Here’s the uncomfortable truth; fraudsters are always in the works trying to deprive you of your hard-earned money. Yeah, that’s right — not every scam involves a victim who was just too gullible for their own good. At times, a criminal will employ an intricate scheme to try and enrich themselves at your expense. To help you stay on the lookout, let’s look at the most common types of financial fraud.
Identity Theft
Arguably the most pervasive form of fraud, identity theft happens when one’s personal information is stolen by a less-scrupulous individual for the latter’s personal gain. The information can be stolen in various ways; data mining is widely preferred, but some victims have also been targeted through social engineering.
Once armed with the details, the thief initiates a scheme to benefit themselves financially at the victim’s expense. They could sign up for credit cards or utility accounts in your name, or just access your bank account and drain the funds.
Phishing
Similar to identity theft, phishing also involves the use of one’s (the victim’s) personal info to exact financial leverage. In fact, the two are so closely related that it’s often difficult to draw a line in practice. But in strict definition, phishing entails criminals posing as service providers.
Your “bank” could alert you to a “problem with your account” via email, asking for your details to solve it. Or it could be your “phone company” informing you of an “unclaimed refund.” Phishers tend to use such suspicious requests.
Investment Schemes
Investment scams come in all shapes and forms. First you have the Ponzi scheme, named for the inventor but propelled to infamy by Bernie Madoff. This is where funds received from new investors are used to pay off their older counterparts. A scammer could also get you to recruit other investors with the promise of high returns; this would be the classic pyramid scheme. Other common schemes involve criminals offering access to elite investment portfolios, targeting victims with documents that appear legitimate.
It’s clear that the best way to protect yourself from types of financial fraud is to guard your information closely. Avoid divulging sensitive details unnecessarily, both online and offline. Also keep tabs on your utility receipts and bank statements; always check with your service providers whenever suspicious communique comes your way. And if you’re offered an investment opportunity that looks too lucrative to be true, that could very well be the case — turn it down before it’s too late.