Financial fraud happens when someone deprives you of your money, capital, or otherwise harms your financial health through deceptive, misleading, or other illegal practices. This can be done through a variety of methods such as identity theft or investment fraud.
For all types of financial fraud it is important to report the crimes to the appropriate agencies and law enforcement as soon as possible. Fraudulent charges should also be disputed or cancelled as soon as they are discovered as well. Furthermore victims should gather all documentation related to the crime (e.g. bank statements, credit reports, tax form from current and previous years) and continue to file important information throughout the reporting process.
Unfortunately most victim compensation programs do not cover money lost to fraud or fraudulent schemes. Check your specific state laws regarding victim compensation to make sure. Civil justice may be the only legal option to recover lost money.
For more detailed information and helpful resources regarding financial crime, visit our Financial Crimes Resource page
Common Types of Financial Crimes
For a detailed overview of common financial crimes and action steps for reporting please see our Taking Action guide to financial crimes ]
Identity theft: Someone steals your personal financial information (e.g. credit card number, social security number, bank account number) to make fraudulent charges or withdrawals from your accounts. Sometimes people will use the information to open credit or bank accounts and leave the victim liable for all the charges.
Identity theft often results in damaged credit rating, bounced checks/denied payments, and being pursued by collections agencies.
Examples:
Unfamiliar charges or purchases on your credit card or bank account statements.
Perpetrators posing as a bank, government office, or official institution in order to steal your personal financial information
Investment Fraud: Selling investments or securities with false, misleading, or fraudulent information. This may be false/grandiose promises, hiding/omitting key facts, and insider trading tips among other things.
Examples:
Ponzi schemes: Investment fraud scheme where returns are paid to investors using new capital from newly recruited investors as opposed to interest and profits from legitimate investments.
Pump & Dump schemes: Stock traders or stock brokers purchase a stock at a low value then entice other clients to buy the same stock in order to inflate its price. Those who bought the stock at its low value then sell their shares and pocket the profit.
Selling a business or real estate opportunity investment with bad, inaccurate, or false information. Also includes omitting or hiding information that is important investment decision.
Mortgage and Lending Fraud: Someone else (often a friend or family member’s) opens a mortgage or loan using your information or using false information
or
Lenders selling you mortgage or loans with inaccurate information, deceptive practices, and other high pressure sales tactics.
Examples:
Mortgage and loan modification services
Predatory lending practices such as:
Unjustified risk-based pricing
Single-premium credit insurance
Failure to present the loan price as negotiable
Failure to clearly and accurately disclose terms and conditions
Short-term loans with disproportionately high fees
“Bait and switch” contract negotiations
Servicing agent and securitization abuses
Mass Marketing Fraud: Often committed using mass mailings, telephone calls, or spam emails. Mass marketing fraud typically involves fake checks, charities, sweepstakes, lotteries, and exclusive club or honor society invitations. These offers and letters are used to steal your personal financial information or solicit contributions and fees to fraudulent organizations.
Examples:
Fake charity donation solicitations
Exclusive Club or Honor Society invites. Usually invitations are sent through mail or emailed and promise membership in a particular organization for a small fee or setting up a recurring charge with no discernable service provided. Also used to steal personal financial information.
Award or Prize notifications. Also seen on the internet as “10,000th Visitor” type notifications. Usually ask for personal financial information or fee to be paid in order for prize to be delivered or award to be made official. If you do not remember applying or entering a competition for the award or prize being given to you it is probably fraudulent.
Phone calls claiming to be from the government, your bank, or other “official” agency