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The Major Types of Financial Fraud & How To Stay Safe From This Fraud

Financial fraud is when someone steals your money or otherwise jeopardizes your financial stability through false information, dishonest tactics, or other illegal methods. This can be accomplished in a number of ways, including investment fraud and identity theft. 

An intentional act of deception involving financial transactions for personal advantage can be widely referred to as financial fraud. Fraud is both a criminal and a civil law infraction. Numerous fraud instances include intricate financial transactions carried out by “white collar criminals” such as corporate professionals who have criminal intent and specialized competence.

Short Term Loan

The Various Types of Financial Fraud That Attack You on A Day To Day Basis

When someone loses money or something else important to them personally, that is consumer fraud. The scam may make use of dishonest, unfair, false, or misleading business tactics. All consumers are at danger of fraud, but seniors and college students are the primary targets of scammers.

By ensuring that banks and financial institutions treat customers fairly, the Consumer Financial Protection Bureau (CFPB) defends consumers from financial fraud and scams. According to the CFPB, “Scammers are continually coming up with new ways to take your money. You can protect yourself by learning what to look out for.”

The most typical consumer frauds are listed below, along with advice on how to avoid falling victim to them.

Tax Fraud

Tax/IRS Scams

When dealing with the IRS or their taxes, the majority of people become anxious. Because of this, tax fraud is a desirable target for financial fraud. Tax refund fraud is among the most frequent ones. Identity thieves who commit tax refund fraud file false tax returns under your name. To maximize your refund, they will record false income, which the criminal will then deposit.

The IRS identified 5.2 million tax returns as false in 2020. This con has a couple of different iterations. In one, a con artist poses as an IRS agent and requests personal information in exchange for payment of back taxes. You might also deal with a dishonest tax preparer who misappropriated your data or falsely applies for a refund in your name.

Signs of Tax/IRS Fraud

  • receiving notification from the IRS that several returns had been filed under your name.
  • receiving tax forms, such as a W-2 or 1099, that are unfamiliar.
  • notifying you of a new account.
  • receiving tax transcripts without asking.
  • Your tax return cheque is blocked by your bank.
  • Before filing your taxes, a refund cheque is sent to you.
  • Your tax preparer won’t sign your return or is unable to explain any inconsistencies.
Tax Time

What Can You Do

Follow the instructions in the letter if you have received a letter from the IRS warning you about filing a fraudulent tax return. If you learn about the scam on your own, get in touch with the IRS right once and heed their advice.

You’ll often need to complete an Identity Theft Affidavit, print it off, and mail it together with your valid tax return.

Cancel the transfer right away if you sent money to a fake IRS agent or tax preparer. Call the fraud division of your financial institution if you’ve provided them your credit card number or bank account details.

Additionally, you should notify the IRS of the fraud at [email protected] (for phoney emails) or 202-552-1226. (with the scam number that contacted you).

Debt Collection Fraud

Some con artists call victims and demand payment for fictitious unpaid bills while appearing as collection agencies. These people are not authorised debt collectors. You also have rights if you have actual outstanding debt that is subject to collection. The Fair Debt Collection Practices Act outlines these rights (FDCPA).

debt fraud

Signs of Debt Collection Fraud

Here are some warning indicators to watch out for to distinguish between a real debt collector and a con:

  • A con artist will hide facts from you, such as the precise sum of the fictitious debt, the identity of the creditor, the fact that you have the right to contest the debt, or details allowing you to investigate the reliability of the debt collector.
  • They’ll exert pressure on you to use cash, a wire transfer, or a prepaid debit card as a form of payment.
  • They might threaten to put you in jail or even claim to be a representative of the government.
  • Scammers will occasionally threaten to report you as a deadbeat to your family, employers, and other people.
  • They’ll make an effort to obtain your personal information, including Social Security or account numbers.
  • The FDCPA forbids some scammers from making early or late calls (before 8 a.m. or after 9 p.m.).

What Can You Do

Here are some steps you can take if you believe you have been the victim of a debt-collecting fraudster:

  • Give no one your personal information over the phone or by email.
  • Request the caller’s name, company name, and street address in addition to a callback number.
  • If the debt collector specifies the name of the creditor, get in touch with them and ask for more information, such as the type of debt you have and the name of the agency hired to collect it.
  • Every year, you can check your credit reports for free to see if any debts have been reported. (Since not all creditors disclose, there is no foolproof technique to find every potential lawful debt.)
  • Be aware of your FDCPA rights.
  • If you think you’ve been conned, file a complaint with the FTC or the attorney general’s office in your state.
Demand Draft Fraud

Govt Impersonator Fraud

Scammers will call you pretending to be from the IRS or the Social Security Administration. Or claim they are employed by Medicare. They warn that horrible things will happen if you don’t pay or refuse to give them your personal information. You can also lose out on a government benefit. However, it’s a con. Recognize the signals to stay away from the con.

Spot Government Impersonator Scams

A phone, email, or text message from someone claiming to be with a government agency is frequently the first step in a government impersonation scam. To sound official, they might give you their “employee ID number.” Additionally, they might know details about you, such as your name or home location.

They frequently claim to work for the Social Security Administration, the IRS, or Medicare, but occasionally they use fictitious agency names like the National Sweepstakes Bureau, which does not exist. Additionally, they’ll explain why you must transfer money right away or provide them with your personal details. If you receive a call like this, end the call. It’s a con artist.

Considering that governmental entities won’t contact you via phone, email, or text to request money or personal information. Only a scammer will do that.

Social Security Identity Theft

What Can You Do

Never pay someone who claims to be with the government with cash, gift cards, cryptocurrency, wire transfers, or any other form of payment. Because it’s difficult to trace that money and nearly impossible to get it back, con artists ask you to pay in this manner. Your money will be taken, and they will vanish.

Never divulge financial or other sensitive information to a caller, texter, or emailer who claims to be from the government. Stop if you believe a call or message might be genuine. Call the government organisation directly at a number you are sure is correct after hanging up the phone.

Do not believe caller ID. The genuine phone number of the government organisation may appear on your caller ID, or it may possibly simply say “Social Security Administration,” for example. Caller ID, however, is a fraud. Anyone in the globe could be making the call.

Avoid clicking on links in unexpected emails or texts. In order to steal your money and personal information, scammers send emails and texts that appear to be from a governmental organisation. Never click on any links, and never share them with others. Just remove the message.

Personal Experience

The Best Practices To Spot Financial Fraud

Scammers have more tools than ever in the modern world to steal your hard-earned money from you, especially as more people spend time online and transact business electronically.

It’s crucial to be aware of five key warning signs for financial fraud, whether you’re attempting to make wise investments or simply safeguard yourself from becoming a victim.

Read on to discover four warning signals to look out for when it comes to safeguarding your identity and avoiding financial theft.

Unsolicited Contact

A clear indication that you are the victim of fraud is if someone reaches you out of the blue offering you a lucrative investment opportunity or financial assistance. On his website FinancialMentor, money expert Todd Tresidder advises that you should be extremely wary of any unauthorised phone calls, letters, emails, or knocks at your door.

These schemes are intended to make you poorer, not richer, whether they come from a smooth-talking sales representative on the phone or an online purported royal. Unwanted phone calls or emails from what appear to be trustworthy sources should also make you cautious.

In these “phishing” scams, con artists pose as legitimate companies and financial organisations in an effort to trick you into clicking a link or calling a number that would reveal your bank account information or provide hackers access to your electronic equipment. Always confirm three times that the message comes from a reliable source.

Money-flipping scam

Requests for Unorthodox Payments

Whether you are the one sending the payment or the one receiving it, a request for an unusual payment method is a surefire sign of financial fraud.

The Consumer Financial Protection Bureau warns that you could be in danger if you’re requested to transmit money via wire transfer, courier, prepaid gift card, or any other intricate scheme.

In an article for The Balance, Justin Pritchard advises against using wire transfers because they cannot be undone if you discover that you have been defrauded.

A request for access to your bank account, credit card, or other financial account is another unmistakable red flag. Additionally, Pritchard advises caution when receiving payments in any form other than cash if you’re an internet seller.

2 hands on money

Threats & Pressure

The more time you have to investigate a dubious investment proposal or weigh a dishonest request, the less probable it is that you will become a victim of fraud. Many con artists apply pressure or even threats to compel you to act quickly.

The CFPB notes that pressure might take a good turn, such as a push to make you act quickly on a deal or an investment before the chance is lost.

According to Pritchard, pressure can also manifest itself in more harmful ways. A scam is most certainly in progress if you are being threatened with jail time, a tax audit, or other severe penalties for not acting. You should also be wary of any intimidation or guilt-tripping tactics.

Have you ever seen a message appear on your web browser advising you to call the tech support number because a virus has been discovered? Avoid doing anything since it’s probably a hoax to get you to pay money to get rid of a virus that doesn’t exist.

Losing Money

Offers That Are Too Good to Be True

This adage, “If it appears too good to be true, it probably is,” has certainly been heard before. It is definitely applicable to financial situations.

Tresidder warns that get-rich-quick schemes, guaranteed or low-risk offerings, and claims of investment returns that outperform the market are all red flags that you should forego making a financial commitment. Another excellent resource to consult before making any dangerous financial decisions is your wealth management advisor.

Tresidder also urges people not to accept offers based on confidential or insider knowledge that is unavailable to the general public. Even if the information is accurate, acting on it can be against the law.

Stay Informed and Protected with Funds Trace

When managing any area of your finances, it’s imperative to remain knowledgeable and vigilant. You may stay away from cheaters’ and crooks’ scams by keeping an eye out for these typical warning flags as you navigate the challenging and occasionally perplexing world of personal finance.

Funds Trace is a fine establishment that requires no introduction. It is one of the best funds recovery companies in the world, having recovered approximately $150,000 of its clients’ hard-earned money. There are companies that can help you recover your funds. Instead of going through the hassle of finding a lawyer or waiting for police feedback, the best thing you can do is contact a funds recovery company like Funds Trace. 

So, what are you holding out for? Don’t be afraid to reach out. Contact Funds Trace right away to get your money back as soon as possible

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