What is a Fraud? A fraud is when one party deceives or takes unfair
advantage of another. A fraud includes any act, omission, or concealment,
involving a breach of legal or equitable duty or trust, which results in
disadvantage or injury to another. In a court of law it is necessary to prove
that a false representation was made as a statement of fact, that was made with
the intent to deceive and to induce the other party to act upon it. It must be
proven that the person who has been defrauded suffered a injury or damage from
the act.
Who commits a fraud and why? It is generally accepted that 20 percent of
employees are honest. Another 20 percent are dishonest and don't mind doing
wrong. That means the remaining 60 percent are potentially dishonest, that's a
total of 80 percent of employees which may be dishonest. To understand fraud you
first have to determine the contributing factors to why people commit fraud.
Some people commit fraud for the sport and thrill of it. There are other
recognizable reasons why honest people may commit a breach of trust. Need is the
most common reason. A desperate financial need is usually the cause of most
frauds. Still some people commit fraud to pay for an elevated life style which
other wise they could not afford. Needs arise from a number of locations these
include: Drug or alcohol addiction, Marriage break-ups and/of extravagant love
affairs, Gambling Debts, Business losses, Unexpected family crises, Mounting
debts, and the desire to live a lifestyle far beyond ones means.
Fraud is costing society several hundred billion a year. Organizations
loose close to 6 percent of annual revenue to fraud and abuse of social systems.
Fraud costs Canadian organizations $100 billion annually. On the average,
organizations loose $9 dollars a day per employee to fraud. On an average of
fraudulent cases males received $185,000 and females received $48,000. A study
done by the insurance industry indicates the groups most likely to commit fraud.
The most typical person who may commit fraud is a college/university educated
white male. Men were responsible for almost four times the fraud as were females.
Losses caused by people with post-graduate degrees were five times greater than
those caused by high school graduates. Fifty eight percent of fraud is committed
by employees, which averages $60,000 per case. Twelve percent of fraud is cause
by owners, which on the average costs the insurance companies $1 million per
case. Fraud increases the cost of Canadians everyday living. It affects bank
rates, insurance rates, credit card rates, and product costs. All companies that
suffer losses factor in the loss to the premium and price the consumer pays.
Fraud is a white collar crime because no one physically gets hurt. The
victims of Fraud are usually: Small companies which have large clientele, such
as Real estate, financial industry, and education industries. Fifty percent of
fraud involves corporations with cash accounts. About ten percent of fraud
arises from conflicts of interest, about five percent of fraud cases come from
fraudulent statements. Presently the funds obtained by frauds are not recovered.
Money obtained from crime is carefully hidden or spent avoiding recovery by the
victims and authorities. It is extremely difficult to locate hidden money's in
today's electronic age. Computers have increased the speed of transactions and
thus often not leaving sufficient documentation to track a potential fraud.
There are numerous ways of hiding fraudulent funds. Criminals often conceal
illicit payments, launder their money, Hide it in complex computer programs,
on/off in book transactions, off shore transactions, and net worth computations.
Fraud is on the rise and the resources to combat it are on the decline,
thus making fraud investigators jobs that much more important. Many crimes,
particularly those which are non violent crimes are going unattended by the
police because they just don't have the man power to combat it. They are willing
to look into fraudulent claims but as of recent they lack the time and resources
to give these crimes all the attention they require. The police are now working
in co-operation with insurance companies, corporations, and investigators to try
to combat this ever increasing crime. Fraud investigators are required to have a
police back ground and a real understanding as to what fraud is, how it relates
to the criminal code, and how to identify it. A fraud investigator must
investigate allegations of fraud. The investigation may require that the
investigator collect evidence, take statements, maintain continuity of evidence,
analyze the scam, prepare court briefs, work with the authorities, testify to
findings in court, assist in the detection and prevention of fraud and white-
collar crime. Fraud investigators must have a extensive educational