Education is your most powerful tool against fraud. Knowing the different types of fraud — and your vulnerabilities — can dramatically decrease your chances of becoming a victim.
Here are some of the most common types of financial fraud
Account takeover schemes
This is financial identity theft, where a scammer gains access to a victim’s bank or credit card account. The scammer then poses as the actual account owner to withdraw funds or make purchases and other unauthorized transactions.
These often involve mass mailing and telemarketing frauds, IRS imposter frauds and others designed to separate seniors from their savings or property. Scammers prey on the elderly because they are seen as more trusting or uninformed. Unfortunately, seniors often don’t report being victimized because they feel embarrassed.
Through fraud or deception, a criminal obtains and uses the victim’s personal information to gain access to their credit card, bank or other accounts for financial gain. Identity fraud is different from identity theft.
Identity theft occurs when a scammer uses the victim’s personal identifying information — such as their name or credit card number — without their permission to commit fraud or other crimes. The person whose identity has been stolen may suffer unpleasant consequences, especially if they are held responsible for the scammer’s actions.
A deceptive practice that involves the illegal sale of financial products. Typical investment fraud schemes are characterized by low- or no-risk investments, guaranteed returns or overly-consistent returns. Two of the most familiar types of investment fraud are Ponzi schemes and pyramid schemes.
In this fraud, an individual is often contacted by email, telephone or text message by a criminal posing as a reputable company. The criminal hopes to convince or trick the targeted individual to reveal personal information — such as usernames, passwords or credit card numbers. This information can then be used by the criminal to access financial, social or other personal accounts.
Ransomware attacks are typically carried out by email. The victim is tricked into downloading and opening an attached file in the email that includes malware. Once opened, the malware is released and prevents or limits the victim from accessing their system, either by locking the system's screen or by locking the victim’s files, unless a ransom is paid.
This is a fraudulent practice in which an email is sent from an unknown source, but is disguised as coming from someone known to the recipient. Therefore, it is more likely to be opened and acted upon. These spoofed emails may contain viruses, like ransomware (see above), or they may request personal information, like a credit card or bank account numbers.
This scam often begins with the scammer contacting the victim via email, text or social media. The scammer promises the victim a significant share of a large sum of money for a small up-front payment, which the scammer requires in order to obtain the large sum. If a victim makes the payment, the scammer either invents a series of further fees for the victim, or simply disappears.
In this scam, the victim receives a phone call from someone pretending to be from a reputable company, like “Microsoft” or “Windows Technical Support,” who promises to speed up or repair their computer systems. The scammer will often request remote access to the victim's computer and then install programs to capture sensitive information, such as credit card data.
These scams prey on a victim’s sympathy by asking for a donation to a worthy cause. The scammer claims to be collecting money for a charity or for disaster relief. In some cases, the victim is given the address of a fake website, where scammers can steal credit card or bank account details from victims who make online donations.
This scam relies on a sense of urgency to work. The scammer poses as a relative or friend of the victim and sends messages to wire money immediately for a pressing need — like getting out of jail or paying a hospital bill. The goal is to get the victim to send the money quickly, before realizing it’s a scam.
Victims may see a want ad on a poster, online or in a newspaper. These fake job offers have certain things in common, such as promising a job and guaranteeing a certain level of income in return for the victim buying something, like a business plan, start-up materials or software. This is just a way to get money out of the victim when there is no job waiting at the end.
This scam often starts with the victim selling an item online. The scammer purchases the item and sends the victim a check for more than amount of the item. The “buyer” then contacts the victim and requests the excess funds be wired back to the “buyer.” A week or so later, when the check from the “buyer” bounces, the victim has lost the item for sale, the excess funds that were wired to the “buyer” and is on the hook to pay back the bank.
The victim of this scam may get a call or email from someone claiming to be their grandchild in distress. The “grandchild” may say they’re out of the country and trying to get home; or they’ve been in a car accident. No matter the story, the scammer always requests the victim to send money immediately in hopes that the money is sent before the victim realizes it’s a scam.
Criminals prey on victims who bid on items online by setting up fake online auction websites or services. Victims who win the bid are told the “seller” only accepts money transfers for payment. The victim sends the money, but the merchandise never arrives.
This scam is a version of the advance fee fraud (see above). Victims are notified by phone, mail, email, text or social media that they’ve won a lottery, prize or sweepstakes. However, to claim their prize, victims must send money to cover the taxes or fees on the winnings.
Using social media, scammers attract victims by advertising a “get rich quick investment scheme.” The victim is asked to purchase a reloadable prepaid debit card and send the scammer the PIN, so they can access the funds for the investment. A new twist to this fraud has the scammer claiming the victim’s investment has done so well that money has to be sent to cover the taxes.
There are several versions of this circulating. In one, scammers use newspaper ads and emails to promote mystery shopping jobs. They often create websites where victims can “register” to become a mystery shopper. However, victims are told they have to pay a fee for information about a certification program, a directory of mystery shopping companies or a guarantee of a mystery shopping job.
Scammers create fake profiles on dating websites to search for victims. Upon finding a target, scammers lure the victim into more private means of communication, such as through personal email or phone calls. The scammer acts as if they’ve quickly fallen for the victim. This creates a false sense of attachment, allowing the scammer to ask the victim for money, often so they can come for a visit.
A fake property owner looks to scam a legitimate renter. The renter finds a dwelling for rent and communicates with the “owner,” usually via email. The “owner” says the renter may have the place if money is wired to cover a security and/or application fee. The renter wires the money and never hears from the “owner” again.
Social networking scams often involve identity fraud and identity theft (see above). This is because social media sites often include a lot of personal information: name, birth date and place, email address and pictures. This makes it easy for scammers to impersonate someone else on social media for a variety of malicious purposes, such as scamming victims out of money.
Someone claiming to be from a government agency contacts a victim and says money is owed for taxes, which must be paid immediately to avoid arrest, deportation, or suspension of a driver’s license or passport. The victim is instructed to pay the money promptly, either through a money transfer or gift card.