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Image Credit, Pexels Sora Shimazaki,Tima Miroshnichenko, Mikhail Nilov, Tara Winstead |
By Lilian H. Hill
With our technologically interconnected world, we are increasingly vulnerable to financial fraud. As technology evolves, so have methods of perpetrating fraud. Cybercriminals constantly seek new ways to exploit vulnerabilities in digital systems, from phishing scams to hacking into databases. In intricate financial or business transactions, fraudulent activities evade detection. Criminals often exploit psychological tactics to manipulate individuals into divulging sensitive information. This can include tactics like impersonation, persuasion, or exploiting trust.
Common Types of Financial Fraud
Identity Theft: Identity theft occurs when someone steals another person's personal information, such as Social Security numbers, credit card details, or bank account information, to commit fraud or other crimes. Personal information can be used to open new credit card accounts that the victim has no knowledge of, and then rack up large amounts of debt for which the victim will be liable. Other types of credit card fraud include unauthorized use of information to make purchases or withdraw funds without the cardholder's consent. This can occur through stolen cards, card skimming devices, or online hacking.
Phishing: Phishing involves fraudulent attempts to obtain sensitive information, such as login credentials, passwords, or financial data, by impersonating legitimate entities through email, text messages, or phone calls. These scam artists send emails or pop-up messages that might alert you to a problem with your account or state that you have a refund waiting. Some of these messages come from legitimate companies (U.S. Office of the Comptroller, n.d.).
Debt Elimination Fraud: Debt elimination fraud differs from reputable companies that assist debtors in responsibly managing their debts. Instead of offering genuine help, scammers claim they can rid you of debt for a small upfront or membership fee, which they pocket without delivering on their promises. Those ensnared in these schemes not only lose the initial fee but also face potential loss of property, accumulation of further debt, harm to their credit score, exposure to identity theft, or even legal consequences (U.S. Office of the Comptroller, n.d.).
Investment Scams: Investment scams lure victims into fraudulent investment schemes promising high returns with little or no risk. These scams can involve pyramid schemes, financial markets, cryptocurrency, real estate, precious metals, or fraudulent offerings of stocks, bonds, or other financial products. They may lure victims in with complimentary workshops or seminars but swiftly transition to charging substantial fees for further training or coaching, purportedly enhancing your chances of success (Federal Trade Commission, 2023).
Advance Fee Fraud: Advance fee fraud, also known as Upfront Fee Fraud, involves soliciting victims to pay upfront fees or taxes in exchange for a larger payout that never materializes. It may involve an opportunity to participate in a special deal or promises to send you money, products, or services. A common tactic is requesting your assistance in removing funds from a country in political turmoil or even asking for your assistance to help law enforcement catch thieves. What the differing methods share is that victims will never recoup their money (U.S. Office of the Comptroller, n.d.).
Tech Support Scams: Tech support scams involve fraudulent individuals or organizations posing as tech support representatives who claim to fix nonexistent computer problems. They often persuade victims to provide access to their computers or pay for unnecessary services.
Romance Scams: Romance scams target individuals seeking romantic partners online. Scammers create fake profiles on dating websites or social media platforms to establish relationships with victims and eventually request money under false pretenses. They often prey on the lonely.
Healthcare Fraud: Healthcare fraud encompasses various schemes aimed at defrauding healthcare insurance providers, government healthcare programs, or individuals by billing for unnecessary services, falsifying medical claims, or selling counterfeit medications. A well-known case occurred in Mississippi. A couple was convicted of health care fraud, money laundering, and tax evasion, while their public business was a Christmas tree farm.
Charity Scams: Charity scams exploit individuals' generosity
by soliciting donations for fake charities or causes. Scammers may use
emotional appeals or misleading tactics to deceive donors and pocket the
contributions.
These are just a few examples of the many types of financial fraud and scams that exist. As technology evolves and criminals become more sophisticated, new variations of scams continue to emerge, highlighting the importance of vigilance and awareness in protecting against financial exploitation.
Ways to Protect Yourself
Avoiding financial fraud and scams is crucial to safeguarding your assets and personal information. The U.S. Consumer Financial Protection Bureau (2024) suggests the following strategies:
Image Credit, Liza
Summer, Pexels
Be Skeptical: Always approach
unsolicited offers or requests for personal or financial information with
skepticism. Scammers often use tactics like urgency or fear to pressure you
into making impulsive decisions. The truism, “If it seems too good to be true,
it probably is” applies here. Don't hesitate to seek advice from trusted
friends, family members, or financial professionals.
Verify Identity: Before sharing any personal or financial information, verify the identity of the person or organization you are dealing with. Legitimate entities will provide ways to confirm their identity, such as official websites, phone numbers, or physical addresses.
Secure Communication: Ensure that any communication regarding sensitive information, such as bank account details or social security numbers, is conducted over secure channels. Look for HTTPS (Hypertext transfer protocol secure) in website URLs and avoid sharing sensitive information over unsecured networks. Do not use public Wi-Fi when conducting sensitive or financial transactions.
Beware of Phishing: Be cautious of emails, messages, or calls requesting personal or financial information, especially if they create a sense of urgency or ask you to click on suspicious links.
Monitor Accounts Regularly: Keep a close eye on your bank statements, credit card transactions, and other financial accounts. Report any unauthorized or suspicious activity immediately to your financial institution.
Use Strong Passwords: Protect your online accounts with strong, unique passwords. Avoid using easily guessable passwords and consider using a reputable password manager to store your login credentials securely. Those days are long gone if you have ever used a single password for everything.
Enable multi-factor authentication: Options for MFA include receiving a text, phone call or email that provides a code you will enter. The code will expire within a stipulated timeline. The most secure and simple way to set up MFA is to set up a face or fingerprint scan. MFA requires you to take extra steps to access your accounts, so it can feel like a nuisance; however, it is an effective way to add an extra layer of protection to confidential data (Boyer, 2023).
Update Software: Keep your computer, smartphone, and other devices updated with the latest security patches and software updates. Outdated software may contain vulnerabilities that scammers can exploit to access your personal information.
Educate Yourself: Stay informed about common scams and fraud tactics. Familiarize yourself with the latest trends in financial fraud and learn how to recognize warning signs.
Report Suspicious Activity: If you encounter or suspect financial fraud or scams, report them to the appropriate authorities, such as the Federal Trade Commission (FTC), your state attorney general's office, or local law enforcement. Reporting such activity can help protect others from falling victim to similar schemes.
References
Boyer, C. (2023, October 23). Why you should use multi-factor authentication for all your accounts. UK Information Technology. https://its.uky.edu/news/why-you-should-be-using-multifactor-authentication-all-your-online-ccounts#:~:text=In%20addition%20to%20protecting%20against,card%20numbers%2C%20usernames%20or%20passwords.
Consumer Financial Protection Bureau (2024, March 1). What are some classic signs of possible fraud and scams. https://www.consumerfinance.gov/ask-cfpb/what-are-some-classic-warning-signs-of-possible-fraud-and-scams-en-2094/#:~:text=Here%20are%20some%20tips%20to,prize%20or%20other%20financial%20windfall
Federal Trade Commission (2023). Investment scams. FTC Consumer Advice. https://consumer.ftc.gov/articles/investment-scams
United States Attorney’s Office (2020, July 23). Pharmacy owners sentenced to prison for conspiracy to commit health care fraud, conspiracy to commit money laundering and tax evasion in $200 million compounding pharmacy scheme. Southern District of Mississippi. https://bit.ly/3WfZ1j7
U.S. Office of the Comptroller of the Currency (n.d.). Types of Fraud. https://www.occ.gov/topics/consumers-and-communities/consumer-protection/fraud-resources/types-of-consumer-fraud.html#advance
