Financial fraud during COVID-19
The coronavirus pandemic has greatly transformed the way businesses conduct their daytoday functions.
The move to more digitisation as “work-from-home” becomes a necessity, has brought with it an increased propensity for fraudulent activity, especially financial frauds.
Financial fraud
Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain.
Fraud is a crime. Many fraud cases involve complicated financial transactions conducted by ‘white collar criminals’ such as business professionals with specialised knowledge and criminal intent.
An unscrupulous investment broker may present clients with an opportunity to purchase shares in precious metal repositories, for example.
His status as a professional investor gives him credibility, which can lead to justified credibility among potential clients.
Those who believe the opportunity to be legitimate contribute substantial amounts of cash and receive authenticlooking bond documentation in return.
If the investment broker is fully aware that no such repositories exist and still receives payments for worthless bonds, then victims may sue him for fraud.
Fraudsters contact their potential victims through many methods, which include face- to-face interaction, by post, phone calls, text messages or emails.
The difficulty of checking identities and legitimacy of individuals and companies, the ease with which fraudsters can divert visitors to dummy sites and steal personal financial information, the international dimensions of the web and ease with which fraudsters can hide their true location, all contribute to making internet fraud the fastest growing area of fraud.
Some schemes offer high or unrealistic rates of return for a small amount of investment while at the same time promising that such investment is easy and risk-free.
Generally speaking, if the offer is too good to be true, members of the public are advised to be wary and should make an effort to verify the validity of the promised high returns.
Most schemes also assert that wealth can be generated with or time.
Illegal schemes or scams are often advertised through spam.
Some forms of advertising for these schemes, market books or compact discs about getting rich quick rather than asking participants to invest directly in a concrete scheme.
It is clearlypossible to get rich quickly if one is prepared to accept very high levels of risk - this is the basis of the gambling industry.
However, gambling offers the nearcertainty of completely losing the original stake over the long term, even if it offers some wins along the way.
Nevertheless, many people long for instant wealth, and find these schemes appealing.
1. Embezzlement,
little skill, effort,
The four basic types of financial fraud are:
also called larceny, which is the illegal use of funds by a person who controls those funds.
Embezzlement is also defined in most states as theft or larceny of assets (money or property) by a person in a position of trust or responsibility over those assets.
Embezzlement typically occurs in the employment and corporate settings.
Many times, embezzlement stories don’t make it into the paper because business people are so embarrassed that they choose to keep the affair quiet instead.
They usually settle privately with the embezzler rather than face public scrutiny.
which is the stealing of company assets by employees, such as taking office supplies or products the company sells without paying for them.
Internal theft is often the culprit behind inventory shrinkage.
which are situations in which employees accept cash or other benefits in exchange for access to the company’s business, often creating a scenario where the company pays more for the goods or products than necessary.
That extra money finds its way into the employee’s pocket who helped facilitate the access
For example, say company A wants to sell its products to company B. An employee in company B helps company A get in the door and company A prices its product a bit higher and gives the employee of company B that extra profit in the form of a kickback for helping it out.
A payoff is paid before the sale made, essentially saying “please.”
A kickback is paid after the sale is made, essentially saying “thank you.”
In reality, payoffs and kickbacks are a form of bribery, but few companies report or litigate this problem (although sometimes employees are terminated when deals are uncovered). is
which occurs when employees take money from receipts and don’t record the revenue on the books.
Any of these financial crimes can happen in any business, however, the one that hits small businesses the hardest is embezzlement.
Embezzlement happens most frequently in small businesses when one person has access or control over most of the company’s financial activities. For example, a bookkeeper may use company money for his own personal needs by writing cheques, make deposits, and balance the monthly bank statement.
There is no segregation of duties.
Consequences of financial fraud
Although cases of corporate fraud and embezzlement have received a proportionately greater share of media coverage, only a fraction of all cases are actually investigated by law enforcement.
With limited resources and a tendency to focus on violent crimes, financial fraud criminals are usually only prosecuted criminally for their deeds if the crimes are large enough or serious enough to warrant scrutiny by law enforcement.
Longer prison sentences are the usual punishment and also, society needs protection from these criminal minds who cause widespread financial damage to so many.
No perfect answer exists when it comes to financial fraud crimes and their punishments.
The system is still evolving and will likely continue to do so for a long time to come.
What is important to recognise is that financial fraud crimes can have many victims and can cause widespread damage, especially to the perpetrators.
For that, stiff sentences to punish and possibly deter the fraud perpetrators are likely necessary, and lawmakers are working to make those sentences fair and equitable.
Financial fraud crimes not only damage one’s reputation, but greatly affects the victims and organisation as well.