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Fraud is an unethical and illegal practice of deceiving people or businesses for stealing. Fraudsters who commit it are usually after financial gain, and they use various methods to do it. That’s why financial fraud is a widespread problem for many consumers.

Technically, all fraudulent activities can be considered financial fraud since they normally involve stealing information, property, or paid services for money. It has evolved in many ways, adapting to the opportunities presented by the major changes in society. For instance, fraudsters now use technology to trick people because many use devices and the internet to conduct financial transactions nowadays.

Financial Fraud: Its Common Types And Ways To Avoid Them

The most effective way to protect yourself from financial fraud is to educate yourself about them. This article can help you with that, as it explains the common types of financial fraud and how to avoid them.

Identity theft

Identity theft is a prevalent problem for most businesses in all industries. It happens when a person steals another person’s identifying information to use it for any financial dealing without their permission. Because of this fraudulent practice, many people and businesses have suffered major economic losses, with plenty unable to come back from it.


You can avoid identity theft by simply not sharing any personal information that can be used to identify you, such as your social security number and date of birth. You must also protect your credit card and bank account numbers. You can do that by ensuring only to purchase or subscribe to reputable businesses.

Credit card fraud

Most businesses accept credit cards as a method of payment because they’re more secure. However, that doesn’t mean that they can’t be used for fraud. Credit card fraud happens when a fraudster steals credit cards or credit card information for unauthorized use.

You can avoid credit card fraud by keeping an eye on your credit report, creating strong passwords for all your online shopping accounts, and canceling your card. On the collection part of your credit report, you’ll find fraudulent debts and have your issuer or bank cancel them if the business collecting that debt can’t prove its validity. To protect yourself better, you can also educate yourself about how to win a debt collection lawsuit.

Tax fraud

Paying taxes is an obligation imposed by the government to gain financial help that they can use to serve the public better. Sadly, fraudsters commit tax fraud to escape that obligation. Tax fraud takes many forms, such as claiming false deductions, falsifying tax returns, and not reporting income.

Committing tax fraud can be avoided by holding yourself accountable. Ensure that you file your taxes early and in a secure manner. You can do that by submitting them through the proper people and website if you did it online, and also make sure that they’re accurate.

Insurance fraud

Insurance is just as important as an investment, and it also involves money which is why fraudsters continue to try to trick people involved in it or have it. Insurance fraud can come from either the claimant, insurer, or seller. It’s considered insurance fraud when a claimant tries to obtain an insurance benefit they’re not entitled to.

On the other hand, insurers commit fraud by knowingly denying a benefit due for a claimant. For sellers, insurance fraud happens when they sell fake policies from fake insurers.

You can avoid insurance fraud by being careful when claiming or buying insurance. Before signing up for one, vet the company thoroughly to confirm its reputation.

Embezzlement

Embezzlement is committed when an individual entrusted with money, property, or other assets steals or misappropriates them for personal gain. It’s a serious crime often viewed by law practitioners as a form of property theft. This usually happens in an environment where an employee or trustee with legal access to their employer’s or friend’s money or property but doesn’t own them legally.

You can protect yourself from embezzlement by doing a background check on your employees. In addition, you should be careful with the kind of people you include in your inner circle because you’ll never know what they’ll do with the information you share.

Wrap up

Financial fraud is dangerous, but you can avoid it by being informed. Use what you read here to spot red flags and dealbreakers in all your financial dealings to protect yourself. Don’t be deceived and keep fraudsters at bay.

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