Fraud: It Started With Identity Theft

Fraud Definition

Fraud is the act of deceiving others with the criminal intent to achieve personal and financial gain from doing so. In some cases, this can be a sporadic decision and in others, it is a very sophisticated plan that is carefully crafted in anticipation. An example depicting a random act of fraud could be a situation where someone finds a credit card laying on the ground. If the individual then uses the lost card to make a purchase, an act of fraud has just been committed. Other more complex plans may involve luring information out of an individual and using it to impersonate their identity.

From that definition, you may start to realise that are many types of fraudulent activities. Some of the most common forms of fraud are listed here:

• Credit card fraud – This is a situation similar to the random act of fraud outlined above. If someone uses your credit or debit card without permission, they are committing credit card fraud. Specifically, they are trying to make purchases or withdraw funds from your personal banking accounts. We will discuss this matter in further throughout the article.
• Identity fraud – This act of fraud is when a perpetrator uses pieces of your identification to secure a mortgage, loan, or even a driver’s licence under your name. Any product or service that requires an application process or address details could be a means to commit identity fraud.
• Investment fraud – Investment fraud typically involves the deception of an individual as it relates to making investments. The most commonly known types include pyramid schemes and Ponzi schemes. Each of these represent a situation in which the investor is lied to regarding the use of their funds.

Here we’ve only listed the most common forms of fraud. Fraudulent activity basically involves anything that has to do with deceiving an individual for the fraudster’s own benefit. This includes persuading an individual’s actions by portraying the existence of a false scenario. A specific example of this would be a telemarketer asking you to contribute to a charitable cause which doesn’t exist. In this case, they are committing fraud by creating the illusion of a charity when really, they are pocketing the donated money. As you can see, there is no one way to commit fraud, which makes it important for individual’s to protect themselves against it.

What is Fraud?

Fraud comes in all forms, shapes and sizes. Often times, fraud begins with an individual committing an act of identity theft. Once the necessary information is obtained, they proceed to impersonate the victim of identity theft. This could be something as simple as buying an item with their credit card. It could also be a situation that is more serious, like applying for a loan or passports in the victim’s name.

As seen in a popular North American television show Suits, fraud can be the act of practicing law without the proper professional licences. More generally, it can apply to any profession that requires certain licences and permissions to carry out specific duties. A form of fraud would be to pretend that you have earned these licences and are allowed to practice that skill when really you aren’t qualified to.

Fraud has severe consequences and is punishable by law. In one of the UK’s biggest fraud cases, a bank clerk by the name of Jagmeet Channa was sentenced to nine years of jail time for attempting to steal roughly £72 million from HSBC. In this case, Channa committed fraud by using the passwords of fellow employees to carry out certain transactions in the crime. Thus, he impersonated his colleagues, but was eventually found guilty of bank fraud.

Credit Card Fraud

As we’ve already mentioned, there are many types of fraud. Credit card fraud is one of the most common forms of fraudulent activity used for the purpose of financial gain. Its two main purposes are to purchase goods for free or to withdraw funds from the accounts. The process begins with identity theft, where an individual’s credit card information is stolen. This may be the physical card itself, or its account number and pin code through online hacking techniques.

Either we ourselves have experienced it or have heard about it from a friend. It goes something like this. You receive an unexpected call from a representative at your bank, who proceeds to ask about your current whereabouts. Confused at first, you reply and state that you are in your hometown or wherever you may be at the time. You are then asked about a couple of random transactions recently made using your account that don’t seem to ring any bells. But wait, you are then told that these purchases were made halfway across the world and in different countries with only a matter of minutes between transactions. In these specific situations, someone was trying to commit credit card fraud against you by pretending as though your credit card belongs to them. Thankfully, if you receive a call of this nature, then your bank is probably already dealing with the situation and will reimburse your stolen funds.

Here are some warning signs that you could potentially be walking into a trap related to credit card fraud. These tactics are typically used by people looking to obtain your financial information for their own personal benefit:

• An offer that is too good to be true. Often, if what you’re being offered seems irresistible in that it’s too good to be true, then it likely is. Scammers like to draw people in with an offer they cannot resist.
• Requires an on-the-spot decision. Typically, you will be forcefully encouraged to make a decision on the spot whether that be a real person telling you this is a one-time offer, or an online ad with a timer approaching zero. Unfortunately, if you cave to this false sense of urgency, the irresistible offer could quickly turn into a never ending nightmare.
• Incomplete information that leaves you with questions. This is not a comforting sign. Especially if the FAQ is vague and doesn’t fully explain questions, or if there’s no physical number to call – often it will just be an email address with no phone number.
• Asked for confidential and financial related information. In most cases, service providers (i.e. banks) do not typically ask for this type of information via email.

Ultimately, avoiding this type of fraud usually involves a strong mental willpower and ability to recognise these warning signs. Otherwise you are exposed to caving under the psychological tactics used by scam artists – they can be extremely convincing using the elements listed above. It’s essential that you keep these in mind and don’t let a desire to hit a quick jackpot win you over. By doing so, you’re well on your way to avoiding protecting yourself from those who shouldn’t be trusted.

Identity Fraud

Another common form of fraud is the one known as identity fraud. It is similar to credit card fraud only in the sense that it usually begins with identity theft. By stealing confidential and personal information from an individual, the scam artist can impersonate the victim. Specifically, they will be using the stolen information to trick others and use it as if it were their own. Despite a similarity in the early stages of both identity and credit card fraud, the two are very different from each other. Identity fraud is when someone applies to a credit card or financial product under another individual’s name. Whereas credit card fraud is when someone makes unauthorized purchases or payments on a stolen credit or debit card as we’ve mentioned earlier. However, identity fraud can take place in other scenarios too. An example would be using stolen personal information to take a contract out for a fraudulent phone plan.

So what should you do to avoid becoming a victim to identity fraud? Below we have outlined some precautions you can take to prevent against this:

• Apply to CIFAS, the nation’s fraud protection agency. UK residents can sign up with CIFAS, in which you will be added to a database that flags your name regarding future applications. Specifically, it notifies those companies who process applications to perform a more thorough check to confirm your identification. Although this does protect you in the event that a fraudulent application uses your personal information, it will also make other application processes that you initiate yourself take slightly longer.
• Shred all sensitive documents and data. Companies exist to provide this preventative measure so that you can shred all documents containing personal information about yourself or your customers.
• Destroy old credit cards, driver’s licences and other government or bank issued-cards.
• Use photocopies of important government-issued information. When required to present these, it is safer to use a photocopy to avoid the risk of losing original documentation. Save yourself the hassle from having to replace any pieces of identification.
• Always keep an eye on your purse or wallet. This will help to ensure a sly pickpocket or thief doesn’t go ahead and help themselves to your belongings.

If you keep these helpful tips in mind, you will significantly increase your protection against those looking for their next victim. If we were to sum these tips up into one actionable tip, it would be this. Do not give anyone a chance to steal or copy the original documentation of government issued identification or bank cards. Keep all originals at home and destroy old issues to help avoid becoming a victim of identity fraud.

How to Report Fraud

In order to report an act of fraud, you must first be able to detect it – unless the consequences have become painfully obvious. For your sake, let’s hope it isn’t painfully obvious yet and that these tips will help you to spot fraudulent activity from a mile away. Here are some warning signs that you may have become a victim to fraud:

• Notifications for unfamiliar activity. You receive notifications via some communication channel about unfamiliar applications opened in your name. This should be an immediate warning sign, especially if it’s a letter in the mail. If it’s via email you should be careful, since this in itself could be a phishing scam.
• Unrecognised charges or missing funds. In this case, mysterious charges have appeared on your credit cards statements or you noticed missing funds from your bank accounts. These unauthorized charges basically confirm that you’re a victim of fraud and should take the necessary measures to limit the impact of the incident. We will provide further steps for reporting fraud shortly.
• Received a notification from CIFAS. If you’ve signed up with CIFAS and someone has tried to apply for something using your stolen information, you will receive a notification regarding the application. Given that this is not for an application you initiated personally, then you know you have been compromised.

Now that you’ll be able to detect fraud, it’s important to be aware of the steps required to report this deceitful activity. Hopefully, you will never have to report a case of fraud by following the safety measures mentioned throughout the article. In the case that you do though, here’s what you need to know:

• Sign up with CIFAS. If you haven’t already, you should strongly consider signing up with CIFAS, the UK’s leading fraud protection agency. Although this will not reverse the current effects of the fraudulent activity, it can help to reduce the impact of it and prevent further occurrences.
• Report the matter to local authorities. Given that fraud is a crime punishable by law, you should report the case to your local police department. They will document the crime and help to reverse or put a halt to any negative consequences of the fraud.
• Notify all institutions that are implicated by the fraudulent activity. Depending on your specific situation, you should notify the institution involved in the fraudulent activity. By this, we mean you should notify your bank if funds are missing, the credit card company for unauthorized transactions, or any other companies that may have received a fraudulent application under your name.

The bottom line is this. If you are aware of fraudulent activities occurring, it is in your best interest to notify company and authority officials immediately. That way, there will be no debate as to why you delayed in reporting the matter. The sooner an incident is reported, the higher the chance of stopping the fraudster in his path. The scope of the impact from fraudulent activities can be reduced too. So look out for yourself and your loyal customers by reporting any suspicious, fraudulent activities.