Financial fraud occurs when someone deprives another of money, capital, or otherwise harms someone’s financial health through deceptive, misleading, or other illegal practices. There are many types of financial fraud and each type affects victims differently. Financial fraud includes identity theft, investment fraud, mortgage and lending fraud, mass marketing fraud, and other crimes involving financial transactions.
What is Identity Theft?
Identity theft occurs when someone steals your personal financial information (for example, credit card number, social security number, or bank account number) to make fraudulent charges or withdrawals from your accounts. Sometimes, thieves will use the information to open credit or bank accounts, leaving the victim liable for the fraudulent charges.
Identity theft often results in damaged credit rating, bounced checks or denied payments, and pursuit by collection agencies.
- Stolen or compromised ATM cards, which may result in unfamiliar charges or purchases on your credit card or bank account statements.
- Perpetrators posing as banks, government offices, or official institutions to steal your personal financial information.
- Perpetrators who use victim’s name, date of birth, and social security number to file false tax returns and receive fraudulent refunds.
What is Investment Fraud?
Investment fraud involves selling investments or securities with false, misleading, or fraudulent information. This may include false or grandiose promises, omitting key facts about the investment, and insider trading tips, among other things.
- Ponzi scheme: An investment fraud scheme where returns are paid to investors using new capital from newly recruited investors, as opposed to interest and profits from legitimate investments.
- Pump and dump schemes: Stock traders or stock brokers purchase stock at a low value then entice other clients to buy the same stock to inflate its price. Then the broker who bought the stock at a low value sells their shares and pockets the profit.
- Selling a business or real estate opportunity investment with bad, inaccurate, or false information. This also includes omitting or hiding information that is important to the investment decision.
What is Mortgage and Lending Fraud?
Mortgage fraud involves opening up a mortgage or loan using someone else’s information or using false information. Lending fraud occurs when lenders sell mortgages or loans with inaccurate information, deceptive practices, and other high-pressure sales tactics.
- Mortgage and loan modification services
- Predatory lending practices, such as:
- Unjustified risk-based pricing
- Single-premium credit insurance
- Failure to present the loan price as negotiable
- Failure to clearly and accurately disclose terms and conditions
- Short-term loans with disproportionately high fees
- “Bait and switch” contract negotiations
- Servicing agent and securitization abuses
What is Mass Marketing Fraud?
Mass marketing fraud is often committed using mass mailings, telephone calls, or spam emails. Mass marketing fraud typically involves fake checks, charities, sweepstakes, lotteries, and exclusive club or honor society invitations. These offers are used to steal your personal financial information or solicit contributions and fees to fraudulent organizations.
- Fake charity donation solicitations.
- Exclusive club or honor society invitations. Usually, these invitations are sent through mail or email and promise membership in a particular organization for a small fee or recurring charge with no discernable service provided.
- Award or prize notifications. These are also seen on the Internet as “10,000th Visitor” type notifications. Usually, they will ask for personal financial information or a fee for the prize to be delivered or the award to be made official. If you do not remember applying or entering the competition, it is probably fraudulent.
- Phone calls claiming to be from the government, your bank, or other “official” agency.
For a detailed overview of common financial crimes and action steps for reporting, please see our Taking Action guide to assisting victims of financial crime.
What Can I do?
While no financial crime is the same, these actions may be of assistance:
- Dispute or cancel fraudulent charges as soon as they are discovered.
- Keep all documentation related to the crime (such as bank statements, credit reports, and tax forms from current and previous years) in a central file in a secure location, while continuing to update law enforcement.
- Report the crime to a variety of agencies.
Reporting the crime to a variety of agencies, including law enforcement, is an option. However, it is important to know that while you should report the crime to law enforcement, they may not file a police report or engage in an investigation. You may find a similar lack of response from other agencies, as they may not be able to investigate individual claims. . Reporting is still an important step to take because these agencies compile information about financial crimes. The information is used to put together cases for law enforcement when a pattern is found. These agencies may also provide information about steps to take to protect yourself from future financial crime.
For all types of financial crime, you may want to report to the following agencies:
- Local police or law enforcement to report the crime and obtain a police report, if possible.
- Your bank(s) and credit reporting companies to report the crime.
- Your local Attorney General’s consumer protection office.
- The Federal Bureau of Investigation (FBI) also investigates financial fraud if the dollar amount lost is over a specific threshold, at least $25,000 or more in some states. To report fraud, you can file an online tip or visit the nearest FBI’s field office.
- The Federal Trade Commission (FTC) Complaint Assistant at 877-FTC-HELP or https://www.ftccomplaintassistant.gov/.
Unfortunately, most victim compensation programs do not typically cover money lost to financial fraud. Check your specific state laws regarding victim compensation to make sure. Civil justice may be the best legal option to recover lost money, but it may not always be a viable option.
Contact the VictimConnect Resource Center by phone or text at 1-855-484-2846 or by chat for more information or assistance in locating services that can help if you have experienced financial fraud.
For more detailed information and helpful resources regarding financial crime, visit the Financial Crimes Resource page.
For consumer scams, the Better Business Bureau (BBB) provides information about ethical business practices and filing consumer complaints.
For fraud by broker or financial firm, the Financial Industry Regulatory Authority (FINRA) takes complaints from investors in a variety of investment fraud situations.
For futures fraud, the National Futures Association (NFA) offers an online complaint form. Investors may also be able to recover funds lost through the NFA’s arbitration program.
For international fraud, The State Department provides information about common financial fraud schemes perpetrated internationally.
For internet fraud, The Internet Crime Complaint Center (IC3) accepts online complaints from victims of online fraud. Third parties may also file a complaint.
For mail fraud, the U.S. Postal Inspection Service handles complaints relating to mail fraud.
For medical identity theft, the Department of Health and Human Services take complaints regarding medical identity theft and privacy violations.
For mortgage loan modification fraud, this website allows you to report mortgage loan modification scams, either by filing an online complaint or calling 888-995-HOPE.
For securities and investment fraud, you can file a complaint or provide a tip on a potential security law violation through the Securities and Exchange Commission (SEC).
For Social Security identity theft, the Social Security Administration investigates complaints involving social security identity theft and misuse of social security benefits. You can file an online complaint or call their fraud hotline at 800-269-0271.
For tax identity theft, the Internal Revenue Service (IRS) offers resources and tips for victims of tax identity theft. You can report potential theft to the IRS’s Identity Protection Specialized Unit at 800-908-4490.