What is Fraud? Types, Detect, Prevent

Definition of Fraud

In this blog post, we’ll be talking about fraud. Fraud is the act of deceiving parties to make gains that are not fair or lawful. Fraud usually inconveniences someone else. Usage of fake documents and false statements is often seen in fraud cases. One example we can give is the real estate fraud case that occurred in Houston in 2025. The couple involved have forged deeds and documents to convince buyers and ended up selling 40 properties they didn’t own. The result was the couple getting ordered to pay $1.2 million in restitution and being imposed an additional $1.38 million in civil penalties.  

What Are the Key Features? 

Let’s talk more about how you can separate fraud from mistakes or neglicence. The first indicator of fraud is the existence of an intent to deceive. Having this is a sure way to understand that the situation is not caused by errors or the person acting without care. Aa material misstatement or a mission is also another indicator. The fraudster will deliberately conceal some facts or straight up lie to convince you of something that isn’t real. For it to be counted as fraud, you need to suffer harm or loss as a result of actions of deception. The harm or loss could be in the form of financial, reputational, or other types. If someone is negligent, they’re most likely careless, if they caused a mistake, this act lacks malicious intent. When it comes to fraud, it is both caused by deliberate acts and the fraudsters intend to harm you or cause you loss in some form.

What Are the Types of Fraud?

According to the sources of FTC, In 2024, U.S. consumers reported $12.5 billion in total fraud losses. This is a 25% increase from 2023.  The main reason for fraud is to mislead someone and make gains in turn, but the way fraudsters go about it can widely vary. We’ll mention all types of fraud and give appropriate examples for each to make you understand better what you’re up against and prepare accordingly.

Financial Fraud

With fraud that is tied to the financial category, the first place fraudsters go to are investors and firms. Ponzi schemes are one example for this type of fraud where investors are promised gains but these gains will come not from profits but from newer and lower rank investors, making the system useless for newer investors. The schemes eventually collapse and the newest investors are left with losses. Financial fraud is the closest type of fraud to the money laundering.

Identity Theft

As you can tell from its name, this type of fraud is led by the fraudster stealing your personal information. With information like Social Security numbers and credit card details, fraudsters can signup to things with your name, drain your funds, or commit  crimes using your name. Stolen credit cards is a common way for identity theft. The card is then used to make purchases or open new accounts. The results are often realised much later when the bills arrive to the owner.

Insurance Fraud

Insurance fraud involves deceiving institutions to receive payouts without qualifying for it. Fake injury claims is one example for insurance fraud. Claims involve damages that are exaggerated or entirely fake accidents staged to get paid. This way, premiums go up for everyone, meaning that not only does the company suffer, the insurance customers get affected, too. Resources also get wasted on people who don’t deserve it rather than on people who need it.

Tax Fraud

If you’re giving out false information to avoid paying taxes, it counts as tax fraud. One example is hiding offshore income, or similarly, inflating deductions. Goverments are affected in tax fraud cases since the fund for public services decrease as a result. This fraud type is combatted with improving monitoring systems from tax officials. 

Banking Fraud

Criminals use different methods to access your accounts or deceive you into giving up sensitive information. This is known as banking fraud, and phishing emails are a common example. Fraudsters act like banks to try and get your information from you. After accessing your accounts, they can drain your funds or use it to launder money. Our Sanction Scanner experts say that a report analyzing 3.7 billion transactions revealed a 43% increase in attempted digital payment fraud in 2024 compared to the previous year. Social engineering scams surged 156%, while phishing rose 77%. 

Payroll Fraud

This type of fraud is known for targetting employers. Fraudsters try and use salary systems to increase funds spent on employees. One example is creating ghost employees. Fake employees get added to the salary system to try and make employers pay more. Small and mid-sized firms should be careful since lacking internal controls make your company more vulnerable to payroll fraud.

Healthcare Fraud

Similar to insurance fraud, this type of fraud occurs when you give out false information to your health insurance program to falsely get money. Billing for unperformed services is a popular way used to make gains. Healthcare systems get affected by this fraud and genuine patients receive less resources because of it.

Online and Cyber Fraud

This type of fraud has been getting popular in the recent years with the use of online services increasing. Fake e-commerce sites are used by criminals to make you pay for a service or product while never delivering them after payment. These types of scams are harder to trace. 

Procurement Fraud

If your company is trying to purchase goods or services, it may get affected by this type of fraud. Bid rigging is one example for it. Suppliers may manipulate tenders in their favor with this technique. Fair competition is lost because of procurement fraud and prices are raised or quality is reduced. 

Government Fraud

This type of fraud involves falsely claiming benefits, subsidies, or relief funds. During the pandemic, false COVID-19 relief claims were made to be eligible for programs companies or people were otherwise uneligible for. The result leads to the loss of government funds and less opportunities for people and companies who are actually in need in that particular category.

Identity Fraud

This type of fraud is similar to identity theft, but fraudsters actually use your ID for their gain with this one. After getting your ID, they can oppen accounts, apply for services, travel using your ID to avoid authorities. Since this fraud involves your actual information, reputational loss is one of the more devastating results. 

Credit Card Fraud

This type of fraud refers to someone stealing your credit card information. Card skimming, data breaches, and hacks can lead to your information getting stolen. As a result, purchases may be made or money may get withdrawn using your credit card. Banks often reimburse you for your losses after you notice odd activity on your account, but the stressful situation you go through is equally important.

Land Fraud

Land fraud is the case when criminals sell property they don’t own. Victims later learn that the property belongs to someone else after they make their payment. This scam works better in regions with poor land registry controls, so our readers should be careful if they live in these regions.

Chargeback Fraud

This fraud involves the customer demanding a refund after making a goods or services purchase. The customer pretends that the transaction wasn’t made by them, keeping the service or goods they received to themselves. This is also known as “friendly fraud”. Merchants get affected in this type of fraud.

Loan Fraud

Loan fraud occurs when a person applying for a loan uses false information about their income or employment details to get qualified for loans. Lenders may suffer financial losses as a result. Lending markets also get destabilized over time because of this type of fraud. In September 2025, The Enforcement Directorate of India has seized real estate worth ₹186 crore linked to Kapil and Dheeraj Wadhawan in a massive ₹34,615 crore loan fraud. It involved fake housing loans issued to 1.8 lakh fictitious borrowers. 

Impersonation Fraud

This fraud occurs when criminals prevent to be trusted figures like government officials, company executives like CEOs or law enforcement officers. They use these titles to demand money from victims. Employees may get tricked by the title and wire money to fake accounts. The second highest reported loss amount involving fraud in 2024 came from impersonation scams, with $2.95 billion reported lost. 

Wire Fraud

Wire fraud occurs when people are tricked into sending money to criminal accounts. This type of fraud is broad and covers every example of electronic payment fraud like phishing emails and romance scams. Often involving international payments, it’s harder to recover these funds.

Check Fraud

Forging, altering, or counterfeiting checks is counted as check fraud. It is frequently done to trick people and banks. Checks aren’t as common as before, but business-to-business payments still give fraudsters an opportunity. Altering details or duplicating checks is often how fraudsters operate.

Account Takeover Fraud

With this type of fraud, hackers gain access to your accounts. They can drain funds, use your account for scams, and change passwords with account takeover fraud. If your accounts from multiple platforms have the same password, you might be more vulnerable to this type of fraud.

Why Fraud is Growing Concern in 2025?

Since the world has gone digital, fraud is moving to digitalised forms as well. The more firms and daily life activities like shopping move online, the more attack surface these fraudsters have. It gets harder to protect every area of the digitalised world since the developments are newer. After the pandemic, the rise of remote work has increased the amount of impersonation and hijacking of communications, giving criminals more chances to attack. In the recent years, the rise of AI has brought many advantages and opportunities for doing good, but fraudsters also use these AI based tools to further scam people and firms. They create deepfakes demanding money and synthetic IDs that mix real information from people with fake details to create fake accounts. At the summit of the Global Anti-Scam Alliance (GASA) in Singapore in September 2025, even seasoned cybersecurity professionals were fooled by a mock QR phishing also known as "quishing" demonstration.  This shows us that even the officials aren’t safe from being potentially scammed with the usage of AI tools.

What Are Red Flags of Fraud?

Let’s talk more about what signs are there for you to notice regarding fraud. When it comes to the business side of things, unusual financial adjustments can be done for manipulation. These adjustments can look like entries made last minute to fix the books. A lack of internal controls also leads to your company being an easier target for fraudsters. A resistance to audits coming from the company should also be enough to make you question what they might be afraid of or hiding.

When it comes to employees, a sudden wealth is the first red flag that should make you suspicious. These funds can look like luxury purchases and lifestyle changes, and fraud might be the one funding them. Employees who are involved in fraud also often avoid taking leave since they’re worried that their absence might give the company an opportunity to discover their fraud. Frequent breaches of policy might look like bypassing approval steps or ignoring financial protocols, and these might be another sign of fraud being committed by employees.

Fraud vs. Scam vs. Phishing vs. Theft

There are major differences between fraud, scam, phishing and theft. 

How to Detect Fraud

Fraud detection is achieved with many components coming together. The first advice we’ll give for our readers is manual audits. Auditors are tasked with finding inconsistencies and they can be helpful uncovering fraud. Where manual efforts fail, AI tools will help you speed up the fraud detection process. These tools will help you discover anomalies that your team might be unable to find. Data analytics also help immensely when it comes to identifying unusual patterns. Regulatory alerts are particularly useful in high-risk industries where transactions and entities need stricter monitoring. Whistleblowers within companies also help uncover fraud since they have insider knowledge of the situation going on.

How to Prevent Fraud: Best Practices for Individuals and Organizations

We will start by giving our readers advices on how to best operate in life to not get caught up with fraud. More platforms have been implementing two-factor authentication (2FA) and taking advantage of this system to better protect yourself will be the right choice. The extra barrier will likely stop unauthorised access and turn criminals away. Suspicious links and emails are common, so you should be thinking twice before clicking on links from addresses you don’t recognise or trusting emails from unknown sources. Phishing is still a popular technique fraudsters use, double checking before engaging will be beneficial for you. Monitoring your banks and credit accounts in case there are suspicious activities going on is another advice we can give. Catching these activities early on and contacting authorities will save you from further damage.

When it comes to companies, the advice is similar but the responsibility you bear is bigger. Your company should be setting up strong defense systems and try not to give fraudsters opportunities for fraud. Internal controls are important since these will help you create an environment where manipulation is harder. Giving your employees fraud awareness training is also helpful since your employees may be victims to frauds and somewhere along the way affect your company, too. With technology developments, using compliance technology like Sanction Scanner feels like the right move. Automated ongoing monitoring and risk screening from this tool will help prevent and detect fraud.

Major Fraud Scandals Case Studies

Let’s now talk about the fraud scandals that are well-known, all having severe consequences. The first case is Wirecard, €1.9 billion went missing from its accounts in 2020 and financial fraud seems to have taken place with this case. In the second case, Enron is famously known for using Special Purpose Vehicles (SPVs) to hide its debt and inflate its earnings in 2001, also known as accounting fraud. Theranos is another example for famous cases and it’s from 2021, this company misrepresented its blood testing technology. This was done to mislead both patients and customers. Similarly, the COVID relief programs had people misrepresenting facts, also known as loan fraud, to get included in the group that could take out loans as part of the Paycheck Protection Program (PPP).

Another case about accounting fraud is Parmalat, this company hid €14 billion in fraudulent accounting entries in 2003. Another example for accounting fraud is Olympus, this company is known for hiding $1.7 billion in losses for years. The company was sued by six banks and they were fined over $520 million.  The Madoff Ponzi scheme is known for scamming people out of $65 billion. Patisserie Valerie is another accounting fraud example where £94 million was lost. The accounting firm Grant Thornton was fined £2.3 million because of their shortcomings when it comes to controls involving Patisserie Valerie. Luckin Coffee is known participating in sales fraud that was revealed in 2020, faking $310 million in sales. Our final example for famous fraud cases is Carillion, where mismanagement occurred and this ended up with misled investors. The result was £1.3 billion of debt of the firm. This would be the end of the construction company. 

Legal and Financial Consequences of Fraud

Fraud has serious consequences for all that are involved. The first consequence is about the legal repercussions. Those involved in fraud may face criminal prosecution and end up with prison sentences. Firms may also get regulatory fines or civil lawsuits because of their fraud case where those affected are looking for compensation. The financial impact is also noteworthy. Reputational damage is one of the most serious results for your company. This is hard to come back from. You will also be facing audit and legal costs caused by investigations. 

Importance of Sanction Scanner in Fighting Fraud

Having a tool like Sanction Scanner to help your company will lessen your burden when it comes to dealing with fraud. Sanction Scanner offers sanctions and PEP list screening, which help figure out if there any sanctioned or high-risk customers attached to your company. Adverse media checks are also there to track negative news about your customers to ensure you aren’t helping this customer by giving them a platform. Thanks to Sanction Scanner’s services, your company will end up with lower fraud exposure, better compliance and saved time.