Fraud is a deliberate deception or misrepresentation that leads to gain, typically financial gain, at the expense of another party. It is a crime that involves intentionally deceiving others with the aim of obtaining a financial benefit or other valuable resources. Fraud can be committed by individuals, groups, or corporations and is typically divided into various categories depending on the type of deception and the means used to commit it.
Types of Fraud
The following are some of the common types of fraud:
Bankruptcy fraud: This type of fraud involves filing for false claims or false declarations in bankruptcy proceedings to defraud creditors.
Insurance fraud: Insurance fraud is a deliberate deception to obtain financial gain from an insurer. This occurs when a person or entity submits false, exaggerated, or misleading information to an insurance company to receive insurance benefits or compensation.
Credit card fraud: Credit card fraud results from the unlawful use of a credit or debit card by another individual without the card owner’s permission. This could happen through skimming or phishing, where individuals use fraudulent software to gain access to cardholders’ information.
Tax fraud: This involves misrepresenting information on tax returns or failing to report income to avoid paying taxes.
Healthcare fraud: Healthcare fraud happens when individuals or organizations submit false healthcare claims to Medicare or other insurance providers.
Investment fraud: Investment fraud involves the promotion of false or misleading information to investors that ultimately leads to financial loss.
Employee embezzlement: Employee embezzlement occurs when an employee misappropriates property or funds that belong to their employer.
Methods of Fraud
Fraud can occur in various forms and use different methods to deceive individuals. The following are some of the most common methods of fraud:
Phishing: Phishing refers to the act of sending email, text, or phone messages that look legitimate and ask for personal or confidential information.
Spoofing: Spoofing involves the use of false caller IDs, social media profiles, or email addresses to appear genuine.
Skimming: Skimming occurs when criminals install a device on the machine for credit or debit card transactions to capture information from a card’s magnetic strip.
Forgery: Forgery is the creation of fake or altered documents that contain false information.
Ponzi schemes: Ponzi schemes involve the use of income from new investors to pay earlier investors, creating a perception of significant profits on investments to rope in more victims.
Prevention of Fraud
Organizations and individuals can take simple measures to prevent fraud. The following are some prevention tactics:
Conducting background checks on employees: This helps to avoid hiring fraudsters from the outset.
Establishing effective internal controls: This can include procedures to prevent unauthorized access to cash, mandating multiple employees to sign off on expenses, and regular audits.
Enhancing password security: This involves strong passwords that are changed frequently and are not shared with other people.
Implementing anti-virus software: Anti-virus software protects against computer viruses, malware, spyware, and other malicious software designed to infiltrate devices and steal information.
Carrying out regular training and awareness campaigns: This involves educating employees and the public on the types of fraud, the methods used, and how to report any suspicious behavior.
Conclusion
Fraud is a serious crime that affects individuals and organizations worldwide. The effects of fraud can be devastating, from financial ruin to reputational damage. It is essential that individuals and organizations remain vigilant and take proactive measures to prevent fraud from occurring. Combating fraud must remain a priority to maintain the integrity of the financial and legal systems and ensure that people’s rights are not violated.
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US congressman George Santos has admitted theft and signed an agreement to have the charges dropped in a Brazilian case dating back to 2008. The deal stipulated that Santos pay restitution and fines within a month. However, he faces other more serious charges of fraud, money laundering and theft of public funds charged against him by US federal authorities.
A court in Montenegro has agreed to release Do Kwon, the former CEO of Terraform Labs, and Han Chang-joon, the company's former finance officer, on a combined bail of €800k ($881,000). Kwon was the executive behind TerraUSD, which collapsed in May causing turmoil in the crypto market. Kwon and Chang-joon were charged with forging official documents in Montenegro which had resulted in their detention. The pair will remain under house arrest and be supervised by police.
British tech entrepreneur Mike Lynch has been extradited to the US to face criminal charges over the $11bn sale of his firm Autonomy to Hewlett-Packard. Mr Lynch will stand trial on charges including fraud, which he denies. The 57-year-old businessman, who is a founding investor in UK cybersecurity firm Darktrace, has long fought attempts by US prosecutors to stand trial in America. At the time of the sale in 2011, Autonomy was the UK's biggest software company and it was the largest-ever takeover of a British technology business.
New York Congressman George Santos has pleaded not guilty to 13 federal charges, including wire fraud, theft of public funds and money laundering. The Republican lawmaker, who has been criticised for exaggerating his background and campaign finances, surrendered to authorities and was taken into custody on 11 May. He was later released on a $500,000 bond. Key figures in the GOP have called on him to resign, and House Speaker Kevin McCarthy said he won’t support Santos’s re-election bid. However, Santostold the press that he has no intention of stepping down and described the probe as a “witch hunt.”
Santos, a vocal supporter of Donald Trump, introduced several pieces of legislation, including a bill that would cut federal funding to countries that persecute LGBTQ people. He also sparked controversy in April with the introduction of the Medical Information Nuanced Accountability Judgment Act, which would ban the government from mandating certain vaccines. The legislation’s acronym, MINAJ, is believed to have been a reference to singer Nicki Minaj, who in 2021 claimed her cousin’s friend had become impotent and suffered swollen testicles after taking the COVID-19 vaccine.
Santos has suffered a string of controversies since his election to the US House of Representatives in 2020. An investigation by The New York Times revealed that he had greatly exaggerated his work experience and educational background, and claimed to have represented Puerto Rican volleyball at the 2008 Beijing Olympics. In fact, Puerto Rico did not field a team, nor was Santos part of the country’s volleyball programme.
New York Congressman George Santos returned to the Capitol to vote on a bill dealing with unemployment fraud, just a day after his arrest on 13 criminal counts of unemployment fraud. Santos, who pleaded not guilty, faced questioning from reporters about the appropriateness of him voting on such a bill while under criminal indictment for an alleged violation of that statute. Santos is a co-sponsor of the legislation designed to extend the statute of limitations for fraud investigations, and provide incentives for states to uncover fraud.
Convicted fraudster Elizabeth Holmes and her former boyfriend, and co-founder of Theranos, Ramesh "Sunny" Balwani must repay $125m of a court-ordered $452m in restitution for deceiving investors, including Rupert Murdoch. Murdoch invested $100m in the firm in 2014 and 2015 while Theranos's value and profile soared. It later emerged that bosses were secretly sending blood tests to traditional laboratories. Ms Holmes, who was sentenced to 11 years in prison for the scandal, recently told the New York Times she was "playing a character I created" and needed to be taken "seriously".
FTX founder Sam Bankman-Fried is reportedly hoping that a recent US Supreme Court decision on the scope of fraud prosecutions will help his legal case after facing charges linked to the collapse of his cryptocurrency exchange. However, many lawyers are predicting that it will not make much difference and Bankman-Fried's chances of having charges dropped remain slim. Bankman-Fried has requested that most of the charges be dismissed, arguing that some were based on a theory of fraud centered around depriving a victim of economically valuable information rather than tangible property.
Her Majesty's Revenue and Customs (HMRC) has said it has found "no evidence of fraud" following an inquiry into 12,000 Chinese companies that changed their addresses to a flat in Cardiff following warnings from the flat's owner, Dylan Davies. Davies received thousands of tax bills since November 2021 for the businesses, none of which were registered in the same names as the flats' occupants. Jim Harra, the permanent secretary at HMRC, said the case was "odd" but the changes in law meant online marketplaces are responsible for paying value-added tax for overseas businesses, "accounting for all VAT payments" associated with Davies' case.
Tejay Fletcher, the founder and leading administrator of the now-defunct iSpoof.cc website, which provided scammers with tools to disguise phone calls from banks to empty their targets’ accounts, blew his ill-gotten gains on luxury cars, including a £230,000 Lamborghini, London’s Southwark Crown Court heard during his sentencing hearing. Fletcher, who earned around £2m from iSpoof, is one of the individuals arrested last year in the UK’s biggest fraud sting by the Metropolitan Police, which reported that iSpoof had directly defrauded a minimum of £43m from UK victims and at least £100m from victims globally.
Tejay Fletcher has pleaded guilty at Southwark Crown Court to charges including making or supplying an article for use in fraud, encouraging or assisting the commission of an offence, possession of criminal property, and transferring criminal property, carried out through his iSpoof website. The site, which earned more than £3.2m ($4.3m) in Bitcoins over less than three years, provided a software tool that enabled criminals to trick people into believing they were speaking to their bank on the telephone by showing false phone numbers. The fraudulent scheme led to the losses of £100m globally, including £43m in the UK. Fletcher will be sentenced on 29 October.
Charlie Javice, a young entrepreneur, has been indicted on charges of defrauding JPMorgan Chase out of money to buy her college financial aid start-up, Frank. She has been accused of securities fraud, wire fraud, bank fraud, and conspiracy. The company was sold for $175m in 2021, but prosecutors allege that Javice lied to JPMorgan by saying her start-up had lined up 4.25 million student customers, while the true number was closer to 300,000. In December, JPMorgan sued Javice and her former chief growth officer Olivier Amar for fraud.
A recent roundtable in the US House of Representatives has shone a light on the issue of fertility fraud, a more commonplace problem than many people realise. The issue is down to a lack of legal and moral accountability placed on fertility clinics and doctors. Proposed solutions include the Preventing Families from Fertility Fraud Act of 2023 which criminalises so-called assisted reproductive technology fraud, including the doctor’s use of eggs, embryos or sperm that the client had not agreed to use, which would result in criminal charges.
Los Angeles County has removed 1.2 million ineligible voters from its voter rolls, following a settlement in a lawsuit led by Judicial Watch last year. A similar situation occurred in New York City in December, leading to the removal of 441,083 ineligible names, accord to Judicial Watch. Minnesota also settled a case with the Public Interest Legal Foundation in September, with six counties removing a total of 501 duplicate names of voters from their list. North Carolina reached a settlement with Judicial Watch in February, with two counties removing over 430,000 inactive voters. This took place in the wake of a large-scale voter fraud scandal in 2018, which resulted in a House race being overturned. Propagandists have called the purging of these ineligible voters an effort to “suppress” votes, however this goes against federal law which requires states to “conduct a general program that makes a reasonable effort to remove” from official voter rolls “the names of ineligible voters” who have died or changed residence. Many of these cases were led by government watchdog organisations.
Several US states have withdrawn from the Electronic Registration Information Center (ERIC), a non-profit organisation that assists states to improve the accuracy of voter rolls and increase access to voter registration for all eligible citizens. ERIC has faced claims of bias, lack of transparency and misplaced focus within its administration, as well as questions about how the organisation uses and shares data and whether some of its requirements violate federal law. This has led to calls for major changes in ERIC's governance and bylaws.
States withdrew from ERIC due to concerns about issues with getting accurate information, which can be found using best practices like regularly obtaining information from the National Change of Address system and checking updated driver’s license records. Federal law requires states to have programs that make reasonable efforts to remove names of ineligible voters from the official list, due to their death or change of residence. ERIC is the only program in the country in which member states can share their statewide voter registration lists in order to find individuals who are registered and potentially voting in multiple states.
ERIC was started as a project of the Pew Charitable Trusts. Funding was also provided by two grants to Pew in 2011 totalling $725,000 from George Soros’s Foundation to Promote Open Society. Recent reports indicate that ERIC member data are being shared with former ERIC lead David Becker’s Center for Election Innovation and Research, raising concerns about impartiality. Several hundred million additional dollars were also distributed to Democrat Party strongholds in 2020 by non-profit the Center for Technology and Civic Life.
The rise in initial unemployment claims has been core to the argument that the labour market is about to collapse. However, the effects of fraud in Massachusetts may have caused a sharp uptick in initial jobless claims that have been generating unneeded consternation. Labour-market data tends to break down in a predictable order towards the end of a cycle. Claims, quits, and job openings first, followed by wages and unemployment. The quits rate has fallen further but appears more like normalisation. Unemployment, at 3.4%, has not moved, while wage growth is grinding down ever so slowly. The consensus call is for an imminent collapse in the labor market. But the data indicate this is not happening.
While the consumer is not retrenching per se, they are noticeably cautious and spending more on grocery basics having splurged on big-ticket items during the pandemic. Walmart is not absorbing prices in its margin, indicating flat-to-down sales in real terms and suggesting a consumer slowdown. The effects of fraud in Massachusetts have been causing sharp upticks in initial jobless claims, generating unneeded consternation. However, it appears that the labor market is not cracking but taking its sweet time. Consensus economic gloom depends on the labor market deteriorating soon.
Tejay Fletcher, founder and leading administrator of fraud website iSpoof.cc, has been sentenced to 13 years and four months in prison by a London judge after pleading guilty to charges including possession of criminal property and transferring criminal property. The site was closed down in a series of global operations last year, with Fletcher earning at least £2m ($2.6m) from his $3.2m cryptocurrency Bitcoin earnings. Criminals were able to use the site to disguise calls as originating from trusted organisations such as banks, allowing them to empty their targets' accounts.
Fraud costs businesses and individuals across the world more than $5tn every year, according to research by financial-advisory firm Crowe and the University of Portsmouth. The figure amounts to nearly 60% of the annual global spend on healthcare. Lower-level financial scams add up to this colossal total beneath the high-profile scandals such as Theranos, which resulted in the recent conviction of founder Elizabeth Holmes, and Wirecard. Among the causes of fraud are greed, covering financial shortfalls, pressure to exceed growth expectations and “fake-it-till-you-make-it” accounting techniques in some tech startups. Fraudsters also take advantage of world events like the economic impact of the Covid-19 pandemic, as seen in the $80bn stolen from the US Paycheck Protection Programme. More should be done to encourage whistleblowers and to recognise the bravery of people exposing fraud, the article concludes.
The Washington Metropolitan Area Transit Authority (WMATA) has been "critically" exposed to cyberattacks since 2019, which could threaten train safety, according to a watchdog report. The report also claims the transit authority had failed to address 50 of the cybersecurity recommendations offered to it by oversight agencies. WMATA was hacked by a computer in Russia this year, the watchdog found, and has employed Russia-based IT workers. The vulnerability of transit systems to cyberattacks is well known, with transit agencies said to have the weakest cybersecurity when compared to other major sectors. There have been calls for the WMATA to beef up its cybersecurity in the wake of declining ridership during the Covid-19 pandemic and a shift towards the use of mobile fare cards and remote train piloting technology.
Tejay Fletcher, the mastermind behind the £100m iSpoof fraud platform, has been sentenced in the UK to over 13 years in prison at Southwark Crown Court. Fletcher's website offered subscribers digital tools enabling them to pose as bank staff so as to scam their victims, many of whom were UK bank customers. Prosecution noted losses in excess of £43m in the UK alone from iSpoof's activities. Fletcher personally received bitcoin worth £2m from the scam and was found to have a Lamborghini, two Range Rovers and a Rolex when arrested.
