Charitable Donations: Give or Take?
by Vicki Colliander- Cottage Grove Crime Board Secretary
Information obtained from the Federal Trade Commission

Your charity dollars are an investment in your community, the nation, and the world. It’s wise to use just as much caution when making your charitable giving decisions as you do when making other decisions affecting your overall financial picture.

Paid Fund-Raisers
Some charities find it efficient to pay professional fund-raisers — to handle large scale mailings, telephone drives, and other solicitations — rather than use their own staff or volunteers. Professional fund-raisers are in business to make money and are entitled to keep a portion of the money they collect. If you’re solicited for a donation, you may want to ask if the caller is a paid fund-raiser and what percentage of your donation the fund-raiser will keep. If you’re not comfortable with the amount, you may want to donate to a different organization, or send your donation directly to the charity so that they benefit from the full amount of your check. 
(photo by Swamibu,- used under creative commons license)

Reducing Telephone and Direct Mail Solicitations
If you feel overwhelmed with direct mail requests for donations, you can help to reduce the number of those solicitations. Typically, when you donate to a charity, your name is placed on the charity’s mailing list. The charity uses this list to re-contact you and often rents it or exchanges it with other organizations. You can stop the sharing of your information by including a note with your donation asking the charity not rent, sell, or exchange your personal information and donation history. You also can ask a nonprofit organization to limit its donation requests to once or twice a year. If the organization fails to honor your requests, you may wish to find a different charity to support.

The Federal Trade Commission’s (FTC) Telemarketing Sales Rule applies to telemarketers who make calls across state lines on behalf of charitable organizations. The Rule restricts calling times to the hours between 8 a.m. and 9 p.m. The Rule also requires telemarketers to promptly identify the charitable organization they represent and disclose that the purpose of the call is to ask for a contribution. Telemarketers may not mislead or lie to obtain a contribution. A consumer who does not want additional telephone calls from a paid fund-raiser can ask to be placed on the fund-raiser’s “do not call” list. If the fund-raiser calls again, they may be subject to a fine of up to $11,000.

The federal government created the National Do Not Call Registry — the free, easy way to reduce the telemarketing calls you get at home. To register, or to get information, visit ­www.donotcall.gov, or call 1-888-382-1222 from the phone you want to register. You will receive fewer telemarketing calls within three months of registering your number. Telephone numbers on the registry will only be removed when they are disconnected and reassigned, or when the consumer chooses to remove a number from the registry.

Charity Checklist
Consider the following precautions to ensure that your donation dollars benefit the people and organizations you want to help. They’re good practices whether you’re contacted by an organization’s employees, volunteers, or professional fund-raisers, soliciting donations by phone, mail, or in person.

• Be wary of appeals that tug at your heart strings, especially pleas involving patriotism and current events. Although the Department of Defense does not endorse any specific war related charity, you can visit their Web site at www.army.mil/operations/oif/FAQ.html to find out about military relief societies that provide assistance to U.S. Service members and their families.
• Ask for written information about the charity, including name, address, and telephone number. A legitimate charity or fund-raiser will give you information about the charity’s mission, how your donation will be used, and proof that your contribution is tax deductible.
• Check out the charity’s financial information. For many organizations, this information can be found online at www.guidestar.org or at GuideStar, 4801 Courthouse Street, Suite 220, Williamsburg, VA 23188; 757-229-4631.
• Ask for identification. The Telemarketing Sales Rule requires for-profit fund-raisers to disclose the name of the charity requesting the donation. If the solicitor refuses to tell you, hang up and report it to law enforcement officials.
• Call the charity. Find out if the organization is aware of the solicitation and has authorized the use of its name. If not, you may be dealing with a scam artist.
• Check with local recipients. If giving to local organizations is important to you, make sure they will benefit from your generosity. If a charity tells you that your dollars will support a local organization, such as a fire department, police department, or hospital, call the organization to verify the claim.
• Watch out for similar sounding names. Some phony charities use names that closely resemble those of respected, legitimate organizations. If you notice a small difference from the name of the charity you intend to deal with, call the organization you know to check it out.
• Know the difference between “tax exempt” and “tax deductible." Tax exempt means the organization doesn’t have to pay taxes. Tax deductible means you can deduct your contribution on your federal income tax return. Even if an organization is tax exempt, your contribution may not be tax deductible. If a tax deduction is important to you, ask for a receipt showing the amount of your contribution and stating that it is tax deductible.
  
  Beware of organizations that use meaningless terms to suggest they are tax exempt charities. For example, the fact that an organization has a “tax I.D. number” doesn’t mean it is a charity; every nonprofit and for-profit organization must have a tax I.D. number. And an invoice that tells you to “keep this receipt for your records” doesn’t mean that your donation is tax deductible or that the organization is tax exempt.
  
• Be skeptical if someone thanks you for a pledge you don’t remember making. If you have any doubts about whether you’ve made a pledge or previously contributed, check your records. Be on the alert for invoices claiming you’ve made a pledge. Some unscrupulous solicitors use this approach to get your money.
• Ask how your donation will be distributed. How much will go to the program you want to support (as opposed to other programs of the nonprofit), and how much will cover the charity’s administrative and telemarketing costs?
• Refuse high pressure appeals. Legitimate fund-raisers won’t push you to give on the spot.
• Be wary of charities offering to send a courier or overnight delivery service to collect your donation immediately.
• Consider the costs. When buying merchandise or tickets for special events, or when receiving “free” goods in exchange for giving, remember that these items cost money and generally are paid for out of your contribution. Although this can be an effective fund-raising tool, less money may be available for the charity.
• Be wary of guaranteed sweepstakes winnings in exchange for a contribution. According to law, you never have to donate anything to be eligible to win.
• Avoid cash gifts. Cash can be lost or stolen. For security and tax record purposes, it’s best to pay by check.

Win, Lose or Fraud?

Congratulations! You’ve won $5,000. All you have to do is deposit the enclosed cashier’s check and wire back $2,000 to cover taxes. Sound too good to be true? It is. Fraudulent letters like this, claiming that the recipient has won a foreign lottery or sweepstakes, are sent out to unsuspecting people every day. The problem is, these people never entered the contest in the first place. This brings up a red flag for many recipients, but the lure of easy money is hard to resist. So some people follow the directions and wire the money, only to find out too late that the check was a fraud and they fell victim to a scam.

These scams impact not only the individual victim, but the business community and financial industry as well. “The impact of this is huge and the personal stories coming from the victims of these crimes cannot help but make you angry,” said John Willems, Special Agent in Charge, Alcohol and Gambling Enforcement Division, Minnesota Department of Public Safety. “These people prey on some of our most vulnerable citizens. They are willing to take the victim’s retirement savings, or even encourage them to take out a reverse mortgage on their home,” said Willems.

Banks often get caught in the middle of these scams and end up suffering financial losses. The U.S. Postal Inspection Service estimates that U.S. consumers lose about $120 million a year. Willems estimates that Minnesota businesses and consumers lose $8 to $10 million a year, though many of these frauds go unreported.

Stopping Foreign Lottery Scams
The Alcohol and Gambling Enforcement Division of the Minnesota Department of Public Safety has partnered with the Minnesota Bankers Association, Minnesota Credit Union Network, FinCrime (a network of financial institutions sharing information in a database on fraudulent activity), the Better Business Bureau, and the American Association of Retired Persons (AARP) to stop or reduce these types of fraud.

The purpose of the group is to combat lottery scams by spreading awareness and developing a database of reported scams. The database can then be used by law enforcement to track down the scammers and stop their operations. The group is growing each month with additional law enforcement agencies and businesses such as wire transfer companies and telephone companies expressing interest in assisting the effort.

Willems and his team have spent time researching foreign lottery scams, who they are affecting, and the best way to stop them. “We worked to determine what the nature of the problem was and who the victims were. Even we were surprised,” said Willems. “It was apparent something needed to be done, so we started to bring the various stakeholders together to develop what we hope will prove to be an effective strategy to attack this problem,” said Willems.

The Department of Public Safety relies on consumers to report when a lottery scam occurs. Partnering with organizations such as banks and credit unions gives the agency another opportunity to collect data on fraudulent activity. They can then pass the information about the scam on to the appropriate law enforcement agency.

“We also do what we can to disrupt the fraud activity. In some cases we may be able to disconnect telephones and work with the Postal Service to follow the flow of mail,” said Willems.

How Are Banks Affected?
Vicki Colliander of Bremer Bank in St. Paul explains that banks are affected in at least two ways: customer perception and trust, and overdrawn accounts. “Customers expect that bankers will always know about a fraud deposit item before the customer attempts to use money,” said Colliander. “After the fact, they frequently ask, ‘Why didn’t you tell me?’”

Many customers are not familiar with the intricacies of the banking system, including terms used by bankers. “They usually phrase their question asking if the funds are available. The funds are available for use by the customer, but there may still be risk that the deposited item will be returned as fraudulent,” said Colliander.

Customers run into trouble when they wire money before the cashier’s check is found to be fraudulent. “If a deposited item is returned as fraudulent and is ‘charged back’ to the customer’s account, the ‘charge back’ could cause the account to become overdrawn. By contract, the customer is responsible for the overdraft because he is responsible for everything he deposits into his account. If the customer does not have the money to cover the overdraft and the account is closed with a negative balance, the bank becomes a second tier victim of the fraud and takes the loss,” said Colliander.

What Can Banks Do?
Banks can play a big role in combating foreign lottery fraud in Minnesota. “We can’t win this fight alone; bankers need to be an active participant if we are to have any chance of success,” said Willems. “We need bankers to be sensitive to this type of fraud just as they are others. When they see this occurring we encourage them to talk with the customer about the nature of lottery/sweepstakes frauds.”

Ideally, Willems would like bankers to collect information about the scam and enter it into FinCrime so the case can be reported to and investigated by the appropriate law enforcement agency. He also stresses the importance of saving the documents that the potential victim received, including the envelope in which the documents were sent. This evidence is important for tracking and shutting down the scammers.

Educating bank staff and customers on how to recognize lottery fraud is also important. Colliander suggests training tellers and frontline staff to be suspicious of items deposited that are outside the norm for transactions on the account. “Train staff to be good listeners. Have a system in place to notify your fraud department should a customer comment on winnings or prizes they have received so action can be taken to protect the customer and the bank from loss,” said Colliander.

Colliander also recommends that banks:

• Develop a communication system that provides timely information to frontline bankers about the latest fraud checks and scams.
• Subscribe to and participate in local and national professional organizations that keep banks informed about these and other scams.
• Provide customers and non-customers with the opportunity to participate in fraud awareness meetings designed to advise on the best practices to deter, detect and defend against fraud.
• Be part of the solution. Partner with law enforcement, prosecutors and legislators to develop, contribute and support a plan to put an end to these scams.

Bremer Bank is a good example of a bank that takes a proactive approach to fighting fraud. “Our Loss Prevention Department is dedicated to gathering information and keeping our bankers informed. Bremer is always willing to participate in the development of a solution and willingly provides support to law enforcement, prosecutors and the legislature in their fight against fraud,” said Colliander.

Although foreign lottery scammers are difficult to track and prosecute, Willems believes that a proactive approach against lottery fraud will deter them from targeting Minnesota. “We will do everything we lawfully can, to make it as difficult as possible to conduct fraud in Minnesota,” said Willems.