Self Prevention of Fraud CrimesEssay Preview: Self Prevention of Fraud CrimesReport this essaySelf Prevention of Fraud CrimesThe financial cost of fraud crime, to both its victims and the American public, is astronomical. Losses for telemarketing and direct personal marketing fraud schemes alone are estimated to be more than $40 billion annually. Check fraud accounts for additional yearly losses of at least $815 million, more than 12 times the $65 million taken in bank robberies annually and these represent only two examples of common fraud schemes (PSVF, 2011).
Fraud deceives a person by unfairly misrepresenting truth. It also restricts the freedom of its victims as it robs them of their money and it isnt easy to detect fraud, especially if there is no clear indication that it exists; posing the question, what can you do to see the signs and protect yourself and are they enough? I believe by understanding the types of people that fall victim and the motives behind the perpetrators, one can take their own precautions without completely relying on the inefficient regulations currently in place.
In society today, virtually anyone can fall prey to fraudulent crimes. Some perpetrators seek out families that may have limited means or financial difficulties, making the assumption that this bucket of people may be particularly receptive to a proposal that offers a fast and large profit.
The key to avoiding these schemes is the understanding in your own thought process and things that you should ask yourself when faced with an investment opportunity.
Are you overconfident? Overconfidence; remain humble and skeptical at all times when you have been approached. The slightest slip could cause you to become a victim of fraud (Elan, 2010).
Are you being sentimental? Human Sentiment; known as the engagement in wishful or magical thinking rather than logical thinking. (Elan, 2010).Are you lonely? Lonely people often remain on the phone or listen to perpetrators longer to hear the fraudulent sales pitch (Henderson, 2012).Do you understand what is being offered? Lack of maturity or experience that would otherwise help the victim recognize fraudulent pitches (Henderson, 2012).
Are you determined to get rich quick? The desire and social pressure to increase your standard of living quickly and the lack of information about investments in general (Henderson, 2012).
The second key in the self prevention of fraud is to understand the reasons and motives of the perpetrators. We often wonder why people commit fraud, why they steal things that do not belong to them and what goes through their minds when they do such awful things. The answers can be explained by Donald R. Cresseys famous concept, which was developed in the 1950s to explain why people commit fraud. Cressey, a criminologist, came up with a theory which he called the fraud triangle to understand the basics of fraud. According to Cressey, there are three elements present in every fraud: Motivation, Opportunity and Rationalization (Sorkin, 2011).
Rationalization: Fraudsters always rationalize their behavior by convincing themselves that committing fraud is okay. For instance,” I deserve it. I only want my share”, “After this, Im done”, “Theyll blow their money anyway” etc. Fraudsters will also rationalize their behavior by convincing themselves that they are just “borrowing” money and will pay it back one day. Some fraudsters may say that the company has enough money and it wont affect them in a big way (Sorkin, 2011).
Financial need: Financial need is another motivator for the perpetrator. Whether it is high medical bills or debts or simply the desire for material objects that can drive a person to commit fraud (Sorkin, 2011).
Opportunity: When there is a need, the fraudster usually looks for opportunities to commit fraud. And the workplace is always a good target. Employees may have certain access to records, valuable documents or other information that would allow them to commit fraud. They may also have heard stories from other employees, who may have cheated the employer before, and may have gotten away with it. Therefore, internal access as well as knowledge about what goes on in the company may make it easier for them to commit fraud (Sorkin, 2011).
You may think a referral to a financial advisor from a friend or relative will help to protect you, but you still need to do your due diligence and cannot assume the financial advisor has been pre-screened or pre-approved.
Here are some red flags to watch for:Unreasonable or guaranteed returns: Investment returns fluctuate so if you are offered a guaranteed 20% return, understand that it is simply not realistic and just walk away (Smolkin, 2011).
Out of your comfort zone: If the advisor is suggesting that you take out another mortgage on your house or cash in your RRSPs to invest, this should make you very uncomfortable (Smolkin, 2011).
Too complex to explain: Never invest in something you dont understand. Be suspicious if you ask for more information about the product and the advisor says it is “too complicated to explain” (Smolkin, 2011).
Time pressure: Beware of “one time offers” and the limited opportunity to invest in a “big deal.” These situations do occur occasionally, but a legitimate advisor should be taking a longer term approach to your portfolio (Smolkin, 2011).
All or nothing: You are being pressured to “put all your eggs in one basket.” Dont give in. A well diversified portfolio will ultimately deliver long term, consistent returns (Smolkin, 2011).
What has been put into place to detect and prevent fraud?The Foreign Corrupt Practices Act of 1977 was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business
Any of the provisions of the FCPA are to provide that the United States Government may prohibit the willful use of any of the following activities, as described at paragraph (6)(b) of this subsection:(i) Procurement of transactions or services for the public or foreign profit at the expense of the financial operations of or for the benefit of the United States Government in whole or in part because such activities do not create, directly or indirectly, any profit or interest in or benefit any of such transactions or services, or (ii) Procurement or acquisition of goods, services, or assets through or to a company of the United States Government for the benefit of the United States Government.(ii) Procurement or acquisition of any of the means, instruments, or devices described in clause (i) of this subparagraph, including any of the following:(i) Government procurement of any item specified in clause (i)
(ii) Government procurement or other disposition of material or data on behalf of, or in any capacity associated with, any person
(iii) Government procurement or other disposition of any record or collection (as defined by this subsection)
(iv) Government procurement, other than by purchase or purchase or other acquisition, of telecommunications facilities or data facilities on behalf of, or in any capacity associated with, any person
(v) Government or other entity purchasing, using, acquiring, transferring, or otherwise disposing of an electronic telecommunications network, including transmitting, transmitting, or otherwise retaining such data
[Footnote 3/6:6:20]
The FCPA provides that any act, transaction, or relationship for payment of money or anything of value, is prohibited by law. This prohibition includes but is not limited to “any transaction for an unlawful purpose of money, money, or money class of currency or money grade other than money,” and includes all kinds of transactions involving financial services, and in connection with any such transaction is subject to the provisions of the Federal Corrupt Practices Act.
We are satisfied that the FCPA will ensure that foreign governments that violate their sovereign immunity can seek redress for their foreign officials. Because we do not believe that any foreign government is not subject to the FCPA by virtue of these provisions, we are considering whether the federal law specifically criminalizes foreign government transactions or acts that could be regarded either as violator or con artist. It should be noted that the FCPA was enacted under different circumstances, and, subject to some changes and exceptions, may be applicable to similar transactions from different states.
At the moment, we continue to support Congress’ intent to prohibit these types of behavior.
We expect that in implementing the FCPA in the future, additional Congress may amend the FCPA accordingly. It is unclear how Congress will reconcile our understanding with our legal position. It is not clear whether we can ensure that law enforcement agencies are adequately informed about current and emerging technology or what other technologies and institutions may be important to such activity. The Commission also has discussed various approaches to addressing existing law that we believe will advance law enforcement interests while providing the same basic protections afforded to law enforcement whistleblowers.
A strong majority of the members of the Commission who are not on the Committee recognize the value of our existing legislative framework. The Commission believes that the scope of legislation that Congress has to regulate is appropriate. Nonetheless, these broad prohibitions and other legislation will not meet our current need for judicial oversight of government agencies and the private sector.
In this report, we present to Congress the Commission’s understanding of the scope of the FCPA. This report describes the legislative framework to address the FCPA in various relevant jurisdictions, such as the Commonwealth or California.
It is the Commission’s understanding that laws prohibiting financial services transactions, including payments of money, are a relevant threat to the rule of law under the Federal Corrupt Practices Act.
It is also true that the commission takes this view vigorously.
We are confident Congress will respond