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Fraud

Reviewed by Apoorva | Updated on Sep 30, 2020

Catalogue

What is Fraud?

Fraud means intentionally deceiving someone through certain actions so the perpetrator will receive an unlawful gain or deny a right to a victim. Fraud can occur in any sector, such as finance, real estate, investment, and insurance.

It can be done during the process of the sale of a real estate property, such as house or land; personal property, such as art and collectables; as well as during the sale of intangible property, such as stocks and bonds.

Types of fraud include credit card fraud, tax fraud, securities fraud, wire fraud, and bankruptcy fraud. Fraudulent activities can be conducted by an individual, group of individuals, or a whole business firm.

Understanding Fraud

Fraud involves misrepresentation of facts, either by intentionally withholding information or by providing false statements, in order to gain something that may not have been provided without the deception.

In situations involving frauds, the perpetrator is well aware of certain information that the intended victim is unaware of. This makes it easier for the perpetrator to deceive the victim. An individual or a company that is committing fraud takes advantage of the information gap. The time and effort required to bridge the information gap acts as a disincentive to fully invest in fraud prevention.

For example, consider a claim application is lengthy. Since thoroughly reviewing the claim may take a long time, the insurer may instruct for a cursory review. So, a policy owner can submit a small claim for a loss that is untrue. The insurer, in this case, may pay the claim without investigating the facts just because the claim is small, resulting in insurance fraud.

How Does Fraud Take Place?

The perpetrator must have committed specific acts in order to prove that fraud has taken place.

  1. The perpetrator must have provided a false statement that looks like a material fact.

  2. The perpetrator must be sure that the statement was untrue.

  3. The perpetrator must have committed a fraud with the intention to deceive the victim.

  4. The victim must be able to demonstrate that it relied on the false statement.

  5. The victim should have suffered damages as a result of acting on the intentionally false statement.

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