Recent studies show that between 12.5 and 15 percent of the population are victims of financial fraud every year. On average, businesses lose an estimated $3.5 billion annually to fraud and financial crime, according to the Association of Certified Fraud Examiners. In addition, fraud losses are estimated to total $80 billion per year in the health care sector, while non-health-related insurance fraud is believed to top $40 billion annually, according to the FBI. In 2012, an overwhelming $25 billion dollars was lost due to identity theft of credit cards in the U.S. alone. When considering the facts, it seems that being well aware of the possibilities in financial fraud could greatly benefit your finances down the road along with knowing when to call a certified fraud examiner if the situation calls for it.
Common Types of Financial Fraud
When hearing about fraud, a picture is painted in the mind of someone stealing money unlawfully. Not many people are aware of the different forms of financial fraud that could immensely effect their finances. Listed below are common forms of Financial Fraud:
- Bribery, which is simply used to deceive the victim into believing false accusations that might lead them to a financial flourish.
- Embezzlement, also called larceny, which is the illegal use of funds by a person who controls those funds.
- Identity Theft, the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain.
- Elder Fraud is an act targeting older adults in which attempts are made to deceive with promises of goods, services, or financial benefits that do not exist, were never intended to be provided, or were misrepresented.
- Money Laundering, which is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.
- Mortgage Fraud is a crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth.
- Securities Fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.
- Tax Evasion, the illegal nonpayment or underpayment of tax.
Who do Fraudsters Consider Easy Targets?
Many experienced fraudsters have a specific type of victim they hunt for to make their scheme more successful. Here are some of the high-targeted victims that criminals prefer when planning their financial attack:
- Senior Adults, especially those who depend on family and friends for their care or those who have physical or mental impairments.
- Individuals who are physically impaired.
- Victims of domestic violence.
- Near-retirees.
- Previous victims of financial fraud.
Who is Most Likely to Commit Financial Fraud?
Well, the average fraud perpetrator typically has no prior fraud charges or convictions, according to new research by the Association of Certified Fraud Examiners (ACFE), the world’s largest provider of anti-fraud training and education. The offender is commonly between the age of 31-45, and somewhat more likely to be male than female. Listed below are potential perpetrators of financial fraud:
- Strangers
- Members of various groups, for example, civic groups, community groups, political parties or professional organizations
- Family members
- Trusted advisers, for example, accountants, attorneys, investment professionals or bankers
After being a victim of financial fraud, the first thought that might come to mind is “How can I prevent this from happening again?” Though recovering your finances would need to be handled through your local bank, there are multiple steps people can take to protect their assets to prevent future fraud. Below are some of the common types of fraud and the best way to prevent any future issues.
Financial Fraud Prevention Checklists:
Identity Fraud Prevention Checklist
- Monitor your bank accounts frequently via the internet.
- Risk of receiving phony statements
- Check your monthly statements and verify all withdrawals.
- Report any suspicious activity immediately
- Shred all personal financial documents before throwing away.
- Avoid giving out your social security number whenever possible.
- Only provide last 4 digits whenever possible
- Use intricate passwords for all websites.
- Keep all personal information protected in a locked storage/password protected file.
Investment Fraud Prevention Checklist
- Reduce exposure to sales pitches.
- Use care with free lunch or dinner seminars.
- Avoid high-risk investments.
- Develop a “refusal script.”
- Ask and check the registration status of the salesperson and the investment itself.
Mortgage and Lending Fraud Prevention Checklist
- Stop if terms of a loan sound too good to be true.
- Resist high-pressure tactics.
- Get referrals to loan and mortgage professionals when obtaining a loan/mortgage.
- Protect yourself
- Never make false statements on loan application
- Overstating income
- Never sign a blank document containing blank lines.
- Read all documents before signing.
- If you don’t understand what you’re signing, hire an attorney the review the documents.
Mass Marketing and other Fraud Prevention Tips
- Shred suspicious mail.
- Don’t do business with anyone who solicits your money in advance of awarding a prize.
- Check the credentials of sellers with unbiased, third party sources.
- Get all offers in writing.
- Don’t deposit checks sent by companies that claim the check is for fees or taxes on lottery winnings.
- Don’t participate in foreign lotteries
- It is against the law!
- Don’t ever respond to junk mail.
What Happens if You’re a Victim of Financial Fraud?
The road to recovery can be very complex but stress-free if you follow these simple steps to help maintain your funds after suffering from any type of financial fraud:
- Place a fraud alert with the Credit Bureaus
- Create a pertinent theft file
- Maintain all relevant documentation
- Know your rights
- Report the theft to the Federal Trade Commission
- Federal Trade Commission Complaint Assistant (877) 438-4338 or visit https://ftccomplaintassistant.gov
- Report the theft to law enforcement
- Consider placing an extended fraud alert and/or credit freeze
- Dispute fraudulent activity
- Consider civil remedies
- Follow up
Financial Fraud is unfortunately part of the world we live in today. You will want to take preventative steps to limit your susceptibility to any kind of personal or business financial fraud. If you do have the unfortunate experience where you suspect financial fraud or have questions about suspicious activity you should act quickly and reach out to a trusted financial fraud examination professional to align yourself with to get the proper support.
Additional Related Blog Articles Worth Reading:
- Banks are Managing Data for Improved Fraud and Crime Prevention
- Catching Social Security Disability Fraudsters in the Act
- The Largest Scam of Its Kind IRS Agency Impersonators
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Veriti Consulting LLC provides various fraud and forensic accounting services for individuals and businesses across the United States. Veriti is also a licensed private investigation agency. If you would like to learn more about the types of fraud and forensic investigative services we offer click here or call 855.232.4410.
References:
“Fraud and Financial Crimes.” FindLaw. Thomson Reuters, 2014. Web. 29 September 2014. https://criminal.findlaw.com/criminal-charges/fraud-financial-crimes.html
“Taking Action: An Advocate’s Guide to Assisting Victims of Financial Fraud.” The National Center for Victims of Crime. September 2013. Web. 29 September 2014. https://www.saveandinvest.org/web/groups/sai/@sai/documents/sai_original_content/p358016.pdf
“Who is Most Likely to Commit Fraud at Your Company?” Association of Certified Fraud Examiners. 2 September 2010. Web. 29 September 2014. https://www.acfe.com/press-release.aspx?id=1677