Five different types of frauds are:
Employee embezzlement
- Vendor fraud
- Customer fraud
- Management fraud
- Investment scams
Employee embezzlement fraud means that the employee of the firm uses his power or authority to manipulate the assets of the company for personal gain. In this case the victim is the employer or the firm. Employee can steal the assets of the firm which is called direct fraud. In case of indirect fraud, employee can use third party by asking for a bribe or hidden commission from suppliers.
In Vendor fraud, the manufacturing or selling companies charge their customers more than the price of the actual product by imposing hidden charges. For example, if the consumer is buying a product from internet, then they may suffer from the higher delivery charges.
When the customers do fraud with the financial institutions, it is called customer fraud. The most common way of customer fraud is to transfer money from on bank to some other bank account. In this case the customer pretends that he is a wealthy or real business man. Once the bank issue loan or transfer money, the customer takes money and gone. Similarly, when customer buys a product and at delivery time the customer refuses to collect it by saying it is not the product he asked for. In such cases customer get that product free of cost.
Management fraud is the most common type of fraud which is done to gain personal interest by showing wrong presentation of financial statements of the business. These personal gains are the bonuses which are subject to their performances. Moreover, misrepresentation of statements is also done to attract investors for the fund collecting from shareholders for the coming year.
Investment frauds are the frauds which are done at the stock markets by spreading the false financial statements and rumors. It is similar to the management fraud. In this case the victims are common investors who are interested in investing their funds in the companies listed at stock exchange.
Civil law is also known as common law which deals with the legal problems between individuals. It has no concern with the public at large. These problems are tort, contracts and family issues such as divorce and custody of children. Fines are the normal way of remedies in case of civil law.
A crime which affects the public at large or the society falls into the category of criminal law. Crimes like murder and kidnapping are the examples of criminal law crimes. The remedies are fines or imprisonment or both in case of criminal law. Moreover, frauds from the management of companies also fall in the category of criminal law.
Charles Ponzi was so successful in the investment fraud because the money collected from the investors was given to the investors who already invested in the scheme of the Ponzi. With quick and fast return more investors invested in this scheme and once the new investors stopped investing all the investors suffered losses.
Demand of professionals to detect and identifying of frauds are increasing because there is a massive amount of money from the common people involved in the business today. To improve the trust of investors on the stock markets, governments are forcing businesses to hire certified auditors for their reviews.
It is very important to gain trust before committing fraud because it provide the time to recover or hide the fraud before detection. For example, it the employee is handling the cash counter, he can use cash for his personal use and then return it without telling anyone. Another example is the fake sales of products at the end of the year and return of the product at the start of New Year to show good performance for the year.
