.0