Fraud is a huge global problem that impacts businesses, governments and individuals. It’s hard to know exactly how much fraud costs because it is covert and often goes undetected. However, estimates suggest that the average organization loses 3% to 6% of its profits to fraud each year. This is in addition to the money that organizations spend on anti-fraud measures and criminal investigations.
Fraud schemes are complex, and the ways in which they are perpetrated change constantly. But it is possible to reduce your risk by educating yourself and your team on the different types of fraud, being vigilant and following security trends.
Some of the most common types of fraud are credit card fraud, lottery and job scams, and investment fraud. Investment-related frauds include Ponzi and pyramid schemes, advance fee fraud, foreign currency fraud, and pump-and-dump schemes. They all involve a person or business misrepresenting facts and misleading investors to make unauthorized gains.
Criminologist Donald Cressey developed a model that identified three conditions that must be present for people to commit fraud. First, there must be pressure — personal or professional — that the fraudster feels they cannot resolve through legitimate means. Then, they must find an opportunity — a chance to defraud someone else — such as stealing cash or falsifying expense reports. Finally, they must rationalize their unethical behavior to make it “acceptable” to them.
To prevent fraud, you can protect yourself and your family by limiting the information you share online and keeping track of credit card activity and bank accounts. You can also avoid storing your credit cards at e-commerce sites to minimize vulnerability to data breaches, and use two-factor authentication wherever possible.
About the Author
