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I.Fraud Crime: Costs, Perpetrators, and Victims

Fraud is an insidious crime. Commonly defined, fraud is an act in which attempts are made to deceive with promises of goods, services, or financial benefits that do not exist, were never intended to be provided, or were misrepresented. And each year, tens of millions of people fall prey to fraudulent schemes and practices. It is estimated that as little as 15 percent of all fraud crimes are reported to law enforcement authorities.

The 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.

A.Emotional Consequences of Fraud

The emotional ramifications of fraud crime can be even more costly. Fraud victims often suffer

• Self-blame,
• Shame,
• Guilt,
• Societal condemnation and indifference (the attitude that victims of fraud deserve what they get as a result of their own greed and stupidity), and
• Isolation (when victims suffer their losses in silence rather than risking alienation and blame from family members, friends, and colleagues).

B.Who Are the Victims of Fraud?

Not all fraud victims are greedy, risk-taking, self-deceptive individuals looking to make a quick dollar. Nor are all fraud victims naive, uneducated, or elderly. Victims of fraud come from a variety of racial, age, gender, religious, socioeconomic, and educational backgrounds. And smart perpetrators prey on those differences. For example fraudulent telemarketers often target the elderly as potential victims, not because they are greedy, but because they are more likely to

• Have money, property, savings, and investments;
• Be home to receive phone solicitations; and
• Remain on the phone longer to hear fraudulent sales pitches (due to loneliness).

Younger, educated adults may be targeted because of a

• Lack of maturity and experience that would help them recognize fraudulent pitches,
• Desire to increase their standard of living quickly, and
• Lack of information about financial investments or purchases.

Other victims are targeted because of certain personality or character traits that may increase their risk for fraud victimization. These include

• Compassion,
• Respect for authority figures, and
• Unsuspicious natures.

C.Who Are the Perpetrators of Fraud?

Fraud perpetrators vary as much as the victims they target. Like their victims, fraud perpetrators come from every educational, geographical, racial, religious, gender, and socioeconomic background.

Contrary to popular belief, most fraud perpetrators are not slinky, shady characters who perpetrate their crimes under the cover of night. Today's fraud perpetrators are often trained professionals who are good at what they do--stealing money and assets from people. Fraud criminals often do their homework by

• Joining professional organizations,
• Participating in community events (to legitimize their schemes and develop trust with potential victims),
• Keeping abreast of current events (to appear knowledgeable about cutting-edge technologies, legitimate financial investments, and business practices), and
• Assuming an "affinity" with their victims (emphasizing their common age, culture, education, race, or financial or social status).

Their weapon of choice is not a gun or a knife, but slick publications, marketing materials, prospectuses, computer and communications technology, and well-rehearsed sales pitches. Many fraud perpetrators use their community and professional credibility and respectability to con, swindle, and deceive family members, friends, business colleagues, and other members of the community with whom they have formed a relationship.

D.Types of Fraud

Long struggles to repair damaged credit reports and repay staggering debts can begin with something as simple as a fraudulent phone call offering pre-approved credit cards, free merchandise, vacations, or credit for persons with less-than-perfect credit histories.

Crimes of fraud vary. Most of us are familiar with crimes involving bogus vacation opportunities or fly-by-night home repair companies. However, these highly publicized fraudulent acts represent only a small fraction of fraudulent practices. The creation of new fraud schemes is limited only by the creativity of perpetrators, and Internet access has exacerbated the proliferation of fraud schemes by expanding the potential fraud audience.

Not all fraud crimes involve the direct selling of goods to customers. The following are some examples of common fraudulent practices:

• Advance fee schemes
• Mail fraud
• Computer fraud
• Health care
• Insurance fraud
• Pension and trust fund fraud
• Credit card fraud
• Check fraud
• Charity fraud
• Home repair schemes
• Identity theft
• Land schemes
• Embezzlement
• Securities and investment fraud (including commodities fraud)
• Telemarketing fraud
• Reverse mortgage fraud

E.The Hidden Cost of Fraud

The ravages of fraud crimes are clearly documented. At best, fraud crimes and fraud perpetrators leave people distrustful of legitimate business opportunities and investments. At worst, fraud crimes destroy the financial and emotional lives of victims. But steps can be taken to reduce the risk of fraud victimization and to address the needs of fraud victims:

• Consumers can better educate themselves about responsible business practices, increasing their ability to make sound purchasing and investing decisions.
• The criminal and civil justice systems can levy harsh punishments and financial penalties against perpetrators, sending a clear message to other fraud perpetrators that these crimes will not be tolerated.
• Society can look more favorably on victims of fraud to reduce the shame and guilt victims often feel. Society can also provide responsive and supportive services as victims seek to retain or regain their financial stability.

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