Fraud is any deliberate deception with the intent to gain unwarranted or unlawful gain. It includes a knowing misrepresentation of fact or concealment and often has serious legal consequences.
Individual frauds, such as identity theft, phishing and pump-and-dump schemes, can be devastating for their victims. Occupational fraud, in which employees, managers or executives of an organization deceive the company itself, can be equally damaging.
There are many types of fraud, from data breaches to bogus claims and insider trading. Whether it’s an insurance scam or an investment scheme, these fraudulent activities cost businesses and consumers billions of dollars annually. Often, they can be prevented by following sound preventive measures such as shredding physical documents with sensitive information and verifying the legitimacy of websites before sharing personal or financial information online. Using secure connections, enabling two-factor authentication for all online accounts and regularly monitoring account activity to identify suspicious or unauthorized transactions are other critical steps.
Criminologist Donald Cressey developed a model that identifies three conditions that must be present for an ordinary person to commit fraud. These are: motive, opportunity and rationalization. Motive refers to a need to gain unfair or unlawful gain, and can include pressure from a variety of sources, such as losing a job or status, gambling addictions, health issues or crippling debt. Opportunity is the means or channel that allows people to commit fraud and can be as simple as accessing a trusted source’s money, computer or credit card. Finally, rationalization is the belief that one’s actions are justified and necessary in some way.