Financial fraud isn’t just inconvenient — it can be financially and professionally devastating. As with medical fraud, victims are often left to clean up the mess alone, which can be complicated, time-consuming, and demoralizing. Depending on the breadth of damage, there’s a chance you might never fully recover your losses, and the experience can wreak havoc on your credit forever. This can impact your ability to buy property, get approved for a credit card, and even land a job.

Unfortunately, financial fraud is on the rise. Losses in the US jumped nearly 42% between 2019 and 2020 and are projected to surpass $721 billion before 2021 ends, according to data from Aite Group. As the pandemic rages on and people continue to grapple with financial uncertainty, it’s unlikely criminals will relent.

 

Luckily you’re not defenseless. To help you mitigate your risk, we’re sharing useful background information and several tips on fighting back.

What is Financial Fraud

Financial fraud is the act of intentionally deceiving an individual or institution to unlawfully access money or other assets, such as property. There are several different types of financial fraud. Here are a few you should be aware of:

 

  • Identity theft


    This happens when someone gains access to personally identifiable information (PII), like a social security number or credit card details, and uses it to access funds in your name.

  • Misappropriation of funds/ embezzlement


    This happens when someone takes money not meant for them — like a relative cashing someone else’s social security check or an executive creating fake invoices to siphon money from their company.

  • Ponzi schemes


    This happens when a scheme lures in new investors to pay profits to existing investors. Victims believe the money is coming from a legitimate business, but it’s actually coming from other investors. In some cases, the person at the top of the Ponzi scheme disappears with investors’ funds, leaving them with nothing.

  • Bank fraud


    Bank fraud is an umbrella term for any sort of deception used to obtain money from a financial institution (or its customers). For example, criminals might open accounts in victims’ names to cash their checks and keep the funds for themselves. Bank fraud also includes wire fraud, where criminals impersonate a financial institution and ask for money to be wired. (For example, a criminal might pose as a title company when their victim purchases a home.)

 

How to Fight Financial Fraud

Becoming a victim of any type of financial fraud can be an awful experience. But, there are steps you can take to reduce your risk.

 

Always assume you’re a target

Anyone can become a victim of fraud, no matter how financially or digitally savvy you may be. You might assume older people are most at risk from predatory financial crimes but, while older adults are often targeted, the highest percentage of victims in 2020 were between 35 and 44 years old (accounting for almost a third of cases). The worst thing you can do is let your guard down because you don’t think you fit a criminal’s target demographic.

Verify the recipient of any transaction

If you’re charged with handling bookkeeping or accounting duties, like paying employees and vendors, or you’re asked to wire money for any reason, always take time to verify the recipient is legitimate. When wiring funds, double-check all instructions by phone with the institution and ask for confirmation that the money was received.

Enable multi-step authentication

Many banks require users to complete a two-step authentication process to access their accounts. But, if not, make sure you enable it immediately. While it might be mildly frustrating, it can significantly reduce the chances of someone breaking into your online accounts. Additionally, make sure to change your password regularly.

Ask your bank to provide a physical token

A physical security token is a device required for accessing a system and often acts as the conduit of data. You may request one from your bank. Typically you’ll need to fill out a form and, of course, verify your identity.

Monitor your PII

Consider using actionable threat intelligence so you can determine whether your PII has been leaked and/or shared on the dark web. You’ll also get notifications about new hacks so you can take all the necessary steps to prevent account takeover (like changing your password and notifying your bank).

If you suspect you’re a victim of financial fraud, be sure to act fast. Some banks require you to report fraud within 60 days, or they may deny your claim. Additionally, make sure to report the issue to the FTC and/or carefully monitor all accounts in case the criminal strikes again.