Fraud

[Carding]

What Is Fraud?

What Is Fraud?
Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud. Fraudulent activity can be carried out by one individual, multiple individuals or a business firm as a whole.

KEY TAKEAWAYS

• Fraud involves deceit with the intention to illegally or unethically gain at the expense of another.
• In finance, fraud can take on many forms including making false insurance claims, cooking the books, pump & dump schemes, and identity theft leading to unauthorized purchases.
• Fraud costs the economy billions of dollars each and every year, and those who are caught are subject to fines and jail time.

Fraud Explained
Fraud involves the false representation of facts, whether by intentionally withholding important information or providing false statements to another party for the specific purpose of gaining something that may not have been provided without the deception.

Often, the perpetrator of fraud is aware of information that the intended victim is not, allowing the perpetrator to deceive the victim. At heart, the individual or company committing fraud is taking advantage of information asymmetry; specifically, that the resource cost of reviewing and verifying that information can be significant enough to create a disincentive to fully invest in fraud prevention.

Both states and the federal government have laws that criminalize fraud, though fraudulent actions may not always result in a criminal trial. Government prosecutors often have substantial discretion in determining whether a case should go to trial and may pursue a settlement instead if this will result in a speedier and less costly resolution. If a fraud case goes to trial, the perpetrator may be convicted and sent to jail.

Legal Considerations
While the government may decide that a case of fraud can be settled outside of criminal proceedings, non-governmental parties that claim injury may pursue a civil case. The victims of fraud may sue the perpetrator to have funds recovered, or, in a case where no monetary loss occurred, may sue to reestablish the victim’s rights.

Proving that fraud has taken place requires the perpetrator to have committed specific acts. First, the perpetrator has to provide a false statement as a material fact. Second, the perpetrator had to have known that the statement was untrue. Third, the perpetrator had to have intended to deceive the victim. Fourth, the victim has to demonstrate that it relied on the false statement. And fifth, the victim had to have suffered damages as a result of acting on the intentionally false statement.

Types of Financial Fraud
Common individual mortgage fraud schemes include identity theft and income/asset falsification, while industry professionals may use appraisal frauds and air loans to dupe the system. The most common investor mortgage fraud schemes are different types of property flipping, occupancy fraud, and the straw buyer scam.

Fraud also occurs in the insurance industry. Thoroughly reviewing an insurance claim may take so many hours that an insurer may determine that a more cursory review is warranted considering the size of the claim. Knowing this, an individual may file a small claim for a loss that didn’t really occur. The insurer may decide to pay the claim without thoroughly investigating since the claim is small. In this case, insurance fraud has been conducted.

The Federal Bureau of Investigation (FBI) describes securities fraud as criminal activity that can include high yield investment fraud, Ponzi schemes, pyramid schemes, advanced fee schemes, foreign currency fraud, broker embezzlement, pump-and-dumps, hedge fund related fraud, and late-day trading. In many cases, the fraudster seeks to dupe investors through misrepresentation and to manipulate financial markets in some way. These crimes are characterized by providing false or misleading information, withholding key information, purposefully offering bad advice, and offering or acting on inside information.

Consequences of Financial Fraud
Fraud can have a devastating impact on a business. In 2001, a massive corporate fraud was uncovered at Enron, a U.S.-based energy company. Executives used a variety of techniques to disguise the company’s financial health, including the deliberate obfuscation of revenue and misrepresentation of earnings. After the fraud was uncovered, shareholders saw share prices plummet from around $90 to less than $1 in a little over a year. Company employees had their equity wiped out and lost their jobs after Enron declared bankruptcy. The Enron scandal was a major driver behind the regulations found in the Sarbanes-Oxley Act passed in 2002.

(c) https://www.investopedia.com/terms/f/fraud.asp

 

[Carding]

Fraud is a type of illegal use of information technology in various areas of business, from telecommunications to the banking sector, the purpose of which is usually to embezzle money from the victim. For fraud, cyber fraudsters can use many methods: phishing, skimming, social engineering, carding, "Nigerian letters", etc. Fraud has been known for a very long time: scammers learned to use the phone for their operations back in the 60s and 70s of the XX century. With the advent of the Internet, cyber fraudsters also moved to it: phishing sites began to appear, and letters of fraudulent content began to arrive at users' e-mails.

Classification and types of fraud

Online scam

This type includes phishing and identity theft.

When phishing, hackers try by all means to obtain from the user his personal data, logins and passwords. Fraudsters can create fake websites that are outwardly indistinguishable from real ones, with similar domain names, so that the user can believe in their authenticity and try to authorize with their username and password, after which the credentials will be obtained by the attackers. Phishing can also be implemented in the form of emails and other similar messages in which fraudsters on behalf of the company (bank, social network, etc.) ask the user for information to log into the account or his personal data (credit card numbers, copies of documents) ...

Identity theft is a crime in which one person impersonates another. Fraudsters can do this, for example, in order to remotely obtain a loan in someone else's name. According to security researchers, a complete identity theft dataset (including documents) costs US $ 16-30 on the black market.

Carding

Carding is the theft of data about plastic cards and their owners (address, answers to security questions, date of birth, name) for subsequent payment for goods in online stores or sale on the black market.

To obtain data, scammers use phishing, social engineering, special devices, and special types of malware. They can also receive information after hacking online stores or banks. To obtain data on payment card details, fraudsters can install special devices on ATMs. These devices read data from the card and the PIN code that the user enters. Attackers can also install special programs on hacked ATMs, payment kiosks, and POS terminals.

Fraudsters often use special devices to steal information from the magnetic tape of a payment card. This type of fraud is called skimming. Skimmers using special equipment can transfer data from one payment card to another. With the advent of contactless payment cards, skimmers began to use new equipment to read data from them.

Internal fraud

The third group can include internal thefts committed by company employees using their official position and access to information systems. The victims of such a fraud can be both the company itself, which employs unscrupulous employees, and its customers.

Fraud victims

A wide range of people suffer from fraud in the field of high technologies: owners of online stores, banks, telecom operators who lose a huge amount of money due to scammers who buy goods from them using someone else's cards, after which the cardholder will definitely request a refund. For example, losses of telecom operators range from 3% to 7% of total income from the sale of services ( ip-news.ru ). Thus, the store will be left without goods and without money. In addition, banks often impose sanctions against the store in the form of a fine ranging from $ 5,000 to $ 200,000. Ordinary users suffer no less - fraudsters steal money from their accounts, take loans on their behalf.

Sources of fraud

There are a large number of forums on the Internet and on the darknet dedicated to Internet fraud. On them, scammers unite in groups, share their experience and teach beginners. Due to this availability of information, the number of cyber fraudsters is growing. At the moment, a significant number of users of different ages and national / ethnicity are engaged in fraud: they buy data on payment card details on the black market, engage in phishing, and rob online stores. This does not require a lot of knowledge and experience, it is enough to find a scheme on the Internet and act. Organized groups that engage in fraud on a professional basis are especially dangerous. They aim at emptying the accounts of mobile operators, using bonuses in online stores to get goods, etc.

Fraud risk analysis

Fraud is a huge risk and huge loss for Internet entrepreneurs and ordinary users. Fortunately, many different anti-fraud systems have been developed for online stores, banks, telecom operators to ensure that there is no fraud on the site. One of the methods of combating fraud is manual checks - in this case, labor costs make up at least 80% of the total amount of work. Another type is IT-dependent methods, when the fight against fraud is based on special samples provided by the IT departments of the company, which significantly reduces labor costs and increases the number of controlled data flows. The third type of countering fraud is automated methods, the use of software and hardware.