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.