Question

Define Fraud and give specific examples of three types

Answer 1

Fraud is a broad legal term referring to dishonest acts that intentionally use deception to illegally deprive another person or entity of money, property, or legal rights.

While the specifics of laws against fraud vary from state to state and at the federal level, there are five essential elements necessary to prove in court that a crime of fraud has been committed:

1. A misrepresentation of a material fact: A false statement involving a material and pertinent fact must be made. The gravity of the false statement should be adequate to substantially affect the victim’s decisions and actions. For example, the false statement contributes to a person’s decision to purchase a product or approve a loan.
2. Knowledge of falsehood: The party making the false statement must know or believe that it is untrue or incorrect.
3. Intent to deceive: The false statement must have been made expressly with the intent of deceiving and influencing the victim.
4. Reasonable reliance by the victim: The level to which the victim relies on the false statement must be reasonable in the eyes of the court. Reliance on rhetorical, outrageous, or clearly impossible statements or claims may not amount to “reasonable” reliance. However, persons known to be illiterate, incompetent, or otherwise mentally diminished may be awarded civil damages if the perpetrator knowingly took advantage of their condition.
5. Actual loss or injury suffered: The victim suffered some actual loss as a direct result of their dependence on the false statement.

Statements of Opinion vs. Outright Lies

Not all false statements are legally fraudulent. Statements of opinion or belief, since they are not statements of fact, may not constitute fraud.

For example, a salesman’s statement, “Madam, this is the best television set on the market today,” while possibly untrue, is an unsubstantiated statement of opinion rather than fact, which a “reasonable” shopper might be expected to disregard as mere sales hyperbole.

Common Types:

Fraud comes in many forms from many sources. Popularly known as “scams,” fraudulent offers may be made personally or arrive through regular mail, email, text messages, telemarketing, and the internet.

One of the most common types of fraud is check fraud, the use of paper checks to commit fraud.

One of the main goals of check fraud is identity theft—the gathering and use of personal financial information for illegal purposes.

From the front of every check written, the identity thief can get the victim’s: name, address, phone number, bank name, bank routing number, bank account number, and signature. In addition, the store may add more personal information, such as date of birth and driver’s license number.

This is why identity theft prevention experts recommend against using paper checks whenever possible.

Common varieties of check fraud include:

• Check theft: Stealing checks for fraudulent purposes.
• Check forgery: Signing a check using the actual drawer’s signature without their authorization or endorsing a check not payable to the endorser, both usually done using stolen checks. Counterfeit checks are considered the equivalent of forged checks.
• Check kiting: Writing a check with the intent of accessing funds that have not yet been deposited in the checking account. Also referred to as “floating” a check, kiting is the misuse of checks as a form of unauthorized credit.
• Paper hanging: Writing checks on accounts that are known by the perpetrator to have been closed.
• Check washing: Chemically erasing the signature or other handwritten details from checks to allow them to be rewritten.
• Check counterfeiting: Illegally printing checks using information from the victim’s account.