Cross-border telemarketing fraud is a growing problem for law enforcement. Bogus lottery and loan scams, once only a problem in the United States, have spread to other countries, particularly Canada. In Canada, laws against illegal telemarketing are lax and sentences for those who are convicted are short and generally require no restitution. This has tied the hands of Canadian law enforcement.

To address this growing problem, U.S. and Canadian authorities are sharing information and tracking illegal telemarketing activity, as part of Project Colt, based in Montreal, Canada. The joint international task force formed in 1998 is focused on preventing fraudulent telemarketing originating in Canada and is comprised of officers from the Royal Canadian Mounted Police, U.S. Customs Service, FBI, U.S. Postal Inspection Service, Montreal City Police, and the Quebec Provincial Police.

How did the U.S. Customs Service get involved in investigating telemarketing fraud? In 1998, the Royal Canadian Mounted Police alerted Customs to a group of fraudulent telemarketers who were perpetrating a new scheme: impersonating U.S. Customs officers.

The scam
Many of the victims of telemarketing fraud are elderly Americans living on fixed incomes - relying on social security, pensions, or life savings. Con artists almost always target seniors, believing that they are more susceptible to scams because of their age. Typically, fraudulent telemarketers - masters at manipulation - will call seniors many times, developing a "friendship with them in order to gain their trust.

A caller from Canada, usually operating out of a "boiler room," places a call to the United States telling the victim that he has won several hundred thousand dollars in the Canadian lottery. The caller claims to be from the U.S. Customs Service, IRS, or the Treasury Department. In order to release the winnings, the caller informs the victim that he must first pay a tax or duty, often several thousand dollars. The caller gives the victim phony contact information indicating where to send the money.

If the victim questions the caller's identity, the telemarketer makes up a name, badge number, and supervisor name to lend more credibility to the fraud. The victim calls the supervisor (usually another caller in the boiler room), who confirms the story and in turn reassures the victim. The victim sends the money to the address, and then waits by the mailbox for a check that will never arrive.

And more scams
In addition to the Customs officer scam, Project Colt identified several other popular scams perpetrated by fraudulent telemarketers. Among them are recovery operations, advanced loan fees, and credit card protection (see sidebar).

In the recovery scam, callers target people who have previously been victimized by telemarketers. The caller claims to be a lawyer, judge, police officer, or income tax official. Callers tell the victim that they are aware of her past experience with telemarketers. They claim that there has been a recent settlement from a court case against telemarketers and that the victim is entitled to part of the award.

But before the victim can collect her share, she must first send in a fee to cover duties or taxes. To lend credibility to the fraud, the con artist will supply details about the person's past experience, such as the amounts of money sent and the companies involved. Recently, con artists have been telling victims that there is a "gag order" on the settlement, and that victims should not discuss the case with government officials, family members, or anyone else.

In the advanced loan fee scam, con artists advertise (usually in newspapers or financial publications) that they have money to loan to people who have had difficulty obtaining credit. The con artist gives the caller approval over the phone, but tells the victim that he must first pay a fee in order to "qualify" for the loan. Once the check is in the mail, the caller is never heard from again... until the next victim.

The credit card protection scam is the latest type of fraud identified by Project Colt. Con artists call victims offering to protect their credit cards from illegal telemarketers. They ask for a fee of between $300-$400. The victim gives the caller her credit card number to pay the fee. The caller now has the victim's credit card number, and proceeds to run up thousands of dollars in "fees and charges."

Thanks to the efforts of U.S. Customs and other law enforcement officers, Project Colt has seized and returned more than $12 million to victims of telemarketing fraud.

Project Colt identifies top 10 telemarketing scams Lottery or sweepstakes scams Recovery operations Advanced loan fees Counterfeit checks Fraudulent charitable donations Fraudulent magazine subscription sales Advance fee sweepstakes fraud "Reloading" of fraud victims Precious metals and gems Investment scam