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8 Main Types of Fraud

Fraud comes in a variety of forms, and learning about each type can give you a better understanding on how to properly avoid getting scammed. In this brief article, we will explore some of the most common types of fraud in the United States. 

1. Identity Fraud

Identity fraud, which often begins with identity theft, is the fraudulent use of an individual’s identity to commit crimes. This illegal practice involves taking on the persona of the victim in order to engage in fraudulent behavior such as financial fraud, criminal activity and medical identity theft. Committing identity fraud is generally initiated with identity theft, in which the fraudster illegally obtains sensitive identifying information about another person. Criminals may open a new credit account under the victim’s name, as well as engage in illegal activity. Identity fraud can result in severe financial consequences for the victim. The fraudulent activities conducted under their name can lead to substantial debts, damaged credit scores, and more.

2. Bankruptcy Fraud

Bankruptcy fraud refers to the illegal and deceptive activities that occur when an individual or organization intentionally engages in fraudulent behavior relating to a bankruptcy proceeding. In most cases, bankruptcy fraud requires the concealment of assets. This occurs when an individual purposely neglects to list all of their assets on a bankruptcy claim in hopes that certain assets won’t be liquidated if the authorities are not aware of them. Another common tactic of bankruptcy fraud is referred to as asset transfers, in which a fraudster unlawfully transfers assets to family members, friends or business associates prior to filing for bankruptcy in order to shield assets from seizure.

3. Credit Card Fraud

Credit card fraud occurs when someone makes unauthorized payments or purchases using a stolen or misappropriated credit card or credit card number. According to Experian, credit card fraud is the most common type of identity theft in the United States. Fraudsters may withdraw cash, make purchases or transfer funds using the victim’s credit card information. Skimming is another frequent form of credit card fraud, in which criminals capture the data from the magnetic stripe of a credit or debit card without the cardholder's knowledge or consent.  Victims of credit card fraud can suffer financial losses if unauthorized charges are not promptly reported and resolved.

4. Insurance Fraud

Insurance fraud refers to the act of exaggerating or falsifying insurance claims to receive payouts for fraudulent or nonexistent losses. There are various different types of insurance fraud, such as staged accidents, fake injuries, healthcare fraud and insurance identity fraud.  Another form of insurance fraud involves the issuer, in which an individual, often without a license to sell insurance, sells policies from fictitious companies. The insurance sector continues to be an attractive target for fraudsters due to the necessity of consumer trust in policies, which criminals readily exploit as a vulnerability.

5. Mortgage Fraud

Mortgage fraud is a real estate-related deceptive practice that involves dishonest or illegal activities related to mortgage loans. It generally encompasses misrepresentation of information in hopes to secure a mortgage or manipulation of the mortgage process for financial gain. Borrowers may illegally misstate their income or employment status on a mortgage application to qualify for larger loans or lower interest rates. Moreover, individuals may purchase distressed or undervalued properties, make minimal improvements, and then sell them at inflated prices. This can involve fraudulent appraisals and collusion with appraisers and real estate agents.

6. Investment Fraud

Investment fraud, which is also referred to as securities fraud or investment scams, encompasses a wide range of deceptive practices that are designed to defraud investors or mislead them into making poor financial decisions. Ponzi schemes rank among the most widespread forms of investment fraud. In these schemes, scammers use funds from newer investors in order to pay returns to earlier investors, creating the illusion of a legitimate investment opportunity. Investment fraud can lead to significant financial losses for victims. When they fall victim to fraud, they can lose their savings, retirement funds, or other assets.

7. Phishing

Phishing is a routinely encountered cybercrime in which a scammer sends fraudulent communications that appear to come from a trustworthy source in order to steal sensitive information. These attacks aim to appear reliable and legitimate at a first balance typically by sending messages from familiar-looking email addresses and using popular brand logos. The messages may contain links or attachments that lead to counterfeit websites designed to mimic real sites. Through these communications, cybercriminals may be able to obtain usernames, passwords, credit card information, and other personal identification or financial data. The fraudsters use these details for a variety of unlawful purposes, such as identity theft and financial fraud.

8. Charity Fraud

Charity fraud, also known as nonprofit fraud, relates to deceptive practices that exploit the good faith of donors for personal or criminal gain. Examples include fake charities that raise funds but don’t actually carry out any charitable services and individuals who falsely claim to be raising money for a good cause when they actually intend to keep the money for themselves. Detecting and prosecuting charity fraud can be challenging because legitimate charities come in many shapes and sizes. Nonetheless, misrepresentation and personal enrichment are often the most obvious red flags regulators and law enforcement look for.

Bottom Line

In conclusion, gaining a comprehensive understanding of the main types of fraud is crucial for protecting yourself and your interests from deceptive practices. Whether you find yourself facing accusations related to fraud or require legal guidance as a victim of fraud, Attorney At Law is your trusted partner. Reach out to one of our specialized attorneys today for a consultation.

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