(Updated: 23 July 2024)
Fraud has always been a part of human societies the world over – ever since currency has existed, so too has the ability to con people out of it. In modern times, people are now faced with more sophisticated forms of financial fraud. Let us gain a clear understanding of fraud, how it began, the common types of fraud, and what steps you can take to mitigate the risks.
Fraud explained
Fraud can be classified as the act of deceiving a person or entity with the intention to illegally gain a financial advantage. Fraud uses a strategy where an individual will intentionally misrepresent the facts to influence a person to hand over their money or possessions willingly, under the guise of investments or potential of future wealth.
Before an act can be constituted as fraud, it must meet two parameters; first, the individual or entity must be fully aware and understand that the statement or claim put forward is false or misleading. Second, the individual or entity must be intent on deceiving another individual or entity for financial benefit.
In the beginning – on a boat
As the story goes, in 300 BC, there were two Greek merchants, Zenosthemis and Hegestratos. These two men devised a plan to intentionally sink their ship to collect on their insurance premium. However, as fate would have it, the two men were caught and Hegestratos lost his life in his attempt to flee, whilst Zenosthemis was left to face the full force of the law.
Fraudsters may not be sinking ships in the 21st century, but as the exchange-based economy evolves, so do the forms of fraud that attempt to exploit it. Fraudsters are constantly working on their next targets, and this is a fact that is never far from the mind of individuals and companies.
The digital fraud journey
Due to the exponential growth and expansion of the Internet, the opportunity to commit cybercrime has in turn grown to massive proportions. According to the Association of Fraud Examiners, no business or individual is exempt from the threat of cyber fraud, with any business expected to lose approximately 5% of its revenue annually, as a result of fraud.
The advancements in technology have revealed the new founded sophistication of fraud that are being used by cyber criminals to con individuals and businesses alike across the globe. We have seen this in the “Master Deeds” incident reported by TimesLIVE in late 2017. According to the report, cyber criminals managed to take the personal information of more than 30 million South Africans. The information taken included identity numbers, names, ages, gender, ethnicity, homeownership, contact information, estimated income, and employee information.
Earlier in the same year, there was a hack of Ster-Kinekor’s website, which put more than 6 million accounts at risk, according to an article by Business Day. Let us not forget the Facebook and Cambridge Analytica data scandal, which compromised more than 96 000 South African Users.
In 2018 there was another data leak which impacted close to 934 000 South Africans who had recently registered to pay traffic fines online. These data dumps are vitally important to take note of, as they contribute significantly towards one of the most damaging methods of fraud – identity theft.
Common types of fraud
Fraud can take many different forms. In fact, there are just over 41 types of fraud according the Case IQ and Fraud.com. Let us take a quick look at the most common types of fraud that can be seen in almost every day living:
- Identity theft and identity fraud
- Credit card and debit card fraud
- Phishing, smithing, and vishing
- Remote banking fraud
- Advance fee fraud
- Card Not Present (CNP) fraud
- Cyber fraud
- Insurance and Investment fraud
Identity Theft
This is the latest and arguably most damaging step forward in the evolution of fraud as it has far reaching, even inconceivable consequences. Experts in the field believe that every two seconds someone’s identity is stolen. With countless studies showing the devastating impact of identity theft across the globe. Identity theft allows fraudsters to open bank accounts, take over existing accounts, and obtain other goods or services illegally in their name.
How to keep your head above water
You need a layered approach when thinking about your fraud prevention strategy. Here are a couple tips to help you stay ahead of fraud evolution.
- Be cautious in the information you share online. Keep your birthday, addresses and any other personal information private.
- Practice good ‘password hygiene’. This means that you need to have different passwords for all of your different accounts. Passwords should contain letters and numbers and should be random or obscure. You should also regularly change your passwords, specifically those used for online banking. You can use a password manager to help you keep track of these.
- If you receive any emails from what appear to be official sources containing invoices or other appeal for payments or personal information, check the source once more and even go as far as having a real phone call with the bank, for example, to verify the authenticity of the email requests.
- When connecting your devices to WiFi services, do not connect to any WiFi you are unsure about and even if you are sure, consider using a VPN to keep your information secure because you do not know who else is on the network.
- If you do any sort of online shopping, make sure that you use two-factor authentication. Also disable the “remember passwords” feature on your browser.
- You should consistently check your credit card statements for any suspicious activity. An alternative would be to sign up to Maris IT’s SAFPS Database check that updates you on any applications that want to use your ID number.
- Beyond everything, you need to be vigilant and constantly aware of new scams.
Conclusion
The Internet explosion has meant that we all live our lives in an entirely different way – from how we connect to communities, to how we do our banking or how we get the groceries, the world has changed. Just as these changes are occurring, there are fraudsters out there trying to evolve their scams to further exploit a growing system. In this rapidly growing and changing digital age you need a trusted partner to help you keep checks and balances or else you will become one of the millions of victims of the new digital fraud.
