Prize draw scams elderly of £350k

By Press Association

In the news

27 October 2008 00:00

More than 20 elderly people have collectively handed over £350,000 in a prize draw scam, the consumer watchdog warned today.

The fraud involved people being telephoned and told they had won an international sweepstakes or prize draw worth up to £500,000.

But they were told that in order to claim their winnings, they had to pay refundable taxes and insurance fees, and they were told to send the cash by money transfer to Canada.

The victims were then later informed that their prize had arrived at a UK airport, but that further sums of money were required to release it.

They were instructed to send personal cheques, often for thousands of pounds, to UK "agents", who were typically other victims of the fraud.

The victims who received the cheques had often exhausted their life savings, and were told that the money was from sponsors to help them pay the release fees for their prize.

They were told to bank the cheque and transfer the money overseas, and in doing so they were inadvertently acting as money mules, helping the fraudsters to launder the money.

Victims of the scam, which was investigated by the City of Westminster Trading Standards Service and the police, were often encouraged to borrow large sums of money once their savings had been depleted, with some people losing more than £50,000.

The OFT said one of the reasons victims were being used to launder each other's money was that many people were less suspicious if their money was sent to a genuine UK address, while people also believed that the prize win must be genuine if they were receiving cheques from sponsors.

In other cases it was for practical reasons, particularly if the victim lived in a rural area and did not have access to money transfer facilities, or they did not have a valid passport.

Mike Haley, OFT director of consumer protection, said: "Prize draw scammers are becoming ever more sophisticated and devious in their attempts to con victims out of their life savings.

"It is despicable that the scammers are exploiting innocent victims to launder money and help defraud other vulnerable people."

One victim, a 68-year-old widow who lives in West Sussex, innocently laundered a total of £21,000 after receiving seven separate cheques because she did not have enough money herself to send over. She did not profit from any of the transfers.

The grandmother, who does not want to be identified, said: "Because they told me I had won hundreds of thousands of pounds, sending money transfers for a few thousand pounds each time didn't seem out of proportion.

"When money turned up from the sponsors, it seemed a genuine prize draw as I wasn't out of pocket.

"I was gobsmacked when I found out. I felt a bit daft that I hadn't cottoned on sooner but my husband had died the year before and I was still sorting things out after that.

"I feel sorry for the people who sent the money because sadly they won't get it back."

Another victim, an elderly man from Devon, was encouraged by the fraudsters to borrow money once he had exhausted his own savings. He remortgaged his house to raise £15,000 for the scammers and has since defaulted on his loan repayments and his bank has threatened legal action.

Elsewhere a 92-year-old man from Warwickshire lost thousands of pounds of his own money and laundered more than £17,600. The scammers targeted him after his wife died. She was the scammers' original target and had already lost £15,000.

The fraudsters adapted their scam to each victim, depending on how much money they thought victims had or could raise. Not all victims were used as money mules.

Two other victims lost more than £47,000 each and a third has lost more than £35,000.

The OFT urged anyone who was told they had won a large cash prize to be sceptical, adding that people were never asked to pay taxes, customs duties, insurance or other fees on genuine winnings before they received them.

Anyone who is contacted about an alleged prize draw which they think may be a scam should contact Consumer Direct, which is run by the OFT, on 08454 04 05 06 or www.consumerdirect.gov.uk