Fraud is a serious state and federal crime that costs the economy billions of dollars each year. Perpetrators are subject to serious fines as well as jail time. Fraud can take on many different forms, four of which we will explore in this article.
Fraud is the use of intentional deception to gain something of value, typically money. Fraud is committed through misrepresentation, false statements, and/or dishonest conduct intended to mislead or deceive.
Fraud is both a civil tort and a criminal wrong. Fraud criminals can be prosecuted in criminal court by the government, but victims of fraud can also file civil lawsuits against the offender to recover damages. Sometimes, a person accused of fraud may be faced with both criminal and civil actions.
In order to convict a defendant of fraud, the prosecution must prove:
The exact penalties for fraud depend on a number of factors including:
That being said, punishment usually includes a prison sentence, restitution, and fines.
There are many types of fraud, including:
Below, we’ll review some of the most common types of fraud: wire fraud, tax fraud, insurance fraud, and identity theft.
Wire fraud is fraud through any form of telecommunication, including:
Because telecommunications are an instrument of interstate commerce, wire fraud is one of the most common federal criminal charges. It is typically investigated by the Federal Bureau of Investigation (FBI) or the Federal Trade Commission.
According to the U.S. Department of Justice wire fraud statute (18 U.S.C. 1343), there are four elements of wire fraud:
Wire fraud carries a penalty of up to a $250,000 fine for individuals and a $500,000 fine for organizations, as well as up to 20 years of imprisonment. Additional penalties apply if the wire fraud is related to a presidentially declared major disaster or involves a financial institution.
According to the IRS, tax fraud is “the willful and material submission of false statements or false documents in connection with an application and/or return."
Indicators of tax fraud include:
In the absence of these indicators, the IRS will usually assume that the person made an unintentional mistake due to negligence, which does not typically lead to criminal charges.
Penalties for common tax fraud crimes include:
Insurance fraud is any duplicitous act performed with the intent to obtain improper payment from an insurer. The estimated annual cost of insurance fraud is $80 billion.
There are three main types of insurance fraud:
To convict somebody of insurance fraud, the prosecution must be able to prove that:
Sentences for insurance fraud vary from state to state, with sentences often being greater for a higher value of the fraud. In California, for example, insurance fraud is a felony that can be punished with up to five years in state prison and a $50,000 fine.
Identity theft and identity fraud are crimes in which a person wrongfully obtains and uses another’s personal data in a way that involves fraud or deception, usually for economic gain.
Identity fraud includes actions such as:
Identity theft is a federal crime prosecuted by a number of government agencies, including:
The maximum penalty for violating federal identity theft laws is up to 15 years in jail, with the possibility of heavy fines. Offenders may also be required to pay restitution to their victim(s).