6 Types of Financial Frauds in the Business World


Financial fraud involves the use of misleading, unfair, deceptive and false business practices to trick innocent civilians. College students and senior citizens are often targeted by fraudsters, but no one is safe. During the COVID-19 pandemic, financial frauds have been on the rise due to fear or financial need.

Financial fraud is on the rise as more victims lose thousands of dollars every year. These types of frauds could happen to both individuals or businesses. Use a private detective or corporate investigation services to help collect leads and evidence. Being aware of the different types of fraud will help keep you safe. The following are six types of financial frauds:

Type #1: Debit and Credit Card Fraud

Debit or credit card fraud is a type of financial fraud that occurs when someone finds or steals your card and manages to access your information. This allows them to withdraw cash, purchase goods, or use your card fraudulently. Some of the red flags of debit and credit card fraud include charges on your statement that you don’t recognize. Some of the transactions may originate from distant or unfamiliar locations.

You may also experience an unexpected and significant drop in your credit score or receive phone calls requesting your debit or credit card information. A fraudster may also test your card before making a major purchase by making several small-dollar purchases.

To protect yourself against debit and credit card fraud, check your accounts daily for unusual activity and report to your bank immediately if you notice anything amiss. If the bank’s response is unsatisfactory, complain to the CFPB. You can also have the account frozen or the card cancelled. Never give the caller information they should already have.

Type #2: Identity Theft

Identity theft is a term used to describe a situation where someone illegally accesses and uses your personal information. Among the stolen details may include your name, credit card information, bank account number and Social Security number. It’s often done through data mining.

The aim of the fraudsters, in this case, is to assume your identity using the stolen information, which allows them to access your bank accounts and drain funds, take out loans, use your name to open and use credit cards, pay medical bills using your health insurance, and file tax returns to collect your refund. Tell-tale signs of identity theft include unexpected withdrawals from your bank account.

At other times, financial statements and bills stop coming in the mail and unfamiliar accounts start showing up on your credit report. You may also start receiving calls from debt collectors concerning unfamiliar debts and credit cards, or medical bills for treatments you never got.

Type #3: Fake Charities

Fake charities steal money from citizens using the same techniques legitimate charities use in raising funds. Before making a donation, have a way of verifying the credibility of where the money is going. The tell-tale warning signs of a fake charity include being pressured to donate now, requests for wire transfers, gift cards and cash are accepted. You should also be alarmed if you receive a “thank you” message for a donation you never made.

The fraudsters’ goal here is to trick you into thinking you already support them. The caller does not provide detailed information concerning the organization. They might also tell you that only a donation will qualify you for the sweepstakes. The group may also use a familiar-sounding name that doesn’t quite match the original. In the wake of a natural disaster, be careful when donating as this is when all the con artists come out to play.

Type #4: Mortgage Fraud

Thousands of mortgage fraud cases show up each year. Distressed homeowners are often targeted by mortgage scams, which may include equity skimming, loan modification schemes and foreclosure rescue schemes, among others. In most cases, they are organized by mortgage and real estate professionals who use their legal positions and knowledge to carry it out.

Signs of mortgage fraud include being asked to sign documents you haven’t had a chance to go through or didn’t understand. You may also be falsely promised that a foreclosure will not happen. The scammers may also promise to modify your loan terms are ask you to pay fees in advance. Some will go to the extent of providing a fake money-back guarantee. Your questions may also be answered incompetently or completely ignored, while the home buying process may be slower than normal.

To protect yourself against mortgage fraud, always ask to verify the license of anyone you do business with. Avoid high-pressure transactions or signing paperwork you don’t understand. Finally, seek professional referrals and advice from a qualified credit attorney or counsellor.

Type #5: Debt Collection Fraud

Some scammers pose as collection agencies and call consumers demanding payment of outstanding debts. If you have unpaid debt, which is due for collection, remember you have rights, and you probably already know how much you owe.

To distinguish a debt collection fraud, the solicitors may try to threaten you with jail time or convince you they are government officials. Some scammers may call late or early (after 9 p.m. or before 8 a.m.), some will withhold important information from you. Others might pressure you into paying with cash or by money transfer. Do not do it!

Type #6: Lottery and Prize Fraud

Lottery and prize fraud goes by many names: foreign lotteries, drawings, sweepstakes, and more. The elderly are often targeted by this type of financial fraud. It starts with a postcard or a phone call. The signs of a lottery and prize fraud include the following: you do not remember registering for the sweepstakes or lottery, being asked to pay a fee to the sweepstakes or lottery office to cover administrative costs or taxes, your winner notification arrives with bulk mail, or being asked to attend a meeting to collect the prize.