Criminal Fraud...

What is "fraud"? Legislated definitions are too complicated so here are three simple explanations expressed in different ways.

1. "All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling (disguising, concealing), and any unfair way which another is cheated." [Black's Law Dictionary, 5th edition]
2. "Deceitful conduct designed to manipulate another person to give something of value (1) by lying, (2) by repeating something that is or ought to have been known by the fraudulent party as false or suspect or (3) by concealing a fact from the other party which may have saved that party from being cheated. The existence of fraud will cause a court to void a contract and can give rise to criminal after liability". [Duhaime's Online Legal Dictionary]
3. "Lying and stealing and cheating for gain"

Fraud comes in hundreds of different flavours but the essential red flags of deceiving someone as a stepping stone to getting their money or property are present in every case. Here is a simple way to decide if you have been defrauded - look at these three examples and the questions that follow.

1. A tenant pays for his rent with a cheque drawn on a closed account. The cheque, of course, bounces and the landlord is out of pocket. Question for the landlord: Would he have accepted the cheque if he had known that it was drawn on a closed account? No, of course not. The tenant deceived the landlord by suppressing the information about the closed account and as a result the tenant continued to enjoy occupancy of the apartment until the landlord's bank returned the bad cheque. The tenant committed a criminal fraud.
2. A "delivery man" goes to a food warehouse to collect cheese for delivery to a restaurant and gives the warehouseman an account number that is valid for that restaurant. After leaving the warehouse the delivery man sells the cheese to a local pizza parlour for a handsome profit. Question for the warehouseman: Would he have allowed the delivery man to take possession of the cheese had he known that the driver did not represent the restaurant whose account number was correctly quoted? Of course not. The driver gave a valid account number but omitted critical information and as a result the warehouse was deceived and led to believe the pickup and delivery was legitimate. The driver committed a criminal fraud.
3. A fraudster who is part of an organized crime group producing counterfeit identification visits a local bank and assumes the identity of an existing customer. This is an "account takeover". He deposits a large cheque for $5,000 and asks the female teller for $500 in cash. The teller obliges. Question for the teller (Customer Service Representative): would she have accepted the cheque and given $500 cash to the "customer" if she had known that the bank's real customer was being impersonated? Of course not. The fraudster deceived the bank staff and committed a criminal fraud.

The KPMG Fraud Survey 2003 for the USA in which 459 large corporations were polled showed that the top seven types of fraud disclosed by those companies were: Employee Fraud (60%), Consumer Fraud (32%), Vendor-related, third-party Fraud (25%), Computer Crime (18%), Misconduct (15%), Medical/Insurance Fraud (12%), and Financial Reporting Fraud (7%). Worse still, fraud is on the increase and the associated value of that fraud is spiralling. It is an alarming fact that fraud is under-reported for many good reasons and we don't therefore really know the true extent of fraud throughout North America.

Facts:

• It doesn't matter whether you are a consumer, a landlord, you run a business, work in a bank or you are a government employee. Everybody is affected and everybody should be concerned and do something to prevent fraud in your own environment.
• In all frauds three factors come into play: (1) a need for cash (often enhanced because of an addiction), (2) rationalization (misguided justification for committing the fraud) and (3) an opportunity (a chance to commit fraud without being caught).
• A "typical" perpetrator of fraud could be a long-serving and trusted employee with no previous criminal history, a married male with a higher than average education. Fraudsters do not walk around with signs painted on their foreheads - they could be the person next to you.
• Criminals will take the least line of resistance - there are few consequences for fraudulent conduct; fraud is easier to commit than bank robbery and often yields higher profit with less risk!
• Many criminals become experts at committing fraud and are capable of sustaining a good lifestyle for a long time at the expense of governments, businesses and consumers.
• If you are a victim of fraud, whether a consumer or a business owner, it is a fact of life that you are unlikely to recoup fraud losses. Doesn't it make sense that the only way to deal with fraud is to prevent it from happening in the first place!

To protect yourself from potential fraud when dealing with other individuals and businesses the golden rule is:

Know WHO and WHAT you are dealing with!! If you practice diligence and critical thinking skills and do not automatically accept people or the documents they present to you without giving them a second thought you will have your own personal fraud radar detector on constant alert and save yourself a lot of grief and loss of income.

Educating yourself about the many schemes fraudsters use to rip you off will pay dividends - knowledge is power and that knowledge will arm you with the information you need to avoid becoming a victim of fraud.

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