What is Financial Fraud?
In a general sense, financial fraud is to make money illegally to obtain personal income, a significant crime, and a violation of civil law that has caused severe declines in the economy. Technological developments and fast-growing internet network has also caused a substantial increase in fraud activities. So, what are the types of fraud exposed to thousands by persons and institutions every year? In this article, we have compiled some types of financial fraud for you.
Types of Financial Fraud
Bribery and Corruption
Bribery ensures that the second person obtains an unfair advantage directly or indirectly in the face of a task or situation intended to be done or prevented. That advantage is generally provided as a money payment. Someone who obtains an unfair advantage over another person receives imprisonment between four and twelve years. In society, bribery occurs more than estimated, and its damages that cause the community can be pretty much. On the other hand, corruption is another type of financial fraud that inadmissible in society as both legal and ethical.
As a direct definition, corruption is an abuse of power for political, financial, or personal gain. It is generally a secret activity. Corruption for both developed and underdeveloped countries negatively affects economic structuring elements such as economic investment and income distribution.
Identity fraud is one of the most common types of financial fraud because of the fast-growing internet network. It aims to commit a crime and personal gain using the person's stolen credentials. Skimming Fraud: Skimming fraud is a fake ID copying transaction. People may experience victimization on ATM, credit, or debit cards. You may face skimming fraud by instant copying of your card information with fraudulent card entry placed in ATMs or gas pumps by the fraudster.
Therefore, the consumer must be watchful while transacting on ATMs. Before doing a transaction, check the machine thoroughly. However, skimming fraud is known as white-collar crime. It occurs employees obtaining income from receipts and not registering revenues. Therefore sometimes, bribery and corruption may include skimming fraud.
One of the white-collar crimes is also embezzlement. It means the person who is a public servant to embezzle on the goods or money was given to him by the employer or business partner for the task. Embezzlement in large companies can occur as a transfer of funds to a personal account. The embezzle or transfer of funds may create fake invoices and receipts to conceal unrealized business activities and show them legitimate transactions.
The Ponzi Scheme is a fraud method in which investors are paid with those returning from their own money or with money from subsequent investors; the system is based on getting new investors for obtaining income for old investors. It promises maximum profit with minimum risk. Ponzi scheme bottoms out and ends when new investors run out of money to invest and cash in circulation is not enough. How to avoid financial fraud depends on you to prevent these financial fraud activities, which cause people and institutions to lose millions of dollars every year, causing significant damage to the economy. Here are some measures to be taken against financial fraud activities:
- Hiding financial information.
- Pay attention to the content of the link you are about to click on
- Protect your personal information ensuring the security of the sites; you are login to
- Know your employee and business partner
- Know Fraud Control steps
The Relationship Between Financial Fraud And Money Laundering
Fraud and money laundering differ in reasons, but their definitions and technical methods have several similar points. First of all, both of them include criminal activities, and they both mean acquiring illegally. So actually, fraud is a premise crime for money laundering. Also, Cooperation between Anti-Money Laundering and Anti-Fraud departments is essential to prevent economic collapse for a country.
For more information about connections between fraud and money laundering, check out our content: What Is Fraud and Money Laundering.