FRAUD DETECTION AND CONTROL

What is a Fraud?

In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual. The specific legal definition varies by legal jurisdiction, but fraud is a crime, and is also a civil law violation.

Defrauding people of money is presumably the most common type of fraud.

Fraud can be committed through many methods, including mail, wire, phone, and the internet (computer crime and internet fraud).

Fraud is a legal and not an accounting concept. For this reason, the accountants have traditionally chosen to treat it as a concept alien to them.

There are four elements to any fraud:

• A false representation of a material nature (either misstatement or omission of a material fact)

• Knowledge that the representation is false, or reckless disregard for truth

• Reliance: The person receiving the representation has reasonably and justifiably

relied on it

• Damages: Such receiving party has sustained financial damages from all of the above.

Acts which may constitute criminal fraud include:

§  bait and switch

§  bankruptcy fraud, is a US federal crime that can lead to criminal prosecution under the charge of theft of the goods or services,

§  charlatanism (psychic and occult),

• confidence tricks such as the 419 fraud, Spanish Prisoner, and the shell  game

§  creation of false companies or "long firms"

§  embezzlement, taking money which one has been entrusted with on behalf of another party,

§  false advertising

§  false billing

§  false insurance claims

§  forgery of documents or signatures,

§  health fraud, selling of products of spurious use, such as quack medicines,

§  tax fraud, not filing revenues or illegally avoiding taxes (tax evasion), in some countries tax fraud is also prosecuted under false billing or tax forgery

§  social fraud, committing fraud to get social security benefits

§  identity theft

§  investment frauds, such as Ponzi schemes

§  marriage fraud to obtain immigration benefits INA s204(c)(1).

§  securities frauds such as pump and dump

§  taking payment for goods sold online, by mail or phone, such as tickets, with no intention of delivering them.

 Fraud has nine elements:

1.   a representation of an existing fact;

2.   its materiality;

3.   its falsity;

4.   the speaker's knowledge of its falsity;

5.   the speaker's intent that it shall be acted upon by the plaintiff;

6.   plaintiff's ignorance of its falsity;

7.   plaintiff's reliance on the truth of the representation;

8.   plaintiff's right to rely upon it; and

9.   consequent damages suffered by plaintiff.

(ASK FOR THE REST OF THIS PAPER)