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Fraud

Types of fraud and how a person can avoid facing fraud charges or being a victim of fraud

Many types of fraud exist, but they all share common elements. Fraud involves a deception that illegally benefits the perpetrator. For example, someone who commits fraud might pretend to be someone else or fabricate evidence to gain money from an insurance company or other entity. 

Perpetrators of fraud could face both civil and criminal penalties. In criminal court, the prosecutor can file charges against the suspect based on state or federal statutes that prohibit fraudulent acts. The victim of fraud can also sue the perpetrator to recover monetary damages as a result of the defendant’s actions.

The most common types of fraud include:

  • mail fraud
  • credit fraud
  • check fraud
  • online fraud
  • medical fraud
  • insurance fraud
  • Mail fraud

    When a perpetrator uses the mail to deceive someone else, they could be charged with mail fraud. This type of scheme could involve letters or packages that the perpetrator uses to entice someone to send them money or valuables. For instance, a scam artist might send a letter that promises a free vacation if the recipient sends an application and a small fee.

    Credit fraud

    If someone uses another person’s credit without their permission, it’s known as credit fraud. The most common example is credit card fraud. The perpetrator uses someone else’s credit card information to make purchases. Credit fraud can also be committed by taking out a loan in someone else’s name.

    Welfare fraud

    State assistance systems exist to provide aid to people experiencing financial hardships. When committing welfare fraud, an individual provides inaccurate or misleading information to obtain assistance, such as understating their income or claiming a non-existent hardship.

    Check fraud

    Check fraud can be committed by the writing of a check on someone else’s bank account without their permission or by writing checks on a closed account or an account without adequate funds. Bad checks go by many different official and unofficial names, such as hot, bounced, or worthless checks.

    Online fraud

    This is a blanket term that covers any fraudulent activity that occurs on the Internet. For instance, if identity theft occurs online, it’s often called online fraud. Other examples of online fraud could include:

    • Attempting to sell an item online that you don’t actually own (such as a car)
    • Work-at-home schemes where the victim must pay for training materials or access to proprietary systems, but never receives payment for work performed
    • Posting a fake dating profile online, then convincing prospective romantic partners to send money
    • Claiming to represent a fake (or unsuspecting) charitable organization and accepting donations for the perpetrator’s own profit
    • Generating fake “clicks” on Internet ads to boost income from pay-per-click providers

    Medical fraud

    When a doctor, nurse, pharmacist, or medical professional makes false promises about a treatment’s effectiveness or uses questionable diagnostic or treatment procedures, they might have committed medical fraud. Also called “health care fraud,” medical fraud might include the sale of unnecessary or ineffective drugs or the filing of exaggerated insurance claims. According to the FBI, medical fraud can also include the fraudulent use of someone else’s insurance coverage.

    Insurance fraud

    If a person provides false information to their insurance company or deliberately causes damage to their own property and files a claim, they could be guilty of insurance fraud because it results in a fraudulent insurance payout. These scams not only result in high costs to the insurance company, but also make it more difficult for consumers to gain coverage.

    Fraud charge classifications

    Individual states decide whether a particular crime falls under the category of misdemeanor or felony.

    • Misdemeanor fraud. A misdemeanor is a lesser offense, which means less potential jail time or lower fines. Most jurisdictions establish misdemeanor fraud as any crime where the damages fall below a certain threshold, usually around $500.
    • Felony fraud. Those facing felony fraud charges could receive a longer jail sentence and a greater fine than for a misdemeanor. The threshold between misdemeanor and felony fraud charges varies from one state to the next, but could range from $300 to $1,000.

    For first-time offenders, the prosecutor might offer a plea bargain that reduces a felony charge to a misdemeanor even if the facts of the case make the crime a technical felony. This is why it’s essential to hire a lawyer if you’ve been charged with any type of fraud.

    Avoiding fraud charges

    Knowing what fraud is defined as is only the first step to protecting yourself. While many forms of fraud are committed intentionally, it’s also possible to commit a fraudulent act without understanding that the behavior is illegal.

    For instance, you might write a check on a bank account that you have already closed. If you simply grab the wrong checkbook, you could commit fraud without realizing it. Similarly, you might attempt to sell a purse online without realizing that it isn’t a designer bag, which could expose you to charges of consumer fraud.

    Although most criminal statutes require fraud to be intentional, it can be difficult to prove that you didn’t realize you were committing a crime. Before you conduct business with another party or take money from another individual, carefully examine the transaction and its potential consequences. Should you be charged with fraud, you will most likely need the help of a criminal defense lawyer.

    Preventing fraudulent crimes

    Nobody wants to find themselves the victim of a fraudulent scheme. The best way to avoid identity theft and other types of fraud is to protect your personal information:

    • Don’t give out your social security number, bank account number, or other personal data, even to a friend, unless it is required for a legitimate reason, such as applying for credit or government benefits.
    • Shred all incoming financial documents before you dispose of them.
    • Avoid conducting financial transactions, such as accessing your bank account, on a public Internet connection.
    • Never send money to someone you don’t know (especially cash).

    If you suspect that a person you’re in contact with might attempt to defraud you, consider the circumstances. It helps to know how to look for red flags, such as:

    • Demands for money in a short timeframe
    • Requirements to use cash or money orders
    • Job opportunities that require up-front payments
    • Requests for personal or financial information, such as your social security number
    • Solicitations to provide inaccurate information or false documents to an entity, like an insurance company
    • Strange activity on your bank or credit accounts

    Reporting fraud

    If you believe that someone has defrauded you, report the incident to the police. Law enforcement will investigate the fraud and file charges against the appropriate party. To increase the chances of successful prosecution, cooperate fully with the police and prosecutors.

    You might need to report certain types of fraud to federal authorities such as the FBI or the Securities and Exchange Commission. The Inspector General’s Department of Health and Human Services Office often handles medical fraud cases on the federal level, while the Federal Trade Commission might accept reports of identity theft and consumer fraud. If you’ve been a victim of mail fraud, consider reporting it to the US Postal Service.

    However, if you report the incident to your local police department, the officers can tell you how to proceed with your complaint if the matter requires outside agency involvement. Once you file a fraud claim, law enforcement will gather evidence and interview suspects. They might ask you for documentation to support their case, such as copies of checks or money orders and any written correspondence between you and the perpetrator. If the case goes to trial, you might have to testify against the defendant.

    Hiring a lawyer

    When you’re the victim of fraud, you might need a lawyer to protect your rights and help you recover damages. Criminal cases are separate from civil cases. Even if the police do not have enough evidence to charge the perpetrator with a crime, you can still file a civil lawsuit to recover damages.

    Your attorney can help you decide when and if you should file a lawsuit and assist you in collecting evidence. Lawyers can also communicate with law enforcement and prosecutors to keep you up-to-date on the status of a criminal case.

    You might need a lawyer to help you recover from fraud, as well. For instance, in identity theft cases, an experienced attorney can help you dispute negative marks on your credit report and repair problems with financial institutions, such as your bank. In many cases, lawyers can achieve results much faster than a consumer working alone.

    Look for a lawyer who has handled fraud cases before. Even if you’re not sure whether you can prove someone else defrauded you, an attorney can provide guidance and support as you decide how to move forward.

    Fraud costs money and can impact the rest of your life, whether you’re the victim or the perpetrator. Understanding how fraud works can help you avoid committing it or becoming a victim of it. However, if you find yourself in legal trouble, hiring a fraud lawyer is the best way to protect yourself.