Fake charities and fake charity collectors are particularly insidious. They exploit the most altruistic while punishing the most vulnerable.
Scammers won’t stop for anything. Fake charities and fake charity collectors are a permanent fixture among fraudsters. But fake charities are especially quick to pop up right after a major natural disaster like an earthquake, a hurricane, a tsunami, a wildfire, or even a pandemic. When that’s what dominates social media and TV news you’ll be most inclined to respond generously. The U.S. Federal Trade Commission (FTC) regularly warns about charity scams, especially in social media, immediately after a natural disaster.
Some of these scammers will say they represent charities you’ve never heard of. The boldest fake charity collectors claim to represent a government aid agency or something that sounds like one but actually doesn’t exist. The worst of them will actually pretend they’re from legitimate, well-known organizations like the Red Cross or Salvation Army. Fake charities may even set up fake websites incorporating the names of veteran charities in order to trick the public. In 2005, following Hurricane Katrina, the Red Cross asked the FBI to investigate 15 such phony look-alike websites. Over 1,300 fake charity collectors were indicted. One fake Salvation Army website collected almost $50,000 in donations.
The scammers behind these frauds may call you at random. Or you might respond to an internet ad they placed. You may even stumble across a sympathetic-looking but phony website. The most common are fake charities that supposedly care for the needy, especially disadvantaged or starving children. The content appeals to your generosity and makes you feel guilty if you don’t respond.
Check with Government Agencies to Identify Fake Charities
Before donating, check to see if your relevant government agency recognizes the group as a charity or non-profit organization. In the United States, a legitimate charity will have tax exempt status. You can verify that with the Internal Revenue Service. Its list of organizations so recognized is public and available to everyone. All countries have parallel structures.
There is absolutely nothing wrong about saying you’ll get back in touch with an anonymous caller only after you confirm his credentials. If he objects, take that as a sign that the organization he purports to represent is illegitimate.
Who Runs the Charity?
All non-profit organizations, including charities, have boards of directors. If a charity’s website doesn’t list its directors, you should assume it had something to hide. If it does name them, they will also note their professional backgrounds, cities of residence, job titles, and even university degrees. Search for these people on the internet to confirm that they exist and the information on the web site is correct.
If you cannot confirm their details, regard the charity as suspicious at best and fraudulent at worst.
Demand to See an Annual Report
Reputable charities post their annual reports online. An annual report provides financial statistics such as the amount of contributions received, the amount of funds distributed, salaries and expenses, and the projects they sponsor. If no annual report is posted on the website, consider it suspicious. This information is not private. It has to be reported to the national oversight agency to maintain tax-exempt status.
What should you look for when you access the annual report? First and foremost, check to see what percentage of donations go to fundraising costs. Charity watchdog organizations (many of which publish lists of untrustworthy or outright fake charities) advise that it should be no more than 35%. The worst offenders have been known to allocate up to 90%, and overhead costs take up much of what’s left over. Clearly, they exist for the benefit of their employees and fundraisers, not for their purported beneficiaries.
Remember, you are not making lives better for suffering people by assuming the best and handing money over to charity scams. Fake charities and fake charity collectors will appreciate your donation. But it will only be put to good use if the charity is legitimate.
Fake Charities Will Evade Transparency
If a charity claims it works alongside, for example, the Red Cross, call your local chapter of the Red Cross to confirm that this is one of their approved projects. Same, of course, for the Salvation Army and any other volunteer organization. Legitimate charities are always willing to provide such confirmation. In the event they say they are affiliated with a specific religious denomination, call its national headquarters, or even a local clergyman or one of its houses of worship to verify.
Unfortunately, some fake charities attempt to make it exceptionally difficult for you to find out anything about them. One way is to pretend they direct all of their donations abroad. Fighting disease in Africa, for example, hunger in India or working with indigenous tribes in South America. If they claim to be doing charity work in a foreign country, contact that country’s embassy. If they don’t know, they can certainly confirm or deny it by inquiring with officials back home. That may take time, but being cautious is worth the wait. See the FTC’s advice for doing your due diligence on purported charities at home and abroad and how to report a fake charity.
Government oversight agencies do attempt to hold fake charities accountable. In 2015, for instance, the FTC, in cooperation with enforcement agencies in every state and the District of Columbia, charged four fake charities and their officers with deception and misrepresentation in raising $187 million from donors. That money went primarily to employees, their friends and families, and to fundraisers, not to the intended recipients. The defendants were banned from engaging any further in charity work, fines were imposed and two of the supposed charities were shut down permanently.
If you think you’ve been the victim of a charity scam, contact the fund recovery experts at MyChargeBack.