Fraud is a criminal activity committed to illegally gain money or deprive someone of their rights. It comes in many forms and can impact individuals, businesses, or entire industries. Examples of fraud include false insurance claims, cooking the books, stock manipulation, mortgage fraud, and identity theft. Fraud costs the economy billions of dollars a year and those caught are subject to fines and prison time.
Most fraud is committed by employees and insiders who exploit their position within an organization. But outsiders can also commit fraud by submitting bad checks, returning stolen products or using fake IDs.
The most common type of fraud is financial – think stock and mortgage fraud, embezzlement, money laundering and counterfeiting. It is important to note that even if there is no criminal prosecution, victims of fraud can pursue civil lawsuits in order to recover their money or restore their rights.
To understand how fraud works, you must look at the motivations of those who commit it. For example, in most cases of corporate fraud, the perpetrator will be under pressure from a personal or professional problem that they are unable to solve through legitimate means. They will then see an opportunity to take advantage of that situation – to steal cash, forge expense reports or manipulate earnings to make themselves richer.
The best way to protect yourself from fraud is to implement a multi-layered defense system that utilizes several types of detection and mitigation tools. Similarly to a military strategy of “defense in depth,” having multiple lines of defense will reduce your chances of being victimized by fraudsters.