International Fraud Awareness Week (IFAW) is an annual event held in November to raise awareness about fraud and to provide resources for businesses and individuals to protect themselves from fraud. This year, IFAW is taking place from November 13 to 19, 2023.
What is fraud?
In law, fraud is an intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law or criminal law, or it may cause no loss of money, property, or legal right but still be an element of another civil or criminal wrong.
The purpose of fraud may be monetary gain or other benefits, for example by obtaining a passport, travel document, or driver’s license, or mortgage fraud, where the perpetrator may attempt to qualify for a mortgage by way of false statements.
In contrast, a hoax is a distinct concept that involves deliberate deception without the intention of gain or of materially damaging or depriving a victim.
Fraud can take many forms, including:
Financial-related types of fraud
- Advance-fee scam is a form of fraud and is one of the most common types of confidence tricks. The scam typically involves promising the victim a significant share of a large sum of money, in return for a small up-front payment, which the fraudster claims will be used to obtain the large sum. If a victim makes the payment, the fraudster either invents a series of further fees for the victim to pay or simply disappears.
- Bank fraud is the use of potentially illegal means to obtain money. There are various type of Bank fraud: Accounting fraud, Demand draft fraud, Remotely created check fraud, Uninsured deposits, Bill discounting fraud, Duplication or skimming of card information, Cheque kiting, Forged or fraudulent documents, Forgery and altered cheques, Fraudulent loan applications, Fraudulent loans, Empty ATM envelope deposits, Identity theft or Impersonation, Money laundering, Payment card fraud, Phishing or Internet fraud, Prime bank fraud, Rogue traders and Wire transfer fraud.
- Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. Bankrupt is not the only legal status that an insolvent person may have, and the term bankruptcy is therefore not a synonym for insolvency.
- Chargeback fraud, also known as friendly fraud or liar-buyer fraud, occurs when a consumer makes an online shopping purchase with their own credit card, and then requests a chargeback from the issuing bank after receiving the purchased goods or services. Once approved, the chargeback cancels the financial transaction, and the consumer receives a refund of the money they spent.
- Cheque fraud (Commonwealth English), or check fraud (American English), refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder’s legal ownership.
- Credit card fraud is an inclusive term for fraud committed using a payment card, such as a credit card or debit card. The purpose may be to obtain goods or services or to make payment to another account, which is controlled by a criminal.
- Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market.
- Insurance fraud is any act committed to defraud an insurance process. It occurs when a claimant attempts to obtain some benefit or advantage they are not entitled to, or when an insurer knowingly denies some benefit that is due.
- Lottery fraud is any act committed to defraud a lottery game. A perpetrator attempts to win a jackpot prize through fraudulent means.
- Mismarking in securities valuation takes place when the value that is assigned to securities does not reflect what the securities are actually worth, due to intentional fraudulent mispricing.
- Mortgage fraud refers to an intentional misstatement, misrepresentation, or omission of information relied upon by an underwriter or lender to fund, purchase, or insure a loan secured by real property.
- Overpayment scam, also known as a refund scam, is a type of confidence trick designed to prey upon victims’ good faith. In the most basic form, an overpayment scam consists of a scammer claiming, falsely, to have sent a victim an excess amount of money.
- Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information.
- Shill bidding: A shill, also called a plant or a stooge, is a person who publicly helps or gives credibility to a person or organization without disclosing that they have a close relationship with said person or organization.
- Tax evasion often entails the deliberate misrepresentation of the taxpayer’s affairs to the tax authorities to reduce the taxpayer’s tax liability, and it includes dishonest tax reporting, declaring less income, profits or gains than the amounts actually earned, overstating deductions, using bribes against authorities in countries with high corruption rates and hiding money in secret locations.
Business-related types of fraud
- False billing is a fraudulent act of invoicing or otherwise requesting funds from an individual or firm without showing obligation to pay. Such notices are, for example, often sent to owners of domain names, purporting to be legitimate renewal notices, although not originating from the owner’s own registrar.
- Cramming is a form of fraud in which small charges are added to a bill by a third party without the subscriber’s consent, approval, authorization or disclosure. These may be disguised as a tax, some other common fee or a bogus service
- Disability fraud is the receipt of payment(s) intended for disabled people from a government agency or private insurance company by one who should not be receiving them, or the receipt of a higher amount than one is entitled to.
- Drug / Pharmaceutical fraud involves activities that result in false claims to insurers or programs for financial gain to a pharmaceutical company. There are several different schemes used to defraud the health care system which are particular to the pharmaceutical industry. These include: Good Manufacturing Practice (GMP) Violations, Off Label Marketing, Best Price Fraud, CME Fraud, Medicaid Price Reporting, and Manufactured Compound Drugs.
- Email fraud (or email scam) is intentional deception for either personal gain or to damage another individual by means of email. Almost as soon as email became widely used, it began to be used as a means to defraud people
- Employment fraud is the attempt to defraud people seeking employment by giving them false hope of better employment, offering better working hours, more respectable tasks, future opportunities, or higher wages
- Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.
- Identity theft, identity piracy or identity infringement occurs when someone uses another’s personal identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes.
- Scams in intellectual property include scams in which inventors and other rights holders are lured to pay money for an apparently official registration of their intellectual property, or for professional development and promotion of their ideas, but do not receive the expected services.
- Internet fraud is a type of cybercrime fraud or deception which makes use of the Internet and could involve hiding of information or providing incorrect information for the purpose of tricking victims out of money, property, and inheritance
- Job fraud is fraudulent or deceptive activity or representation on the part of an employee or prospective employee toward an employer. It is not to be confused with employment fraud, where an employer scams job seekers or fails to pay wages for work performed.
- Long firm fraud (also known as a consumer credit fraud) is a crime that uses a trading company set up for fraudulent purposes; the basic operation is to run the company as an apparently legitimate business by buying goods and paying suppliers promptly to secure a good credit record
- Odometer fraud, also referred to as “busting miles” (United States) or “clocking” (UK, Ireland and Canada), is the illegal practice of rolling back odometers to make it appear that vehicles have lower mileage than they actually do. Odometer fraud occurs when the seller of a vehicle falsely represents the actual mileage of a vehicle to the buyer
- Phone fraud, or more generally communications fraud, is the use of telecommunications products or services with the intention of illegally acquiring money from, or failing to pay, a telecommunication company or its customers.
- Health care fraud includes “snake oil” marketing, health insurance fraud, drug fraud, and medical fraud. Health insurance fraud occurs when a company or an individual defrauds an insurer or government health care program
- Racketeering is a type of organized crime in which the persons set up a coercive, fraudulent, extortionary, or otherwise illegal coordinated scheme or operation (a “racket“) to repeatedly or consistently collect a profit.
- Return fraud is the act of defrauding a retail store by means of the return process. There are various ways in which this crime is committed. For example, the offender may return stolen merchandise to secure cash, steal receipts or receipt tape to enable a falsified return, or use somebody else’s receipt to try to return an item picked up from a store shelf.
- Telephone slamming is an illegal telecommunications practice, in which a subscriber’s telephone service is changed without their consent. Slamming became a more visible issue after the deregulation of the telecommunications industry, especially after several price wars between the major telecommunications companies.
- Telemarketing fraud is fraudulent selling conducted over the telephone. The term is also used for telephone fraud not involving selling. Telemarketing fraud is one of the most persuasive deceptions identified by the Federal Trade Commission (FTC)
- Wine fraud relates to the commercial aspects of wine. The most prevalent type of fraud is one where wines are adulterated, usually with the addition of cheaper products (e.g. juices) and sometimes with harmful chemicals and sweeteners (compensating for color or flavor).
- Technical support scam, or tech support scam, is a type of fraud in which a scammer claims to offer a legitimate technical support service. Victims contact scammers in a variety of ways, often through fake pop-ups resembling error messages or via fake “help lines” advertised on websites owned by the scammers. Technical support scammers use social engineering and a variety of confidence tricks to persuade their victim of the presence of problems on their computer or mobile device, such as a malware infection, when there are no issues with the victim’s device. The scammer will then persuade the victim to pay to fix the fictitious “problems” that they claim to have found. Payment is made to the scammer through ways which are hard to trace and have fewer consumer protections in place which could allow the victim to claim their money back
- Fertility fraud is the failure on the part of a fertility doctor to obtain consent from a patient before inseminating her with his own sperm. This normally occurs in the context of people using assisted reproductive technology (ART) to address fertility issues. The term is also used in cases where donor eggs are used without consent and more broadly, in instances where doctors and other medical professionals exploit opportunities that arise when people use assisted reproductive technology to address fertility issues. This may give rise to a number of different types of fraud involving insurance, unnecessary procedures, theft of eggs, and other issues related to fertility treatment.
- Sham marriage or civil partnership is one where the relationship is not genuine but one party hopes to gain an immigration advantage from it. There is no subsisting relationship, dependency, or intent to live as husband and wife or civil partners. After a period, couples often divorce if there is no purpose in remaining married. The reverse situation, in which a couple gets a divorce while continuing to live together, is called paper divorce.
- Paternity fraud, also known as misattributed paternity or paternal discrepancy, occurs when a man is incorrectly identified as the biological father of a child. The underlying assumption of “paternity fraud” is that the mother deliberately misidentified the biological father
Government-related types of fraud
- Benefit: The most common form of benefit fraud is when a person receives unemployment benefits, while working. Another common form of fraud is when the receivers of benefits claim that they live alone, but they are financially supported by a partner or spouse. Failing to inform the state about a “change of circumstances”, for example, that your partner is now living with you, or that you have moved house, or that a relative has died, leaving you some money may also be fraud by omission.
- Electoral fraud, sometimes referred to as election manipulation, voter fraud, or vote rigging, involves illegal interference with the process of an election, either by increasing the vote share of a favored candidate, depressing the vote share of rival candidates, or both. It differs from but often goes hand-in-hand with voter suppression. What exactly constitutes electoral fraud varies from country to country, though the goal is often election subversion.
- Medicare fraud is typically seen in the following ways: Phantom billing, Patient billing and Upcoding scheme and unbundling.
- Visa fraud has different criteria in various parts of the world but the commonly accepted points are the sale, provision, or transfer of otherwise legitimate visas, misrepresentation of reasons for traveling and forgery or alteration of a visa.
- Welfare fraud is the act of illegally using state welfare systems by knowingly withholding or giving information to obtain more funds than would otherwise be allocated.
Other types of fraud
- Affinity fraud is a form of investment fraud in which the fraudster preys upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups.
- Charity fraud is the act of using deception to obtain money from people who believe they are donating to a charity. Often, individuals or groups will present false information claiming to be a charity or associated with one, and then ask potential donors for contributions to this non-existent charity.
- Confidence trick is an attempt to defraud a person or group after first gaining their trust. Confidence tricks exploit victims using a combination of the victim’s credulity, naïveté, compassion, vanity, confidence, irresponsibility, and greed.
- Counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the original, for use in illegal transactions, or otherwise to deceive individuals into believing that the fake is of equal or greater value than the real thing.
- Faked death, also called a staged death, is the act of an individual purposely deceiving other people into believing that the individual is dead, when the person is, in fact, still alive. The faking of one’s own death by suicide is sometimes referred to as pseuicide or pseudocide.
- Forgery is a white-collar crime that generally refers to the false making or material alteration of a legal instrument with the specific intent to defraud
- Hoax is a widely publicized falsehood so fashioned as to invite reflexive, unthinking acceptance by the greatest number of people of the most varied social identities and of the highest possible social pretensions to gull its victims into putting up the highest possible social currency in support of the hoax.
- Mail fraud was first defined in the United States in 1872
- Romance scam is a confidence trick involving feigning romantic intentions towards a victim, gaining the victim’s affection, and then using that goodwill to get the victim to send money to the scammer under false pretenses or to commit fraud against the victim
- Bride scam is a form of romance scam – a confidence trick that aims to defraud potential grooms with the offer of a foreign bride. The basis of the confidence trick is to seek men from the western world who would like to marry a foreign woman and pretend to be willing to marry them. The woman (scammer) asks the man to send money, for example, for the purposes of purchasing an airline ticket or a visa they have no intention of buying. The relationship ends after requested money has been wired and received, sometimes after multiple transfers have been made.
- Scientific misconduct is the violation of the standard codes of scholarly conduct and ethical behavior in the publication of professional scientific research.
- Spyware (a portmanteau for spying software) is software with malicious behavior that aims to gather information about a person or organization and send it to another entity in a way that harms the user by violating their privacy, endangering their device’s security, or other means.
- Vomit fraud is a type of fraud in which a driver of a vehicle for hire falsely claims that an “incident requiring cleanup” occurred while a passenger was riding in the driver’s vehicle. The company then charges the passenger a “cleanup fee” to reimburse the driver for having to clean the vehicle.
- White-collar crime” refers to financially motivated, nonviolent or non-directly violent crime committed by individuals, businesses and government professionals
- Domain slamming (also known as unauthorized transfers or domain name registration scams) is a scam in which the offending domain name registrar attempts to trick domain owners into switching from their existing registrar to theirs, under the pretense that the customer is simply renewing their subscription to their current registrar. Domain name scams are types of Intellectual property scams or confidence scams in which unscrupulous domain name registrars attempt to generate revenue by tricking businesses into buying, selling, listing or converting a domain name. The Office of Fair Trading in the United Kingdom has outlined two types of domain name scams which are “Domain name registration scams” and “Domain name renewal scams”
- Elder financial abuse is a type of elder abuse in which misappropriation of financial resources or abusive use of financial control, in the context of a relationship where there is an expectation of trust, causes harm to an older person.
The impact of fraud
Fraud has a significant impact on Nigeria, both economically and socially. In 2021, the estimated cost of fraud in Nigeria was 10.4 trillion Naira, which is equivalent to 3.6% of the country’s GDP. Fraud can have a number of negative consequences, including:
- Economic losses: Fraud can lead to direct financial losses for businesses and individuals. For example, if a company is defrauded by an employee or a customer, it may lose money, revenue, or assets. Fraud can also lead to indirect financial losses, such as the cost of investigating and prosecuting fraud cases, the cost of implementing fraud prevention measures, and the loss of customer trust.
- Reduced investment and economic growth: Fraud can discourage investors from investing in Nigeria, which can lead to slower economic growth. This is because investors want to be sure that their investments are safe and that they will receive a fair return on their investment.
- Increased unemployment: Fraud can lead to job losses, as businesses are forced to cut costs in order to offset the financial losses caused by fraud. This can have a significant impact on individuals and families, as they may lose their income and their ability to provide for their basic needs.
- Increased poverty and inequality: Fraud can exacerbate poverty and inequality, as it often disproportionately affects the poor and vulnerable. For example, if a poor person is defrauded out of their savings, they may have difficulty recovering financially.
- Loss of trust: Fraud can erode public trust in the government, businesses, and financial institutions. This can make it difficult for businesses to operate and for the government to implement policies.
- Increased crime and insecurity: Fraud is often associated with other crimes, such as organized crime and corruption. This can lead to an increase in crime and insecurity, which can make it difficult for businesses to operate and for people to live their lives safely and securely.
What is being done to address the problem of fraud in Nigeria?
The Nigerian government and businesses are taking a number of steps to address the problem of fraud. These include:
- Enhancing law enforcement: The Nigerian government is increasing the resources available to law enforcement agencies to investigate and prosecute fraud cases. This includes the establishment of specialized anti-fraud units and the training of law enforcement officers on how to investigate and prosecute fraud cases.
- Strengthening the regulatory framework: The Nigerian government is also strengthening the regulatory framework for the financial sector and other industries in order to make it more difficult for fraudsters to operate. This includes the implementation of new regulations and the enforcement of existing regulations.
- Educating the public about fraud: The Nigerian government and businesses are also educating the public about fraud and how to protect themselves from fraud. This includes public awareness campaigns and the development of educational resources on fraud.
The fight against fraud is an ongoing one, but the Nigerian government, individuals and businesses must be committed to addressing the problem and reducing its negative impact on the country.
Protecting Your Business from Fraud
There are a number of steps that businesses can take to protect themselves from fraud. These include:
- Implementing strong internal controls
- Training employees to recognize and report fraud
- Using fraud detection software
- Monitoring customer accounts for suspicious activity
Cayene Hosts’ commitment to fraud prevention
Cayene Hosts is committed to providing its customers with the best possible protection from fraud. We have a number of measures in place to protect our customers’ data and to prevent fraud. We also encourage our customers to take steps to protect themselves from fraud.
Here are some additional tips for businesses:
- Make sure your business is registered with the government.
- Get a business tax identification number (TIN).
- Open a business bank account.
- Set up a system for tracking your income and expenses.
- Get insurance to protect your business from fraud and other losses.
Here are some additional tips for individuals:
- Protect your personal information.
- Don’t give out your personal information to anyone you don’t know and trust.
- Be careful about what you share on social media.
- Be cautious when clicking on links in emails or text messages.
- Use strong passwords and change them regularly.
- Monitor your bank statements and credit card statements regularly.
- Report any suspicious activity to the authorities.