What is Fraud?

Published by Thomas Herold in Accounting, Laws & Regulations

'Fraud' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Fraud turns out to be an intentional misstating or misrepresentation that leads businesses or individuals to encounter harm. These damages are frequently reflected as monetary loss. Several elements must be involved for acts to be considered fraudulent. A number of different kinds of fraudulent activities exist. They range from insurance fraud to identity theft to supplying false tax information to offering false statements. In some cases, this type of deception is only one part of a larger crime. It is typically handled in criminal court, though it may be tried in a civil court case as well.

Not every jurisdiction or country has the same definition of what constitutes fraudulent activity. The United States judges it to include a number of different components. A fact or statement has to be misrepresented or untrue. This statement must be relevant or important. The person making the statement must be aware that it is a false declaration. He or she must also mean for the listener to rely on the statement. The hearer can not be aware that the declaration is untrue. This listener must be relying on the veracity of the declaration in order to make a choice. The hearer also can not have a reason to believe the statement could be untrue. Most importantly, the hearer has to experience some form of damages for it to be considered fraud.

In other words, the persons speaking have to supply a lie which they know is untrue while intending the hearer to believe it to be true. The hearer can not know it is a lie or believe the lie might be false. The hearer also has to rely on the lie in a decision making process. The listener must suffer damages from believing the lie to be the truth.

There are numerous different kinds of fraudulent activity. These can mostly be arranged according to three categories of employee, government, and consumer. Employee fraud means that workers defraud the company or individual who employs them. This could be done by intentionally falsifying expense reports or by embezzling corporate funds.

Government fraud revolves around activities that are done intentionally to trick a government agency or some types of businesses protected by law. Insurance and tax frauds are components of this group.

Consumer fraudulent actions revolve around scams and cons. They are designed to cheat individuals out of money or personal information, like with scams that involve investments, telemarketing, or gathering sensitive components of personal identity.

Some cases of fraudulent activity are committed by white collar criminals and pertain to complex financial deals. To be considered white collar crime, the fraudulent activity must involve business professionals who harbor criminal intentions and who possess specific knowledge. Crooked financial advisors might attempt to trick clients into buying shares of precious metal repositories.

They have credibility from their reputation as a professional investment advisor that makes them trustworthy to clients. Individuals who feel this is a legitimate business opportunity could invest large sums and obtain realistic looking share certificates from the advisor. When the advisor is well aware that there are no repositories like these and accepts payments for the false share certificates, he has defrauded the customers who contributed funds to the investment venture.

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The term 'Fraud' is included in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.