Eleanor Finch
Fraud is a deliberate act or failure to act, with the intention of obtaining an unauthorized benefit, either for oneself or for an institution, by using deception or false suggestions. It is any activity that relies on deception to achieve a gain. This can include identity theft, phishing scams, and advance-fee schemes. Fraud can be classified as either organizational or individual. Organizational fraud includes fraud committed against an organization from the outside, such as vendors lying about work done or demanding bribes. Individual fraud involves a single person being targeted by a fraudster, such as through identity theft or advance-fee schemes. Financial fraud is a common type of fraud, encompassing mortgage fraud, insurance fraud, and securities fraud. Credit card fraud, check fraud, and wire fraud are also prevalent forms of fraudulent activity.
| Characteristics | Values |
|---|---|
| Type | Criminal, civil, internal, consumer, financial, securities, cryptocurrency investment, identity theft, mortgage, insurance, check, credit card and debit card, debt collection, elder financial exploitation, retail, online and digital, vendor, business email compromise, charity, advance fee, Nigerian letter or 419, Ponzi, pyramid, telemarketing, cryptocurrency job, romance, tech support, grandparent, government impersonation, sweepstakes and lottery, home repair, TV/radio, holiday and gift card, imposter, spoofing, phishing, ransomware, sextortion, skimming, air loans, appraisal, property flipping, occupancy, straw buyers, pump-and-dump, tax, intellectual property, product and retail, payment |
| Target | Individuals, businesses, banks, insurance companies, stock market, mortgage market, investors, vendors, employees, managers, executives, customers, organizations, government officials, company representatives, homeowners, elderly, children, teens, ATM/debit and credit card users, email users, crowdfunding platforms, charities, retailers, online shoppers, car buyers, healthcare |
| Method | Falsification, withholding information, lying, faking documents, identity theft, phishing, spoofing, skimming, deceit, misrepresentation, misleading terms, fraudulent loan applications, false promises, fake profiles, false customer profiles, false statements, hacking, malware, data capture, impersonation, fake names, deception, counterfeiting, non-delivery, theft, scamming |
| Motive | Greed, lack of money, coercion |
| Outcome | Financial harm, fines, jail time, financial loss, theft of personal information, intellectual property theft, rights denied, loss of money, loss of rights |
| Action | Criminal trial, settlement, civil case, money recovery, rights re-established, victim support, fraud detection software, blocking financial loss |
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What You'll Learn
Identity theft
If you believe you have been a victim of identity theft, it is important to take immediate action. Contact the companies where the fraud occurred and their fraud departments, explain the situation, and ask them to close or freeze the accounts to prevent further unauthorized activity. Change logins, passwords, and PINs for all your accounts, and place a fraud alert by contacting one of the three major credit bureaus: Equifax, Experian, and TransUnion. A fraud alert is free and will make it more difficult for someone to open new accounts in your name. Additionally, request your credit reports from these bureaus and review them for any unauthorized accounts or transactions. Finally, report the identity theft to the FTC and the police, providing as much information as possible to assist in the investigation.
While identity theft and identity fraud are often used interchangeably, they are distinct crimes. Identity theft refers to the act of stealing personal information, while identity fraud is the use of this stolen information to make fraudulent transactions. Identity fraud can be committed using the identity of a living or deceased person or even a completely fictitious identity. Understanding this distinction can help individuals better protect themselves and take appropriate actions in the event of identity compromise.
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Phishing scams
Phishing is a type of online scam where consumers receive an email that appears to be from a legitimate business, such as a bank or an online payment website. The email typically asks the recipient to update or verify their personal information by replying to the email or visiting a website. The web address might look similar to one the recipient has used before, and the email may be convincing enough to get them to take the requested action. However, once the recipient clicks on the link, they are directed to a spoofed website designed to steal their information. These fake websites might look almost identical to the real thing, tricking people into entering sensitive information such as passwords, credit card numbers, and banking PINs.
To protect yourself from phishing attacks, it is recommended to not respond to emails or pop-up messages requesting personal or financial information. Additionally, if you receive an email or text message with a link or attachment, ask yourself if you have an account with the company or know the sender. If the answer is no, it could be a phishing scam, and you should report and delete the message. If the answer is yes, contact the company using a phone number or website you know is genuine rather than the information provided in the message. Implementing multi-factor authentication can also make it more challenging for scammers to access your accounts, even if they obtain your username and password.
If you suspect that a scammer has obtained your information, visit IdentityTheft.gov for specific steps to take based on the type of information lost. Additionally, update your computer's security software and run a scan to remove any identified issues. If you receive a phishing email or text, report it to the appropriate authorities to help combat scammers.
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Cryptocurrency investment fraud
Cryptocurrency is a type of digital currency that generally exists electronically. It can be bought using a phone, computer, or a cryptocurrency ATM. Bitcoin and Ether are well-known cryptocurrencies, but there are many others, and new ones are being created all the time. Cryptocurrency is often used for quick payments, to avoid transaction fees charged by traditional banks, or for the anonymity it offers. Some people also hold cryptocurrency as an investment, hoping that its value will increase.
There are several types of cryptocurrency investment fraud. One common scam involves criminals luring unsuspecting investors into setting up accounts on an online investment platform with the promise of high returns. However, the platform is actually a Ponzi scheme, and investors are paid returns from the money put in by other investors. Another scam involves phony investment managers contacting people out of the blue and promising to grow their money if they buy cryptocurrency. Scammers may also impersonate celebrities, contacting fans through social media and offering them lucrative cryptocurrency investment opportunities. In reality, any cryptocurrency sent goes straight to the scammer.
Some warning signs to look out for include promises of guaranteed returns, excessive marketing, and unnamed team members. No financial investment can guarantee future returns, so be wary of any crypto offering that promises definite profits. Crypto fraudsters often invest heavily in marketing to reach as many people as possible in a short time and raise money quickly. If the marketing seems over-the-top or makes extravagant claims, pause and do further research. Also, with most investment businesses, it should be possible to find out who the key people behind it are. Be cautious if this information is difficult to find.
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Charity fraud
In a typical charity fraud scheme, individuals or groups will present false information, claiming to be a legitimate charity or affiliated with one. They may use the name or logo of a well-known charity to gain people's trust. They will then ask potential donors for contributions, often pressuring them to donate immediately and urging them to donate in cash, gift cards, cryptocurrency, or wire transfers. This sense of urgency is a common tactic used by scammers to prevent donors from taking the time to research the legitimacy of the charity.
Fraudsters may also create fictitious charities, often in the wake of high-profile disasters or emergencies, exploiting people's desire to help those affected. In these cases, the money donated goes directly into the pockets of the scammers instead of providing relief to those who need it. After natural disasters, unethical contractors may also commit charity fraud by pretending to be affiliated with the government or legitimate relief organizations to obtain money for post-disaster repairs.
To protect yourself from becoming a victim of charity fraud, it is important to exercise caution and conduct thorough research before donating to any organization. Take your time, verify the legitimacy of the charity, and be wary of requests for immediate donations, especially in the form of cash, gift cards, cryptocurrency, or wire transfers. Remember that legitimate charities will be transparent about how your donations will be used and will not pressure you to donate in a specific way.
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Mortgage fraud
The two primary categories of mortgage fraud are:
- Fraud for profit: This is typically committed by industry insiders such as bank officers, appraisers, mortgage bankers, and real estate agents. They use their industry knowledge to facilitate fraud by misusing the mortgage lending process to steal cash and equity from lenders or homeowners. Fraud for profit schemes often involve a straw borrower, a dishonest appraiser, a dishonest settlement agent, and a property owner, who work together to obtain an inappropriately large loan. They then share the ill-gotten gains, and the mortgage eventually goes into default.
- Fraud for property: This is typically committed by borrowers to gain or maintain ownership of a property. For example, a home buyer may lie about their employment status, income, property value, or credit situation in hopes of obtaining a loan approval or more favourable loan conditions.
Common mortgage fraud schemes include:
- Foreclosure rescue scams: Scammers charge upfront fees with false promises to save a home from foreclosure.
- Loan modification scams: False promises to modify loans or reduce mortgage payments.
- Predatory lending: Lenders offer loans with high fees, abusive terms, or hidden charges, often promising to modify or refinance the mortgage for an upfront fee.
- Property flipping: This becomes fraudulent when a property is purchased below market value and immediately sold for profit, typically with the help of a corrupt appraiser who inflates the value.
- Occupancy fraud: This occurs when a borrower wishes to obtain a mortgage for an investment property but states on the loan application that they will occupy the property as their primary residence.
- Asset rental fraud: Loan applicants borrow or rent the assets of others to make themselves appear more qualified for mortgage financing.
- Equity skimming: Investors use a straw buyer to purchase property on their behalf, using false income documents and credit reports to obtain a mortgage loan in the straw buyer's name. The investor then rents out the property until foreclosure, profiting from the rental income without making any mortgage payments.
To avoid becoming a victim of mortgage fraud, it is recommended to only work with accredited and registered lenders, never pay upfront fees for loan modification help, and always get everything in writing before signing any documents.
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Frequently asked questions
Fraud is an intentional act of deceit designed to reward the perpetrator or deny the rights of a victim. It involves falsification, either by withholding important information, lying, or faking documents.
Some common types of fraud include identity theft, phishing scams, advance-fee schemes, Ponzi schemes, mortgage fraud, insurance fraud, and securities fraud. Fraudsters commonly target businesses like insurance companies and banks and often involve innocent individuals to execute their schemes.
If you suspect fraud, you should report it to the appropriate authorities. In the United States, the FBI's Internet Crime Complaint Center (IC3) is a resource for reporting online fraud. Additionally, investing in fraud detection software can help identify and prevent potential scams or fraudulent activities.
