There are many types of fraud in finance that can be detrimental to an individual or a company. The more sophisticated the times, the more sophisticated the criminals that steal our assets.
This kind of criminal activity can occur anywhere and anytime. Therefore, we must always be cautious and vigilant against many types of potential fraud.
As an anticipatory step, here is information on the most typical types of fraud that we encounter.
The most common types of financial fraud
As explained before, there are various types of fraud, which are classified based on the method, mode, and media used. The most common and frequently encountered sorts of fraud are phishing and skimming, but there are others; what are they?
1. Phishing
Phishing is the most common type of fraud in the modern era. Phishing uses email, SMS, or fake websites to get sensitive information from customers, such as personal data, passwords, and credit card information.
For example, a fraudster may send an email to a victim on behalf of a trustworthy bank, enticing them with gifts and including a link. The victim then enters the link on purpose with the intention of getting a prize.
After clicking, a fake website (designed to seem exactly like the actual website) appears, asking the victim to enter personal information and credit card details in order to get the prize.
When this occurs, the fraudster gets the victim’s personal information without knowing about it.
2.Skimming
Those who like to make transactions at ATMs or credit card EDC machines seem to be more careful. This is because fraudsters can now insert tools or devices into these machines in order to steal credit or debit card information. That is the definition of skimming as a type of fraud.
3. A fake identity
A further impact of this type of phishing and skimming fraud is fake identity fraud. Personal data and valuable information obtained through phishing or skimming are subsequently used by the perpetrator to conduct transactions on behalf of the victim.
Examples of transactions that can be made include opening a new account, accessing a credit card, or applying for an online loan on behalf of the victim.
4. Investment fraud
During the COVID-19 pandemi, public interest in investment is starting to grow, particularly in investments that provide big returns in a short period of time. The fraudster’s method is usually to use a phony investment or an illegal system.
It can be difficult to identify whether an investment is genuine or fraudulent because fraudsters frequently create sites/apps that appear trustworthy and are accompanied by investor testimonials.
5. Corruption
Corruption has become one of the most common types of financial fraud experienced by companies and government institutions. Corruption is defined as the illegal use of authority to obtain personal or group benefits.
An example of corruption that often occurs is misuse or abuse by an individual or group through falsification or manipulation of financial reports. This is more prone to occur when financial supervision is weak.
6. Online loan fraud
There are many illegal online loans that provide easy money loans with no strings attached. This is obviously highly appealing to anyone who needs money quickly. However, that illegal online loan is charging a high interest rate, even almost 100%.
Online loan fraud is characterized by the fact that it is quite easy to give loans without first checking with prospective borrowers. Furthermore, online loans are usually not registered with an authorized organization, such as Otoritas Jasa Keuangan.
How to Prevent Financial Fraud
After knowing about various types of fraud, we have to know how to avoid them. The objective of prevention is to minimize the risk of financial loss, both for ourselves and for the institutions where we work.
1. Always keep personal information secure
Never give personal information such as a credit card number, bank account number, or other identity number to someone we don’t know or over email or phone, as this is unlawful.
2. Verify the source of the information
Before giving information or responding to a financing request, ensure that the source has been verified. For example, when we receive an email from a bank or financial institution, open the genuine website and call the phone number stated on the site to check that it is correct.
3. Use a password or a strong PIN
For essential accounts, use strong passwords that are unique. Don’t use easily guessable personal information, such as a birth date or family member’s name. Always enable two-factor authentication if your provider supports it.
4. Check your account regularly
To avoid skimming and phishing, check bank account and credit card activity regularly to detect suspicious transactions. Report any suspicious or unlawful transactions immediately.
5. Use the OCR feature for business financial management
To prevent potential financial fraud types of corruption and manipulation of financial reports in a company environment, use and utilize AI technology included in OCR software. For example, Fintelite’s OCR+ product
Fintelite’s OCR+ provides more financial security for businesses. This is due to the fact that OCR+ can process numerous financial transactions practically and automatically by utilizing physical and digital documents.
Potential losses caused by irresponsible employees can be minimized by ensuring that the data listed in financial reports corresponds to all physical or digital document evidence.
Always be careful and do regular checks as a preventative step
Thus, this is some information on the various types of fraud in finance, hopefully it can help us avoid the risks of other frauds. Always be wary of information coming via email or text message.
Maintain your composure and thoroughness when carrying out various financial transactions or anything involving personal information.
