Fraud encompasses any activity that relies on deception to achieve a gain. Legally, fraud is defined as a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment” (Black’s Law Dictionary).

Preventing fraud is crucial for both individuals and businesses. Effective fraud prevention programs can yield numerous benefits, such as reduced financial losses, better compliance with regulations, heightened employee awareness of potential fraud, and improved corporate governance. Common types of fraud that target individuals includes: identify theft, imposter scams (phishing attacks), credit card and debit card fraud, mortgage and loan fraud, fake check scams, employment scams, online fraud and malware, advance fee scams, ponzi schemes and investment fraud, tax refund fraud, healthcare fraud (medical identity theft), and cryptocurrency fraud. Common types of fraud that target businesses include: insider fraud, payroll fraud, proprietary data fraud, retail fraud (counterfeit payments and return fraud), bribery and corruption, asset misappropriation, misuse or theft, worker’s compensation fraud, financial statement fraud, and business tax fraud.

Organizations must be vigilant for signs of potential fraud. These red flags vary depending on whether the perpetrator is a customer, broker, or vendor. Money laundering red flags are unusual transactions or patterns, especially in high-risk businesses. Employee red flags are when an individual is living beyond means, financial difficulties, or unusual office hours. Remote work has made it more difficult to detect employee fraud. Management red flags include disputes over risk audits, lack of transparency, and overly complex financial transactions.

Business email compromise (BEC) fraud is one of the most financially damaging online crimes. BEC fraud exploits the reliance on email for business and personal communication. This form of fraud targets businesses and individuals by compromising legitimate business email accounts through social engineering and computer intrusion techniques.

The following are some tips to increase identity protection and prevent personal fraud from occurring. Do not open unfamiliar emails; verify the sender via other means before engaging with the email content. Be cautious with links; malicious links often resemble legitimate ones. Ensure website addresses are secure before providing personal information. Stay informed; keep up to date with current scams via resources like the Cybersecurity and Infrastructure Security Agency (CISA). Use strong passwords; follow CISA guidelines for creating and protecting strong passwords. Finally, keep software updates; regularly update operating systems and applications to protect vulnerabilities.

One way to prevent business fraud is to ensure that bank accounts are protected. It is important to have separate accounts and to maintain distinct bank and credit card accounts for personal and business use. It is important to monitor employee expenses by implementing a reimbursement policy with fraud protections, such as automatic alert for unusual spending. It is also important to safeguard computer systems. This can be done by using firewalls and antivirus software to protect company data and detect breaches early. Enforcing strong password policies also helps to increase protection. Finally it is a good idea to do routine backups of files daily or weekly and store them off site for quick recovery in case of a breach.

Fraud prevention in an ongoing effort that requires vigilance from both individuals and businesses. By staying informed and implementing strong protective measures, you can significantly reduce the risk of becoming a victim of fraud. Global Compliance Investigations, LLC (GCI) is a U.S. Military Veteran owned, independent, global risk management firm. GCI offers comprehensive cybersecurity services designed to combat the threats posed by sophisticated adversaries like fraudsters. GCI delivers the highest quality of cybersecurity services across a range of offerings that can be tailored to a client's unique requirements. These services are performed by professionals with decades of experience in computer forensic reviews, vulnerability assessments, and policy and procedure review. Contact GCI if you have any questions or matters to discuss.