The definition of financial fraud is manipulation that produces transactions that provide a material benefit. Not always, but often, the main perpetrators of financial fraud are business people who have specialized knowledge in a certain area and use it for their own material gain.
Below are some of the most common areas that financial fraud can occur.
1. Insurance Fraud
Anyone who seeks to cheat a financial company out of money that could be obtained through cashing in a policy through deception is guilty of insurance fraud. Typically, this happens in one of two ways: hard fraud or soft fraud. Soft fraud is when a person over-exaggerates the impact that occurs during a tragedy, such as the damage caused by a water leak, while hard fraud would be akin to causing the house to flood in the first place to claim an insurance policy.
2. Unauthorized Transactions
Most of us are familiar with the spam phone calls that try to tell us we’ve won some kind of prize, and if only we’ll provide them with some kind of bank account information, they’ll wire it directly to us. This is just one example of an unauthorized transaction, where someone obtains your account information or personal identification number (PIN) and starts making fraudulent withdrawals.
3. Wire Fraud
This occurs when someone uses an interstate electronic device to try and deceive people into buying things that they themselves do not own. If someone calls a person in a different state and tries to get them to buy their car – that they do not even possess – that’s an example of wire fraud. It’s a federal crime and is punishable by up to 20 years in prison, a fine of up to $250,000, or both.
4. Credit Card Fraud
Any time a fraudulent transaction involving a credit card is made, fraud is most likely at the center. It involves buying, selling, or faking credit card information and then using that data to make unauthorized transactions. There are several different types of credit card fraud, but the severity of the punishment changes depending on several different factors: past criminal history, amount stolen, etc.
5. Securities and Investment Fraud
More of a white-collar crime, securities and investment fraud occurs when a company inflates the stock price of their company in order to attract more outside funding. Alternatively, this could also apply to insider trading, when a person with private, insider knowledge of a company uses that information to make purchases or sell stocks at the perfect time. Any kind of fraud involving stocks generally falls under this umbrella.
6. Internet Investment
With the advent of internet marketing, there has been no shortage of people trying to sell dreams of future returns on new and revolutionary products to unsuspecting people online. Though some of these ventures may honestly go bankrupt, when a person knowingly provides false advice on investments that they know won’t produce any returns, it’s classified as an internet investment. These can be especially hard to track, however, as the person most often closes down their business and moves on without a trace.
Forgery is as old as fraud itself and occurs when one person impersonates another by signing or authorizing checks on checks, credit card statements, bills, etc., in someone else’s name. Also, if one person’s work is fraudulently presented as the work of someone else’s – good or bad – it’s a form of forgery and can be prosecuted with a hefty fine, depending on the circumstances.
Due to the number of financial transactions occurring specifically in New York City, it should come as no surprise that the New York State penal code treats financial crimes very seriously. While some infractions may only classify as a misdemeanor, others can be charged with an outright felony, which could land the offender with serious jail time and incur some heavy fines. Regardless, conviction of a financial crime will give you a criminal record, which can make landing a job in any kind of industry, but especially the financial sector, a challenge.