What are Charity Scams?

In 2021, American individuals gave over $320 billion to charitable causes. People give to charity for various reasons, including a sense of duty or religious obligation. However, according to a study in Psychology Today, most people donate for a very simple reason: because they were asked.

Many donations occur in the spur of the moment, and there's little time to research the organization adequately. This opens the door for fake or dishonest charities to scam money out of well-intentioned Americans.

Definition of a Charity Scam

Charity scams include any attempt to steal money from people under the pretense of charity. Instead of passing donations along to legitimate causes, charity scams line their pockets and use the funds to trick others.

Scammers frequently run cons after disasters like natural disasters or tragic events, or after a trend emerges like blockchain and the crpyto scams that followed. They take advantage of people's empathy to push them into a poor decision.

Most Famous Charity Scams

Charity scams can range from telling complete lies to slightly changing critical information. In some cases, donation funds pass through many hands, which increases the chance of fraud. There are even cases of reputable charities committing crimes without even knowing it.

While these scams affect all levels of charity, there are many extreme examples.

The Foundation for New Era Philanthropy

In the 1990s, the Foundation for New Era Philanthropy targeted legitimate charities for a Ponzi scheme. This organization promised doubled returns on investment by claiming connections to high-level "secret philanthropists."

This scam continued to steal money by using new investments to repay old ones and, at the end of six years, had embezzled $135 million.

The danger of Ponzi and Pyramid schemes is that the charities don't realize they've been deceived until everything is uncovered. Outside parties often perform fundraising, and investors see substantial returns. However, this money was taken from other charitable organizations, losing the donor's trust.

United Way of America

United Way is a highly respected charity that works in countries around the globe, but fraud can happen in the most trusted organizations.

William Aramony acted as United Way of America's CEO for over two decades. During Aramony's divorce, he was accused of using the money raised by affiliated charities to fund his private life. This included lavish vacations, expensive gifts to friends, and support for a teenage mistress.

When investigated, United Way of America's expense reports were dubbed sloppy with inattention to detail. The documentation failed to differentiate personal and business expenses, leading to Aramony's retirement in 1992.

Aramony and two associates were later Federally indicted after an investigation by the FBI, IRS, and United States Postal Service. The investigation charged him with defrauding United Way of America for $1.2 million.

Police Survivors Fund

Justin White created the Police Survivors Fund to support the families of police officers killed in action financially. This message was explained in solicitations, but the specifics of the charity were left out.

In fact, the Police Survivors Fund did not have any connection to law enforcement offices, and only five percent of the donated money was given to the families of fallen officers.

The involved telemarketers guilted potential donors by mentioning the hardships of widows and children. Their strategies even took advantage of tragedies like the September 11 terrorist attack to abuse people's compassion and patriotism.

A typical sales pitch told people that others gave $911 as a symbolic gesture. Over three years, White scammed donors out of $440,000, with only $14,500 given to surviving families.

Much of the Police Survivors Fund's credibility stemmed from its "official-sounding" name. Double-checking a charity's source, no matter how credible it appears, is essential to ensuring your donation goes to those in need.

The Warning Signs of a Fake Charity

The above examples show how hard it is to identify a fake charity. Donations could be fed into a Ponzi scheme or misused by the greedy executive of a reputable organization.

In short, being absolutely sure of where your donation goes isn't feasible. However, there are warning signs that make it clear when you shouldn't trust a charity. Noticing these red flags gives you the best chance of preventing your altruism from being exploited.

Desperate Need of an Immediate Donation

Shady organizations often goad people into making an impulsive donation. Their telemarketers use buzzwords to play with people's sympathy or fear without providing details on their "charity."

The Police Survivors Fund even implied that police officers might not respond to emergency calls if people refused to donate. These are shallow attempts to get donations before their victims can do any research.

A Stress on Cash

Cash doesn't leave a paper trail, which makes it perfect for charity scams trying to avoid investigation. It's rare for a charity to refuse any level of donation or assistance. Most will even be excited to direct you to volunteer opportunities if you can't make a monetary contribution.

If a charity approaches you and demands a cash donation, that's a glaring red flag. End the communication without giving any personal information and do some research on your own.

Very Minimal Proof of the Cause

Charities in the United States must register with the IRS every year. Most will also get further accreditations to prove how they distribute donations. Beware of charities that can't reference this information.

Additionally, scammers may direct you to their "official" website. Most charity site addresses will end in .org rather than .com.

How to Protect Yourself

Most charity scams are avoidable with a bit of personal research. Not only does this keep you informed, but it's a great way to learn how to interact with causes you care about. Here are a few places and tools to rely on when confirming an organization's identity.

Check with Watchdogs

Searching for a charity through the Wise Giving Alliance will teach you a lot about it. Charities must follow strict standards for accountability, which include:

• Strong Governance Protocols
• Overall Effectiveness Toward their Mission
• Financial Transparency
• Accreditation Process

Donors can be sure that any organization listed here allocates at least 65 percent of its finances towards its reported cause.

Use Search Tools to Validate and Verify Information

Building trust begins with transparency and honesty. Many charities publicly list their contact information and make representatives readily available to achieve this. If you cannot find a public list of this information, you can also use search tools to locate things like phone records, email records, and even public headquarters addresses.

Contacting the charity with prepared questions lets you work on your terms. You'll learn much more than what's said in a charity's rehearsed sales pitch. Some good questions to ask include:

• What's your mission?
• What progress have you made toward your goals in the past year?
• What references do you have for past success?

You can also find volunteer reviews and organization history with a quick search. The easier this information is to find, the better. Be leary if you need to perform extensive research in order to find what should be public knowledge.

Avoid Sharing Personal Information

The best way to protect yourself from danger is not to share any personally identifiable information. Trustworthy charities respect the privacy of donor information to build public trust.

If a telemarketer is stubbornly digging into your personal information, you should hang up immediately. Some fraudulent scammers will use a charity as a pretense to steal your information and sell it to third-party buyers.

Visit the charity's site and confirm their donor privacy policy before interacting with them further. Ensure their policy includes clauses for no sharing and opting in/out of future fundraising opportunities.

Conclusion

Most Americans are happy to give when asked. Sharing good fortune and giving to those in need leaves a warm feeling. However, many dark-hearted individuals aim to exploit people's good nature.

Charity scams are malicious setups designed to steal money in the name of philanthropy. Telemarketers contact donors through official channels and pressure them into a donation. These calls typically ask for an immediate cash donation and provide vague details on the charity itself.

There are numerous ways to check the validity of a charity. The Wise Giving Alliance keeps strict and detailed records to prove a charity's honesty and effectiveness. Reading a charity's online reviews and past fundraising efforts will also help you grasp its character.

So, if you're thinking about future donations, just a little time to research a charity ensures your money goes into the pockets of those in need.