In the United States a charitable foundation is an organization which has formalized the process of relieving poverty, advancing education, supporting disaster relief, and/or assisting with community projects. Charities are non-profit organizations which can take the form of either a non-operating private foundation (trusts) or operating foundation (public charities). When many of us hear of a tragic event that hits close to home, we give our support with an open heart in order to help others in need. Unfortunately, with this act of kindness we could be creating an environment that is highly vulnerable for fraud perpetrators and fake charity scams.
Charity fraud is the intentional act of deception committed by an individual or group of individuals who ask for contributions in the name of a worthy cause. Perpetrators of charity fraud will take advantage of a tragic event to appeal to the compassion and empathy of donors. They make material misrepresentations about their charity in order to gain the donor’s confidence and trust, and then use high pressure methods to convince them to donate.
Fraud in charitable organizations occurs when legitimate organizations or the individuals working for the organization misuse donations, or when illegitimate organizations or individuals collect donations on behalf of a sham organization. Perpetrators of charity fraud prey on the generosity of their donors through a variety of means. Some individuals may try to get the attention of a passerby on the street requesting cash for the hungry or disabled while others may use telemarketing scams in which the perpetrator tries to convince the potential donor of their legitimacy and the immediacy of financial need for a worthy cause. Yet, the most useful tool provided to the fraud perpetrator has become the internet. With the right emotional appeal together a mix of anonymity, there is almost no better way to convince donors that their money is going towards a worthy cause. Some of the internet’s most notorious charity frauds include the Tsunami Victim scam, 911 Charity scam, and the Nigerian 419 e-mail scams.
One of the more recent charity scams to appear on the internet was when hurricane Katrina decimated New Orleans. Following the tragedy, the Federal Bureau of Investigations estimated that over 2000 websites sprung up claiming to provide either funds or aid to the victims of the disaster. Fraud perpetrators who were following the news closely began creating websites several days before the storm had even made landfall. Internet fraud experts told ABC News that “in the days leading up to Hurricane Katrina, they saw dozens of websites being registered with Katrina in their names”. Many of these websites were created to look exactly like the website used by The American Red Cross, but once the donation was made it was sent to a third party, while the contributor was actually redirected back to the legitimate American Red Cross website. Of course none of the...