Types of Financial Fraud

 

 

  1. 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.

 

  1. 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 wired.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. Telemarketing scams – The victim is persuaded to buy a valueless or nonexistent

product, donate to a bogus charity or invest in a fictitious enterprise.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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 transactions.

 

  1. 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.

 

  1. 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.

 

  1. 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 well.