Types of Financial Fraud
- Misappropriation of income or assets – A
perpetrator, often a family member or
caregiver, obtains access to
Social Security checks, pension payments, checking or savings account, credit
card or ATM, or withholds portions of checks cashed for the victim.
- Fictitious relative – The perpetrator calls the
victim pretending to be a relative in
distress and in need of cash and
asks that money be transferred either into a financial institution account or
- Identity theft – Using one or more pieces of
the victim’s personal identifying
information (including, but not
limited to, name, address, driver’s license, date of birth, Social Security
number, account information, account login credentials, or family identifiers),
a perpetrator establishes or takes over a credit, deposit, or other financial
account (“account”) in the victim’s name.
- Financial institution employee fraud – The
perpetrator calls the victim pretending to be a security officer from the
victim’s financial institution. The perpetrator advises the victim that
there is a system problem or internal investigation being conducted.
Thevictim is asked to provide his or her Social Security number for
“verification purposes” before the conversation continues. The number is
then used for identity theft or otherillegal activity.
- Financial institution examiner fraud – The
victim believes that he or she is assisting authorities to gain evidence
leading to the apprehension of a financial institution employee or examiner
that is committing a crime. The victim is asked to provide cash to bait the
crooked employee. The cash is then seized as evidence by the “authorities”
to be returned to the victim after the case.
- Power of Attorney fraud – The perpetrator
requests a Limited or Special Power of Attorney, specifying that legal
rights are given to manage funds assigned for investment to the perpetrator,
a trustee, an attorney, an asset manager, or other title that sounds
official and trustworthy. Once the rights are given, the perpetrator uses
the funds for personal gain.
- Charitable donation scam – Scam artists
claiming to represent charitable organizations use e-mails and telephone
calls to steal donations and in some cases donors' identities.
- Advance fee fraud or “419” fraud – Named after
the relevant section of the Nigerian Criminal Code, this fraud is a popular
crime with West African organized criminal networks. There are a myriad of
schemes and scams—mail, email, fax and telephone promises are designed to
facilitate victims’ parting with money, ostensibly to bribe government
officials involved in the illegal conveyance of millions outside the
country. Victims are to receive a percentage for their assistance.
- Pigeon drop – The victim puts up "good faith"
money in the false hope of sharing the proceeds of an apparent large sum of
cash or item(s) of worth which are "found" in the presence of the victim.
- Inheritance scams – Victims receive mail from
an "estate locator" or “research
specialist” purporting an
unclaimed inheritance, refund or escheatment. The victim is lured into sending a
fee to receive information about how to obtain the purported asset.
- International lottery fraud – Scam operators,
often based in Canada, use telephone and direct mail to notify victims that
they have won a lottery. To show good faith, the perpetrator may send the
victim a check. The victim is instructed to deposit the check and
immediately send (via wire) the money back to the lottery committee. The
perpetrator will create a “sense of urgency,” compelling the victim to send
the money before the check, which is counterfeit, is returned. The victim is
typically instructed to pay taxes, attorney’s fees and exchange rate
differences in order to receive the rest of the prize. These lottery
solicitations violate U.S. law, which prohibits the cross-border sale or
purchase of lottery tickets by phone or mail.
- Telemarketing scams – The victim is persuaded
to buy a valueless or nonexistent
product, donate to a bogus
charity or invest in a fictitious enterprise.
- Fake prizes – A perpetrator claims the victim
has won a nonexistent prize and either asks the person to send a check to
pay the taxes or obtains the credit card or checking account number to pay
for shipping and handling charges.
- Internet sales or online auction fraud – The
perpetrator agrees to buy an item
available for sale on the
Internet or in an online auction. The seller is told that he or she will be sent
an official check (e.g., cashiers check) via overnight mail. When the check
arrives, it is several hundred or thousand dollars more than the agreed-upon
selling price. The seller is instructed to deposit the check and refund the
overpayment. The official check is subsequently returned as a counterfeit but
the refund has already been sent. The seller is left with a loss, potentially of
both the merchandise and the refund.
- Government grant scams – Victims are called
with the claim that the government has chosen their family to receive a
grant. In order to receive the money, victims must provide their checking
account number and/or other personal information. The perpetrator may
electronically debit the victim’s account for a processing fee, but the
grant money is never received.
- Phishing – Technology or social engineering is
used to entice victims to supply personal information such as account
numbers, login IDs, passwords, and other verifiable information that can
then be exploited for fraudulent purposes, including identity theft.
Phishing is most often perpetrated through mass emails and spoofed websites.
- Spoofing – An unauthorized website mimics a
legitimate website for the purpose of deceiving consumers. Consumers are
lured to the site and asked to log in, thereby providing the perpetrator
with authentication information that the perpetrator can use at the victim’s
legitimate financial institution’s website to perform unauthorized
- Pharming – A malicious Web redirect sends users
to a criminal's spoofed site even though the user entered a valid URL in the
browser's address bar. This redirection usually involves worms and Trojans
or other technologies that attack the browser address bar and exploit
vulnerabilities in the operating systems and Domain Name Servers (DNS) of
the compromised computers.
- Stop Foreclosure Scam – The perpetrator claims
to be able to instantly stop
foreclosure proceedings on the
victim’s real property. The scam often involves the
victim deeding the property to
the perpetrator who says that the victim will be allowed to rent the property
until some predetermined future date when the victim’s credit will have been
repaired and the property will be deeded back to the victim without cost.
Alternatively, the perpetrator may offer the victim a loan to bridge his or her
delinquent payments, perhaps even with cash back. Once the paperwork is
reviewed, the victim finds that his or her property was deeded to the
perpetrator. A new loan may have been taken out with an inflated property value
with cash back to the perpetrator, who is now the property owner. The property
very quickly falls back into foreclosure and the victim, now tenant, is evicted.
- Investment Property – Property is sold to the
vulnerable as a guaranteed investment with high yield returns. The victim is
convinced to buy investment property through, or in conjunction with, a
property management firm that will handle all the loan documents, make all
the loan payments, place the tenants, collect the rents and maintain the
property. The victim is told that he or she has to do nothing other than be
the buyer and borrower. The property then falls into foreclosure. The victim
finds that the property was inflated in value, payments at the closing were
made to the property management company or affiliated parties, no loan
payments have ever been made, and any collected rents have been stolen as