What is fraud?

In the broadest sense, fraud can encompass any crime committed for financial gain that uses deception as its primary modus operandi. More specifically, fraud is defined by Black’s Law Dictionary as:
“A false statement made with knowledge of the truth or the concealment of a material fact intended to induce another to act to their detriment.”
Consequently, fraud includes any intentional or deliberate act of depriving another of property or money through cunning, deception, or other dishonest acts.

Types of fraud
Fraud can compromise a company, whether internally by employees, executives, officials, or company owners, or externally by customers, suppliers, and other parties. Other forms of fraud target individuals rather than companies.

Internal Fraud
Internal fraud, also known as workplace fraud, can be defined as: “The use of one’s occupation or employment for personal enrichment through the deliberate misuse or misappropriation of the organization’s resources or assets.” Simply put, this type of fraud occurs when an employee, manager, or executive commits fraud against their employer. Although fraudsters are increasingly adopting technology and new approaches to conceal and cover up workplace fraud schemes, the methodologies used in this type of fraud generally fall into clear, time-tested categories.
To identify and outline these schemes, the ACFE developed the Occupational Fraud and Abuse Classification System, also known as the fraud tree.
Más información sobre el Árbol de Fraude.

External Fraud

External fraud against a company encompasses a wide range of schemes. Dishonest vendors may engage in bid-rigging schemes, bill the company for goods or services not provided, or solicit bribes from employees. Similarly, dishonest customers may present bad checks or falsified account information for payment, or they may attempt to return stolen or discounted products for a refund. In addition, organizations also face threats of security breaches and intellectual property theft committed by unknown third parties. Other examples of fraud committed by external third parties include piracy, theft of confidential information, tax fraud, fraudulent bankruptcy, insurance fraud, healthcare fraud, and loan fraud.

Fraud against people
Numerous fraudsters have also devised schemes to defraud people. Identity theft, Ponzi schemes, phishing scams and advance-fee fraud are just some of the criminal methods being used to steal money from innocent victims.

Why does fraud happen?

The most widely accepted model and the best way to explain why people commit fraud is the Fraud Triangle. This model was developed by Dr Donald Cressey, a criminologist whose research focused on embezzlers – people he referred to as ‘breachers of trust’. Find out more about the Fraud Triangle.
(1) Bryan Garner, ed., Diccionario Ley de Negro. 8ª Ed. (2004), S.V., "fraude".