WHAT IS FRAUD? | FINANCIAL AND NON FINANCIAL PERSPECTIVES

DOES EVERYONE KNOW THE MEANING OF FRAUD?

This article would be written in a very rather unusual manner as it will start with a very strange story. I happen to take up the role of a business advisor of a young entrepreneur in his early 20s who did not file his tax returns correctly in the previous year. He followed the advice of ‘do-it-yourselfers’ when filing for his tax self assessment rather than employing the service of a small business accountant.

What is fraud?’ is the question that was put to me by a confused
young man who was indicted for committing fraud. He was charged for being fraudulent in his deeds. He claimed he was not aware that his action constitutes fraud.

I bet that there are many people in this young man’s situation. Being ignorant of the law is the principal cause of one finding him or her in this situation. Fraud in the pure legal sense of it is any false representation of a matter of fact for personal gain- it does not matter how it is done. Fraud is the intentional deceptive acts that are being perpetrated by people with the aim of making gain or causing a loss to another.

People in the legal field would agree with me that there are certain aspects of the features of fraud as contained in the various legislations that are hard to define and establish. For example, most fraud fighters and examiners of fraud believe that fraud be viewed from these broad perspectives:

  • False representation
  • Inadequate disclosure of information
  • Misuse of power or position

Now, what would you say about the young man that complained to me about facing charges of fraud in the law court when he claimed to have fallen under the second category. He claimed he unintentionally disclosed lesser information without knowing that he was committing fraud. Well, what I told him was that ignorance of the law is not an excuse; the law is there for all to read and understand. When in doubt of what the law says, speak to a legal expert that would help direct your footsteps in the right path.

For fraud to take place, the three elements of fraud which are; opportunity, rational and pressure, this is what fraud fighters call the triangle of fraud.

EIGHT (8) TYPES OF FRAUD

INVESTMENT OR PONZI SCHEME FRAUD: this is a type of fraud where fraudsters trick people into subscribing to their pyramid scheme of outrageous return on investment. The perpetrator of the fraud will simply use the money collected from the new subscribers to pay the old subscribers their capital and returns.

EMPLOYMENT FRAUD: This kind of fraud where jobseekers emotion are preyed upon. I recently got targeted for such fraud. The targeted called me on phone after I registered with one of the popular jobsites in the UK. The caller took me through an interview and booked an appointment for further interview when I would have access to an internet ready computer. The call came through and I whole heartedly participated in the interview. It was so organized that I never realised where he was heading to. It quickly became clear to me when I was asked to make some payment for the training that would enable me get the job. I was able to escape this fraud because of my training as a Fraud Examiner; everyone would not have been so lucky considering the level of sophistication employed by these highly trained and networked fraudsters.

INTERNET FRAUD: this is any kind of fraud that is committed using this ubiquitous technology called the internet. This type of fraud can be simple or sophisticated. Using simple email account, a fraudster from a remote village anywhere in the world can leverage on greed that is imminent in human beings. On the other hand, internet fraud can involve the use of technical skills of hacking and programming to commit fraud.

MORTGAGE FRAUD: there was a surge in mortgage fraud in the wake of the global economic crisis when fraudsters employ all sorts of negative smartness to trick both home owners and home buyers off their hard earned money. A good example is a case I recently read on one of the articles published in a fraud magazine where the target was senior citizens. The criminals promised the senior citizens mouth watering returns to buy off their home and also secure a condo apartment for them. As soon as they got the attention of their target, the rest become story.

CORPORATE FRAUD: corporate fraud also known as occupational fraud is a popular, yet most difficult fraud to detect. Responsible officers are the ones that commit this kind of fraud. Accounting fraud is a good example of corporate fraud that top managers can commit and go undetected. The best way of preventing this type of fraud is to establish solid internal control and quality corporate governance.

Conduct fraud: this is a kind of fraud that is inborn in many big time fraudsters like Ponzi. Conduct fraud is commonly called cheating in common parlance. It is the cheapest form of fraud to commit as people tend not to pay real attention to matters where conduct fraud is committed. The perpetrators of this nature of fraud continually look for easy opportunity to strike.

CHURCH FRAUD: religious or church fraud is committed in most religious gathering where trust is misplaced. Lack of proper control and concentration of management functions in the hands of less qualified people is largely responsible for this nature of fraud. Is only in churches that you would see someone who has no finance training or experience whatsoever assume the position of a treasurer.

CHARITY FRAUD: people with fraudulent mind take advantage of other people’s pains and surfering to make money off unsuspecting public. I still remember a scam email that was sent to me during the Haiti earthquake. The sender of the email designed a phony site all in the name of charity asking people to donate. Those that gave their card details quickly discovered that their money in the bank disappeared within a twinkle of an eye.

Notice that this is by no means a comprehensive list of possible types of fraud that can be committed by those evil minded people. The list of frauds and fraudulent activities constantly increase as people make up ways of conning out hard earned money from other people or entities. To be updated on fraud matters, you may want to subscribe to the newsletter of a local fraud fighting community in your locality.

HOW TO PREVENT BASIC FRAUDS

Most frauds that are discussed in this article can be prevented by following simple made in this section of this post. There are two things that should always be on your mind. The golden rule of avoiding fraud is to have it at the back of your mind that if it is too good to be true, it probably is. The next rule of thumb of fraud prevention is to have sound internal control in place.

At the base of the basic, yet powerful tips of preventing fraud is education. Education and constant learning is the key to keeping safe. If you keep an eye on the activities of the bad guys, you will be rest assured that you are relatively safe.

Wow! What a long article to write answering the question; what is fraud? Well, it might have been a very long piece of writing but the message contained in it is worth the time you invested in reading it.

Comments

  1. Which sections of law define punishment for fraudulent acts mentioned therein? says:

    I want to know more about the law that define punishment for fraudulent act mentioned there in

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