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Fraud Glossary A-Z

Academic Fraud: Academic fraud refers to fraud within an academic setting. This type of fraud may take place in many forms, and includes: bribery (e.g., taking money for grades); cheating; fabrication; impersonation; plagiarism; professional misconduct (e.g., grade inflation).

Accounting Fraud:  Accounting fraud is the intentional misrepresentation or alteration of accounting records.  Includes changing sales, expenses, revenues, stock value.  Fraud results in avoiding debt obligations and obtaining favorable financing.

ACH Fraud:  ACH fraud is the theft of funds through the Automated Clearing House financial transaction network. The ACH network acts as the central clearing facility for all Electronic Fund Transfer (EFT) transactions in the United States.

Advance Fee Schemes: Advance Fee schemes describe fraud cases in which fraudsters persuade a victim that the s/he has won a something valuable, or been specially selected for a golden business deal.  The only condition, say the fraudster, often via the internet,  is that the victim has to pay a small amount of money prior to receiving the windfall.

A “419” scam is a common Advance Fee scheme.  The ‘419’ number refers to the Nigerian criminal code for fraud. In a 419 fraud, the typical line is that a person from Nigeria with an official sounding name, knows of a large amount of unclaimed gold or money which cannot be accessed directly.  As part of the scam, the fraudster may send official looking documents, with fake seals and stamps.

Once a victim is hooked, the fraudster mentions a financial stipulation before consummating the deal.  He might suggest that a bank official needed to be bribed, or that a deposit be made into a Nigerian bank to become eligible for the promised windfall.

The 419 fraud is not limited to Nigeria, and has taken place all over the world, including the U.S., U.K., South Africa, Russia, Pakistan, India, Benin, Ivory Coast, and other nations.

Affinity Fraud:  Affinity fraud is a scheme, usually an investment scams, that targets members of identifiable groups.  Often, affinity fraudsters victimize their own religious or ethnic communities.  Affinity fraudsters also target the elderly and professional groups. The affinity fraudsters are usually members of the group they are ripping off.

Agent Fraud: Agent fraud refers to insurance agent fraud.  In this type of fraud, an agent may: steal a customer’s premium, failing to send it to the insurer; sell a phony insurance policy; ‘over-selling’ a coverage a person does not need; urge customer to make other investments.

Application Fraud:  Application fraud occurs when a fraudster submits a new credit application with fraudulently-obtained information.  The fraudulently-obtained information may include identity documents, pay slips, bank statements, and other sources.

ATM Fraud: ATM fraud refers to a fraud using an Automated Teller Machine.  One method is for a fraudster to make a fraudulent deposit, then withdraw money against that deposit.  Another is a scheme in which card information is skimmed from the machine itself..

AVS Fraud:  Address Verification Service fraud involves defrauding the AVS service.  The AVS is a service provided by banks to merchants to verify the credit card holder’s address.

Auction Fraud:  Auction fraud is increasingly taken place via the internet.  Auction fraud often involves a seller sending an item that is different and/or inferior to the one bid on, or failing to send the item altogether.

Auction fraud also takes place in the non-digital world.  Car and horse auctions are also places where fraud occurs.

Auto Insurance Fraud:  Auto or car insurance fraud is a deceptive act against an insurance company for financial gain. It is illegal in all 50 U.S. states.

Bank Account Fraud:  Bank account fraud is a type of identity theft that involves fraudulently opening new accounts in a victim’s name, or transacting against victim’s account.

Bank Fraud:  Bank fraud is the criminal offense of knowingly defrauding, or attempting to defraud, a financial institution.  Bank fraud also included fraudulently obtaining property owned by or under the control of a financial institution.

Bankruptcy Fraud:  Bankruptcy fraud, a federal crime, can be done in several ways, including, concealing assets or destroying, withholding, or falsifying documents related to a bankruptcy case.

Bankruptcy fraudsters also  make false statements with regard to their assets as they claim bankruptcy protection.  The bankruptcy fraudster may  illegally transfer money to friends or family, shift  assets offshore, and fail to report sources of income.

Bankruptcy fraudsters also file multiple bankruptcy cases in several states.  Multiple filings impede the court’s ability resolve the case.

Bankruptcy fraud carries a sentence of up to five years in prison, a fine of up to $250,000, or both.

Broker/Dealer Fraud:  Broker/Dealer fraud refers to stockbroker misconduct.  Broker dealer fraud may occur in several ways: Excessive trading in order to generate commissions; Unauthorized trading;  Misrepresenting material information about a stock; Advice to a client to invest in stocks that are clearly not suited to the client’s financial goals, or beyond the client’s risk tolerance.

Business Fraud:  Business fraud is the general term referring to fraud that takes place within the area of business transactions.  Fraud can be perpetrated by and on virtually any business, and is common in real estate transactions, contractual agreements of all kinds, and the purchase and sale of businesses and materials for businesses.

‘Bust-Out’ Fraud:  Bust-out fraud, also known as sleeper fraud, occurs when someone applies for and uses a credit card or line of credit.  This is done often under the fraudster’s own identity, or it may be stolen.  Then, the fraudster maxes out the credit card or credit line and disappears.

Charity Fraud:  Charity fraud involves soliciting funds for a fraudulent charity, or misappropriating funds for a legitimate one.

Check Fraud:  Check fraud includes: stealing checks; forging checks; altering checks; ‘kiting’ [read: floating checks between banks to allow withdrawal of insufficient funds];

Computer Fraud:  Computer fraud is the use of information technology to commit fraud. In the United States, computer fraud is specifically proscribed by the Computer Fraud and Abuse Act, which provides for jail time and fines.

Consumer Loan Fraud:  Consumer loan fraud occurs when a fraudster submits a consumer loan application that contains false information.  Consumer loan frauds are often perpetrated via the internet.

Contractor Fraud:  Construction fraud involves deceit in the execution and/or planning and/or billing of construction work.  This often involves home repairs.   Often, a fraudulent contractor promises work at a rate and time, and the contractor fails to honor the promise.

Corporate Fraud:  Corporate fraud includes actions taken by company or an individual that are designed to give an advantage to the company or individual.  Corporate fraud can affect the company, shareholders, and the entire economy.

Counterfeit Payments Fraud:  Counterfeit payment schemes are relatively new to the United States.  In this scheme, fraudsters pose as tourists, overseas military personnel, and students, and ask for help cashing checks or money orders.  They may also target people for personal relationships.  These are ruses to collect personal information.  

Cross-border Fraud:  Cross-border fraud is another variation of the advance fee fraud, or other internet ‘phishing’ fraud.  These frauds, which originate in another country, frequently involve sweepstakes, or lotteries, credit card “protection,” and travel offers.

Debt Elimination Schemes:  Debt Elimination scams are a common scam, advertised extensively on radio and television.  In this scam, the fraudulent company or individual claims to be able to eliminate a consumer debt of a mortgage, student loan, credit card.  The fraudster claims to be able to reduce or eliminate the debt based on specially-prepared documents.  Often these documents are either altered or contain fraudulent information, or a just plain fake papers.

In a typical Debt Elimination Scam, the fraudster asks for his fee upfront.  This fee can total several thousand dollars.

“Double check” fraud: Double-check fraud is a type of accounting fraud.  Here is an example:  The bookkeeper of a business remits a check for $500 to company A.  At the same time, the bookkeeper makes out a check to herself for $100 and notates it also under “company A.”  This is a very difficult fraud to detect because the recipient of the check would not raise suspicion.

Elder/Senior Fraud:  Elder fraud come in many forms, all despicable. There’s the Grandparent Scam where con artists contact the elderly claiming to be their grandchild, urgently asking for money.  There are investment schemes that target the elderly.  The elderly are targeted for medicare fraud schemes.  The elderly are specifically chosen by telemarketing frauds.  And, as objectionable as it seems, the elderly are sometimes preyed upon by their own family and clergy!

Embezzlement:  Embezzlement is theft of property or money by a person in a position of trust, or an agent or employee of a company in a position of trust.

First-Party Fraud:  First-party fraud is similar to bust-out fraud.  In first-party fraud, the fraudster opens an account or line of credit in his/her own name, intending to default or disappear on the debt obligation.

Forgery:  In its broadest sense, forgery is reproducing something — a document; money; work of art — for a fraudulent purpose.  Signatures are commonly forged, as are phony bank and loan documents.

Fraud:  Fraud is a general term that applies to an intentional act of deception against an individual, group, or company that results in material gain for the fraudster, or perpetrator of the fraud.

Fraudster:  Perpetrator of fraud.  See also:  thief; scumbag; liar;

“Friendship” fraud: Friendship fraud occurs when a close friend of an employer or individual is defrauded by the ‘close friend.’  Many people have had their good intentions exploited by ruthless ‘friends of the family.’

Hacker:  In its broadest sense, a hacker is an individual who exploits and infiltrates a computer network or computer.  There are ‘white-hat’ hackers, who expose weaknesses in networks; and ‘black-hat’ hackers who wreak great financial and other damage by their actions.  Computer hackers are among the most dangerous and clever of all fraudsters.

‘Hard’ Fraud:  Hard fraud is a type of insurance fraud.  It is an elaborate, ‘big money’ fraud that requires planning and coordination.  It is ‘hard’ because the planning leaves much ‘hard’ evidence if discovered.  The payout for a hard fraud is extremely high, and the punishment lighter than, say, robbery.

Healthcare fraud:  Healthcare fraud is a broad term that may apply to: Medicare and Medicaid healthcare fraud; individuals obtaining and/or selling prescription drugs; billing malpractice by healthcare practitioners; filing duplicate claims; altering dates, description of services; modifying medical records; giving/accepting kickbacks; prescribing unnecessary treatment.

Immigration Fraud:  Immigration fraud occurs when someone enters the country illegally, which includes the use of fraudulent passport and visa documents.

Insider Trading:  Insider trading is defined as a malpractice wherein trade of a company’s securities is undertaken by people who by virtue of their work have access to the otherwise non public information which can be crucial for making investment decisions.

Internet Investment Fraud:  Internet investment fraud comes in many varieties, including:  phony or misleading newsletters, which tout certain stocks; misuse of financial public ‘bulletin boards,’ where a fraudster will mislead about a stock or other financial information in order to defraud someone; ‘pump and dump’ schemes, where consumers are pushed to buy and ‘pump’ up the price of a stock, which is then ‘dumped’ by the fraudster after the share price is raised.

Investment Fraud:  Each state has specific securities laws pertaining to it.  In general, investment fraud is an offer to sell a security using a materially untrue statement, or omitting a material fact,  in order to take an investment for a security.  Federal investment fraud law is found under the Securities Exchange Act of 1934.

Jobs Scams:  Jobs Scams are a type of advance fee scam.  In a jobs or employment scam, the fraudster, acting as a recruiter or employer, offers an enticing job opportunity.  The ‘opportunity’ might be a job in Europe or another desirable location, and it requires an up-front payment of some sort, ostensibly used for permits, visas, or other ‘work’-related documents.

‘Kiting’:  Kiting is a form of bank fraud whereby someone ‘floats,’ i.e. passes between, checks between banks, allowing money to be drawn or taken from an account with insufficient funds.

Lottery/Sweepstakes Fraud:  A lottery or sweepstakes fraud occurs when a victim is contacted, either via mail, internet, or telephone, telling the victim s/he has won a substantial amount of money.  It is often an international fraud.  After contacting the victim, the fraudster tells the victim that in order to process payment, the victim must provide certain personal information.  This information is used for identity theft by the fraudster.

Mass Marketing Fraud:  Using the telephone, mass direct mailing, or internet spam, mass marketing fraud is fraud that casts a huge net, reaching millions of potential victims.  Often a mass marketing fraudulent website looks slick and professionally designed.

Medicaid Fraud:  Medicaid fraud usually takes the form of providing of false information in order to claim Medicaid benefits.  This is illegal.

Medicare Fraud: Medicare fraud usually takes the form of providing false information in order to claim or obtain Medicare benefits.  This is illegal.

Medical Identity Fraud:  Medical identity fraud is a form of identity theft in which someone illegally accesses and uses another person’s identifiable information to fraudulently obtain medical service, medical insurance coverage, or prescription drugs.

Money Laundering:  Money laundering is a type of fraudulent scheme the aim of which is to conceal the source, identity, and destination of illicitly-obtained money.  Money laundering takes place in three basic stages: One — original illegal activity (e.g. drug dealing proceeds) Two:  the money launderer funnels the money through a number of  transactions intended to obscure who initially received the money. Three:  the money is returned to the money launderer.

Mortgage Fraud:  Mortgage fraud is a common fraud type.  In a mortgage fraud crime, the fraudster misrepresents or omits material information on a mortgage loan application to obtain a loan, or to obtain a larger loan than would have been obtained had the lender been aware of the truth about the borrower.

Non-Receipt Fraud: This occurs whenever new or replacement cards are mailed and then stolen while in transit.

Occupational/Employment fraud:  Occupational fraud takes place in the workplace.  It is one of the most common forms of fraud.  According to the Association of Certified Fraud Examiners annual report, nearly half of all small businesses experience fraud at some point in their business life cycle.   This type of fraud is manifested in a variety of ways, including: fake invoicing; forged check writing; stolen goods and merchandise.

Pharmacy Fraud:  Pharmacy fraud is the fraudulent sale of pharmaceuticals via the internet.  According to the Federal Food and Drug Administration, it is a violation of the Federal Food, Drug, and Cosmetic Act to dispense prescription drugs without a valid prescription.  Further, Pharmacy fraud also involves selling either diluted or tainted drugs via the internet.

Phishing/Spoofing: Phishing is an internet fraudulent activity in which a deceitful fraudster sends an official-appearing email in an attempt to extract personal information.  A ‘spoofed’ email is when the fraudster purposely alters parts of the email to make it appear as if it was written by another.

Ponzi Schemes:  Named after the Italian immigrant to the U.S., Carlo Ponzi, a Ponzi scheme is an investment fraud in which new investment money is used to pay earlier investors.  What the victims are ‘investing’ in is usually fictitious, such as a remote real estate development, or a high-yielding African diamond mine.  Bernard Madoff ran a massive Ponzi scheme, which stole billions of dollars from Madoff’s circle of wealthy American Jewish friends.

Pyramid Schemes:  A Pyramid scheme is variation of a Ponzi scheme.  In a Pyramid scheme, investors get paid by recruiting new investors.  The ‘pyramid’s’ growth is exponential, and unsustainable, and eventually crumbles.  In both a Ponzi and Pyramid scheme, the demand for payment to earlier investors outstrips the new money coming in and both schemes collapse.

Relationship Scams: Relationship or Dating scams utilize the internet’s many dating websites.  These unscrupulous fraudsters take advantage of people seeking companionship and set up phony profiles, and manipulate their way into a victim’s emotions… then his or her wallet.

Rental Property Scams:  In one type of rental property scam a legitimate renter gets scammed by a fraudulent owner.  In this case, the renter finds a dwelling for rent and communicates with the “owner,” usually via email.  The “owner” says the renter may have the place if money is wired to cover a security and/or application fee. The renter wires the money, and never hear from the “owner” again.

In another rental property scam, it is the legitimate owners who get scammed by fraudulent renters.  In this case, the fraudster renter contacts the legitimate owner, again, usually via email.  The bogus renter expresses interest in renting the place.  The fraudster renter then sends a check for the deposit but then cancels the agreement. The legitimate owner wires the money back only to discover the original check was a fake.  Obviously, timing is key to pulling of this deception.

Securities Fraud:  Securities fraud refers generally to stock fraud, where a stock broker either misrepresents a stock; over-sells a stock or security; insider-trades stocks.  Securities fraud also occurs when someone sells securities without proper license or certification.

Shoulder Surfing:  Shoulder surfing is the act of looking over someone’s shoulder and stealing information from them.  This can be done at an ATM machine, where someone can determine a PIN, or at a bank, where someone may ‘shoulder surf’ a person’s bank identification number.  Crowded coffee shops are targets for shoulder surfers.

Skimming:  Skimming is essentially the theft of credit card information in an otherwise legitimate transaction.  It is a particularly pernicious fraud where fraudster may copy a restaurant or bar receipt.  The fraudster may be the waiter, who has a device, called a skimmer, which can capture and store credit card information.

Skimming also refers to employees ‘taking something off the top,’ as in embezzlement.

Soft Fraud: Soft fraud is a form of insurance fraud.  It arise because of an unplanned event.  An example would be a case in which a person gets into an auto accident and exaggerates his injuries to receive more money damages.  By contrast, a ‘hard’ insurance fraud is a planned scheme, often involving expensive insurance company payouts.

Social Media Fraud:  In a social media/networking fraud, the fraudster hacks into a victim’s social networking account, then contacts friends with urgent requests for money, claiming some emergency.  This is an increasingly common form of fraud.

Tax Fraud:  Tax fraud essentially means cheating on a tax return in an attempt to avoid paying a tax obligation. Examples of tax fraud may include, but are not limited to: Deliberate failure to file all types of tax returns. Deliberate failure to report all income received during the tax year.  The penalties for tax fraud — federal and state — can be severe, including decades of imprisonment.

Telemarketing Fraud:  Telemarketing fraud is basically telephone fraud — selling something fraudulently over the telephone.  Telemarketing fraudsters often target the elderly.  They have their ‘pitch’ down pat, and are experts of not just extracting money, but information over the phone.

Third-Party Fraud:  The ‘third-party’ in a third-party fraud is the victim of identity theft.  An example is someone who has his identity stolen, but is unaware of that theft.  The fraudster then opens an account or line of credit under the unwitting ‘third-party’ victim’s name.

Triangle Scheme:  (See Pyramid Scheme.)

True Name Identity Fraud:  A true name identity fraud occurs when a fraudster  assumes the complete identity of another person, living and identifying himself as that person.

Wire Fraud:  Wire fraud is the intentional use of the wire communications– telephone, internet — to defraud.

Work-at-Home Schemes:  More common in times of recession and high unemployment, the work-at-home scheme involves the promise of high pay doing work from the comfort of one’s home.  The catch?  Just a small, up-front fee to join the network/organization/business.

Worker’s Compensation Fraud:  Workers Compensation fraud occurs when someone willfully makes a false statement, provides false information, or conceals information in order to receive workers’ compensation benefits, or prevents someone from receiving benefits to which they are entitled.

Employers sometimes also commit workers’ compensation fraud by underreporting payrolls in order to receive lower premium costs.  Health care providers sometimes bill for services never performed.

 

 


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