Common examples of criminal and civil fraud

As technology continues to progress, fraudsters come up with new and increasingly sophisticated methods of defrauding businesses and individuals and avoiding detection. In order to put yourself in the best position to avoid becoming a victim of fraud, it is important to be aware of the common ways in which you could be targeted.

Identity theft

Business identity theft involves the unauthorised use of a company’s credentials, such as credit card information, to fraudulently obtain goods, services or credit. For example:

• Re-activating dormant or inactive businesses to use their credentials
• Exploiting online data breaches to access sensitive business information
• Using stolen business information to apply for credit

Embezzlement

Embezzlement is where a party misappropriates funds or property that they were entrusted with. For example:

• Employees taking cash payments from customers without recording the transaction
• The submission of invoices to a fake vendor for goods or services that are not provided
• The improper use of payroll to siphon company funds to a perpetrator

Tax evasion

Tax evasion is the act of deliberately not paying taxes owed to the Government. It should not be confused with tax avoidance, which is the act of using tax laws to reduce your tax burden. For example:

• Hiding or underreporting income to avoid paying taxes on it
• Claiming deductions for expenses that were improperly, or falsely incurred
• Concealing the ownership or value of assets

Credit card fraud

Credit card fraud is an umbrella term that covers any fraudulent activity committed using a credit or debit card. For example:

• The usage of card information obtained through data breaches to purchase goods, services or transfer funds to a perpetrator
• The unauthorised usage of a payment card obtained through theft or other means
• False chargebacks through credit card providers

Securities fraud

Securities fraud can occur where an individual or a company attempts to induce investors to make decisions related to stock or commodities markets based on false or insider information. For example:

• Failure to disclose material information about the potential risks of an investment
• The use of non-public information about a company to make decisions about buying or selling that company’s stock
• The deliberate manipulation of a company’s financial data to mislead investors or creditors

Misrepresentation

Misrepresentation occurs when one party makes an untrue statement of fact which someone else relies on, which in turn causes loss to them. The three types are:

• Fraudulent misrepresentation
  • Where a statement is made knowingly, without belief in, or with recklessness as to its truth
•  Negligent misrepresentation
  • Where a party makes a statement carelessly, or without reasonable grounds for believing it to be true
• Innocent misrepresentation
  • Where a party makes a false statement but believes it to be genuinely true.

Other wrongdoers

As well as the fraudster, there may be other parties involved, who you might have a claim against, if you can show:

1. Conspiracy: where more than one person/entity has been involved in the fraud, there may be a conspiracy, if unlawful means were used to further the conspiracy.
2. Dishonest assistance: when someone helps the fraudster with a dishonest state of mind, that person can be liable too.
3. Knowing receipt: when someone receives stolen fund or assets, they can be liable too. 

Concealment

Concealment can occur when a party fails to disclose important information to another party that they have a legal duty to disclose, and this leads the other party to suffer loss. For example:

• Deliberate non-disclosure of a material fact
• Taking active steps to hide a material fact

Breach of fiduciary duty

Where there is a relationship of trust between two parties, such as a company and its agent or director, and a solicitor and client, the party who has been entrusted (the agent, director, or client) is under a fiduciary duty - a duty of trust and confidence. A breach of this fiduciary breach can occur where the fiduciary puts themselves in a position of conflict with the interests of the person to whom they are a fiduciary and derives a benefit.

Cryptocurrency fraud 

We have an article coming soon on cryptocurrency fraud which sets out the more common ways fraudsters steal and deceive crypto investors. Keep an eye on our Deception Diaries page.

AI fraud 

Our article about the risks presented by AI and the impact of AI on cyberfraud can be read here: The impact of AI on cyberfraud

Conclusion

Fraud can occur in many different ways, and as a result, can be challenging to spot before it is too late. If you think you may have been a victim of fraud, or wish to discuss how you could implement effective prevention strategies, please contact one of our experienced fraud team to see how we can help you.

As tackling fraud becomes a priority in both the private and public sectors, Mills & Reeve has launched a new fraud forum, Deception Diaries. This forum will keep you informed about the evolving landscape and offer expert advice on trending fraud topics.