Red Flags: How to Detect and Avoid Financial Fraud

By Scott Hamilton, CFP®

Modern technology has enabled bad actors to commit common scams that are a plague on the financial industry. Fraudsters take advantage of people’s credulity and desire to do the right thing, and it has resulted in the financial ruin of many well-meaning Americans, especially those of retirement age.

A basic rule of thumb in detecting these common scams: if it sounds too good to be true, it probably is. Another important note is that surprises are rare in legitimate finances—if an unusual situation crops up suddenly, it’s important to verify whether it’s legit. Most of the time, it isn’t.

Still, fraudsters are getting smarter and more resourceful, and it’s becoming increasingly difficult to recognize common scams. Here are a few of the newest and most threatening scams out there and how to combat them. 

AI Simulations

Artificial intelligence (AI) has evolved to the point where it can be used for virtually anything, including impersonating family or friends over the phone. One of the common scams of the AI era involves fraudsters using bots to call targets, delivering messages that sound convincingly like a close family member or associate.

Generally, the message proclaims that the fake family member is in an emergency or tight situation that calls for the quick delivery of cash. This is often followed up by calls from an “authority” like a public defender, which increases the pressure on the recipient.

Sometimes these callers “spoof” the caller ID to make an incoming call appear to be coming from a family member or a legal entity such as the Sheriff’s Department.

The best way to guard against this ploy is to immediately contact the friend or family member the con artist posed as—being sure to use the contact information you have saved for them. The vast majority of the time, it turns out that nothing is actually wrong.

Check Fraud

Another common scam fraudsters take part in is stealing written checks sent from residential mailboxes. They use alcohol or other chemicals to remove the payee’s name and replace it with their own. Alternatively, they may monitor your mailbox for checks you’ve received and replace your name.

There are several ways to avoid falling victim to this scheme.

You could use a mail slot on your front door so your mail goes straight into your house, or you could take out a P.O. Box or make all deliveries from within the post office. You can also fill in the payee line on checks completely by drawing a long, thick line after the payee’s name to make it harder to erase. And if you do write a check, make sure you’re using a black gel pen. These types of pens have ink that’s more difficult to remove. 

Bank Impersonations

Someone posing as a bank employee may call you and demand you remit money to them via wire transfer. They may claim it’s to reverse fraud on your account that didn’t actually happen.

Remember, if a message sounds unreasonably urgent and places a lot of pressure on you, chances are good that it’s a scam. No real bank would ever contact you with this kind of demand. It’s even more telling if they ask you to provide your account information. Wouldn’t your bank already have those details?

Guard yourself by calling the bank directly. There should be a contact number on your account statement you can use to call and report the fraud.

Social Security Fraud

Recently someone attempted to fraudulently claim my Social Security benefits. They had scheduled a claim meeting on my behalf. Fortunately, I received a notification from the Social Security Administration (SSA) and was able to call and cancel the meeting in time. To protect yourself, set up an account at using ID.ME, verify your earning history regularly, and be aware that scammers can use personal information leaked from data breaches like the one at Experian.

Other Common Scams

Other frequent financial swindles include:

  • Calls from “the IRS”: Scammers impersonate IRS agents, threatening arrest or legal action unless you immediately pay a supposed tax debt.
  • Demands to refund a payment you supposedly received: Fraudsters claim that you received an overpayment and demand a refund, often leveraging fake payment notifications or altered account balances.
  • People claiming to be with a utility company: They threaten to shut off service if you don’t pay immediately over the phone.
  • Requests from online strangers and new connections: Scammers pose as new friends or romantic interests online, building trust before requesting money for fabricated emergencies or investments.
  • Reports that your computer is infected with a virus: Cybercriminals pretend to be tech support, claiming your computer is infected. They ask for access to your computer and sometimes charge fees for unnecessary or fake software to “fix” the issue.
  • Calls saying you’ve won the lottery or have a once-in-a-lifetime opportunity: Con artists inform you of a large lottery win or exclusive investment, but require up-front fees or personal information to claim the supposed prize.

Generally speaking, if the message is urgent, the circumstances are a surprise to you, or the deal sounds improbably favorable, the chances of it being a scam are sky-high.

Get Financial Clarity to Avoid Common Scams

Hamilton Financial Planning focuses on helping retirees and pre-retirees gain financial clarity. As part of our duties, we offer guidance on how to identify and avoid the tricks unscrupulous actors use to steal money. We’re always looking for ways to safeguard assets and retirement savings from crime.

Schedule a complimentary get-acquainted meeting online or reach out to us at 512-261-0808 or

About Scott

Scott Hamilton is founder and chief financial officer at Hamilton Financial Planning, a wealth management firm that specializes in providing comprehensive financial planning for retirees. With over 20 years of experience in the financial industry, and having completed over 250 financial plans for retirees across all industries, but mostly the oil and gas industry, Scott is passionate about providing his clients with the tools and insight they need to achieve their financial goals. He has a Bachelor of Business Administration in finance from Texas State University and an MBA in international finance from Pepperdine University. Scott has also been happily married to his wife, Gayle, for over 25 years. To learn more about Scott, connect with him on LinkedIn.