Fake Charities Can Be Almost Impossible to Spot. Here's How to Make Sure Your Donations Get to the Right Place

Tetra Images | Tetra images | Getty Images
  • In times of crisis, people often instinctively want to help. However, there are just as many scammers trying to capitalize on the environmental, social and geopolitical unrest.
  • Here are tips to make sure your donations get to the right place. 

Whether it's an effort to support women's rights or gun control, fight climate change or help Ukrainian refugees, more Americans are giving to charity this year in response to global challenges.

However, there are just as many scammers trying to capitalize on the current environmental, social and geopolitical unrest.

"Any time there's something that is in the spotlight, there are going to be folks that are taking advantage of that," said Kevin Scally, chief relationship officer at Charity Navigator, which independently evaluates and rates nonprofits.

Charity impersonation scams can be hard to spot

Not only are charity scams now on the rise but they are also increasingly difficult to identify, he said.

"The methods of outreach are becoming more sophisticated," Scally said. "It branched into charities being misrepresented or using that organization's name or likeness." 

New reports show scammers are often impersonating better-known groups and applying for tax-exempt status. Since the IRS' vetting process does little to determine whether a charity is legitimate, it can be almost impossible for donors to weed out fakes with names that sound like real charities and have IRS approval.

The IRS also recently issued a warning to taxpayers about fake charities. "Some dishonest telemarketers use names that sound like large well-known charities to confuse people," according to the release.

More from Personal Finance: 
Here’s how much cash you need to ride out a recession
5 steps to take now to prepare your finances for a recession
Experts see a recession coming. How to prepare a portfolio

In one example, a 501(c)(3) organization formerly called the Cancer Society of America posed as the American Cancer Society online and on social media and cashed more than 150 donation checks made out to the well-established charity. The organization was permanently dissolved after a settlement order with the Federal Trade Commission.

In another case, the now-defunct Cancer Fund of America was one of four tax-exempt organizations run by members of the same family or their close business associates that the FTC accused of scamming consumers out of more than $187 million.

Earlier this year, the National Association of State Charity Officials sent a formal request to the FTC to prohibit this kind of charity impersonation.

"Bad actors who impersonate charities prey upon the good will and generosity of donors using well known causes such as cancer, veterans and local firefighters" Yael Fuchs, president of the National Association of State Charity Officials, wrote. "Using high pressure tactics to tug at the heart strings of consumers to compel a donation on the spot, these bad actors intend to leave no time for the consumer to research their claims before agreeing to donate."

In the end, donors pay a high price, "High volume soliciting using direct mail or telemarketing make these scams profitable and can result in millions of dollars in charitable assets lost to fraudulent charitable solicitations."

5 ways you can avoid charity scams

To make sure your money gets into the right hands, Scally offers these tips to avoid charity scams:

  • Never click on a link or attachment to donate online. "A donation form may look very legit but could be folks trying to take advantage of people's kindness," he said. Rather than use the link provided, do your own search.
  • Look up the relief effort through a site such as BBB Wise Giving AllianceCharity Navigator or CharityWatch and read online reviews. Then, enter the URL of the charity yourself to independently confirm you are coordinating with the right organization.
  • Fall back on organizations with a proven track record and a clearly established mission. If it's a personal plea for funds through a site like GoFundMe, stick with making donations to people or groups you know and can vouch for.
  • Always pay by credit card, which offers additional layers of protection, rather than a debit card, which taps money straight from your checking account, and never donate in the form of gift cards or wire transfers.
  • Check your accounts regularly for any suspicious activity or unauthorized charges. Even verified organizations may prompt you to increase the amount or frequency of your donation without you realizing it, another tactic that goes against best practices, Scally said. "That's certainly something to look out for."

Subscribe to CNBC on YouTube.

Copyright CNBC
Contact Us