Scams have been around for as long as the world has, and it’s been done in any manner of ways with any number of laws governing them during its existence. However, technology has made them arguably worse, and US law works to combat that with intense penalties. Committing any of these scams online or over the phone will result in federal felony charges, as the government and even FBI work to closely monitor these situations and try to put an end to them. Being aware of the different types of fraud and being careful about who you give your information to are essential ways to avoid being caught up in one of these fraud scams.
Laws for Felony Fraud Schemes
18 U.S. Code § 1343
The law that makes this a federal felony is Section 1343, which concerns fraud by wire, radio, or television. The wire part includes the internet and phone calls, as the federal government reserves the right in these cases to pursue federal charges when crimes take place over interstate or foreign communication, which your computer, phone, radio, and TV all do. It states that those in violation of this law are:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.
That language is pretty all-encompassing, and it basically includes any attempt to take money or property from someone under false pretenses, whether it’s being deceptive about the product, lying about where the money will be going, or deceiving someone in any other way. Note that it doesn’t include the term ‘successfully,’ and instead just ‘intending to devise,’ meaning that the plot doesn’t even have to be carried out in order to receive a federal felony charge.
It sets out a punishment of up to 20 years in prison and comes with high fines. Punishments are aggravated severely when the scheme involves a presidentially declared disaster or a financial institution. In these cases, prison time can be up to 30 years, and fines can reach a million dollars.
There are just four requirements to define a crime as wire fraud. The defendant must have intended to fraud someone, devised or helped carry out a plot to take property, money, or anything of value from someone, clearly intended to use the above mentioned wire communications, and did so. These charges are also applicable to each and every occasion of fraud committed. The schemes listed in this article are considered felony charges when they are carried out over these methods of communication, as they often are in today’s age of technology.
18 U.S. Code § 2325
A good majority of fraud schemes will also apply under this section of the law. Section 2325 applies to telemarketing or email marketing of any kind that is deceptive or attempting to take money in a manipulative way with phone calls, texts, emails, and instant messages. It requires those found guilty of this to be subject to up to five years in prison, or ten years if they targeted seniors above the age of 55. It also requires a full repayment of the value of what they took from the victim, as well as anything used to commit the fraud, which can include computers, software, and other technology. Many of the schemes listed here will also fall under this category, especially when they involve obtaining money and information through promises of a prize, product, and any other number of methods.
Common Types of Wire Fraud
Advance Fee Schemes
This is pretty simple and broad. All it includes is asking someone to pay a fee upfront for literally anything – whether it be a product, service, deposit, investment, loan, or others – when there is either a misrepresented result or no result at all. However, it is still necessary to prove that the offender didn’t intend on providing their side of the deal; it doesn’t apply to just unhappy customers.
This has been around for a long time, making it well known, but recent improvements in technology have allowed them to become more creative and effective. Scammers that catfish will pose to be someone else on the internet in order to win over the affections of someone. They’ll then ask for money, and sometimes start out small and slowly increase over time until the victim has spent thousands and more on their online romance.
There is actually a state law in Oklahoma concerning this practice specifically, called the Catfishing Liability Act of 2016, which provides protections to those who have had their identity stolen in order for the defendant to create a false persona or profile, posing to be someone they aren’t. However it’s also considered a felony fraud on the federal level as well. This is because the “Catfish” deceives the victim about who they are, where the money was going, and what they would get in return, as well as is often in violation of trademark laws and the such for stealing photos and other infringement violations. Social media has made this scheme all the easier, allowing scammers to create extensive profiles to hold up the validity of their character and further deceive their victims. Victims may form whole lives and make extreme life decisions based on this relationship they think they have with someone who is being manipulative about their identity and motives.
This includes a lot of different types of fraud, but what makes them business fraud is that the scammer is operating under the pretense of being a legitimate business. Acting as a charity to accept or request donations from individuals is charity fraud. This also involves working through online auction sites and not sending merchandise after it’s been paid for. However, it works both ways as well. Not giving payment once merchandise or another good has been received can also be fraud. Another scheme involves sending more than an amount owed to someone, and then asking for the excess funds to be transferred back to, usually an overseas, bank account. It is then found that the initial money sent was fraudulent.
Counterfeit Prescription Drugs
This is when someone orders a medication, believing it to be the accurate medication that they ordered, and the drug they are sent is not what they ordered – whether it be missing the active ingredient, contaminated, or have the wrong ingredients. This is a particularly dangerous scheme, and caution must always be exercised when ordering prescription drugs online.
Credit Card Fraud
This is probably the most commonly known form of fraud, which includes obtaining someone’s credit card information illegally – whether through using unsafe websites or identity fraud, and using it to obtain money or make unauthorized purchases. Criminals will sometimes use schemes to obtain identity information to open up credit card accounts without permission as well.
Fraudulent Cosmetics and “Anti-Aging” Products
This is quite like the scheme involving fake prescription drugs, and this can be dangerous as well. Often, these cosmetics and other products will be promoted as name brand or advertised to have healthy, legitimate components, and the product received is not the product ordered. They can have extremely dangerous ingredients and bacteria that should never be applied to the body, but users may never know that it isn’t the real thing. Selling products in any form that aren’t what they’re advertised to be, and especially selling harmful products, is a serious felony charge.
Health Care or Insurance Fraud
Health care schemes usually target patients. They do this by selling fraudulent insurance cards, stolen or fake medication, supplements, weight loss pills, and more. Sometimes this is done by obtaining a valid prescription, but then selling them on the internet.
There’s quite a few ways that someone can commit health insurance fraud, which usually target insurance companies. It may be offering medical equipment for free, only to turn around and charge the insurance company for the cost. Additionally, those insured and providers may bill insurance companies for services that were never actually performed, or altering the information for a higher payout than reserved for the case. Providers may also provide unnecessary treatment, just for the sake of billing. Insurance members may report inaccurate information when applying for better rates or other reasons, as well as allowing someone else to use their health insurance card.
Unfortunately, the costs assumed for these practices often go back to the insurance customers. In fact, it’s estimated that ten cents of every health care dollar is dedicated to fraudulent health care practices.
This is a federal crime on its own, regardless of whether it was acquired or used through the internet or other wire communication. The Federal Bureau of Investigation, Federal Trade Commission, Secret Service, and Postal Inspection Service all work together in the identification and prosecution of identity theft crimes. Types of data that can be stolen through identity theft are your social security number, credit card number or pin, credit history, and other identifying pieces of information. Criminals will often use this to open up credit card accounts, use stolen credit card information to make purchases, or even take out loans in someone else’s name.
Market Manipulation Fraud
Market manipulation fraud usually occurs when a perpetrator leads others to believe that their low-trading stock is in high demand in order to raise the price, usually through manipulation tactics to sell to unsuspecting purchasers. This type of behavior can cause drastic damage to the market, quickly turning stock prices upside down. An even more technologically advanced version of this is when computer hackers get into online brokerage accounts in order to make purchases of a stock for it to rise in price, allowing them to sell for higher prices.
Nigerian Letter Scam
This is another very commonly know scheme, which has been deemed the Nigerian Letter Scam from its typical story for manipulation. The story usually goes that they are a prince or some other diplomat from Nigeria who has been exiled or needs to leave for some reason. They usually require monetary assistance for their situation, a place to store their money safely, or some other scenario that requires the victim to provide their bank account information and whatever else they’re looking for to extort. Sometimes victims will send installments for years, have their accounts drained entirely, or even be tricked into going to Nigeria and being imprisoned.
Online Vehicle Sale Fraud
These advertisements are usually the ones that look too good to be true. They’ll often be photos of really nice cars for extremely discounted prices, usually with some reason why they’re trying to get rid of the car for so cheap. However, these cars are not even in their possession, and they have no intentions of giving a car in receipt of the money. They ask for money to be transferred in some way – made increasingly easy with today’s apps like Venmo, but then stop responding once they have received the money.
Criminals use this tactic by sending an email or text message asking you to confirm your personal information, usually posing to be a reputable organization that you would confirm with. It can snowball from a password to an account, to bank account info, to social security numbers, to identity theft and more. It can lead to losses in security and money in accounts.
Named after Charles Ponzi who began the practice in 1990, Ponzi schemes promise investors high returns, collect money, and then encourage them to recruit their own investors to increase that return. However, there often is no return or even an investment opportunity at all, and investors instead use it to pay earlier investors and make a profit. Legit investments are usually registered with the Securities and Exchange Committee (SEC) or state regulations, so investors should be wary of those that are not.
Pyramids schemes are quite like Ponzi schemes, but they don’t usually require an investment. They instead usually sell a product that they’re required to first purchase themselves, or some other way of giving money to the members in levels above them, making money go up the pyramid, leaving the lower levels to struggle to see a profit, and even go deeper into debt. They usually attract members by offering them an opportunity to run their own franchise, but they’re made excited to recruit more members through commissions and rewards. It gets to the point where money is being made by recruiting and obtaining members to be in levels below, rather than by actually selling the product. It’s similar to the Ponzi scheme in that most of the money made is going to pay the top investors, not ensuring all members are making a profit. Additionally, it cannot be sustained, as they’ll run out of people to invest at some point and crumple.
Also widely known because of how often they call now, this is when individuals or even recordings call claiming they have some kind of prize or other offer to give, but they first require a bank account number, social security number, or even initial payments to be made before the offer can be claimed. While it sometimes involves attempting to sell a product that is deceptive or nonexistent, it pretty much applies to any scheme with communication over the phone. Its definition in Section 2325, lists types of telemarketing tactics as:
a plan, program, promotion, or campaign that is conducted to induce—(A) purchases of goods or services;
(B) participation in a contest or sweepstakes;
(C) a charitable contribution, donation, or gift of money or any other thing of value;
(D) investment for financial profit;
(E) participation in a business opportunity;
(F) commitment to a loan; or
(G) participation in a fraudulent medical study, research study, or pilot study,
Obviously, fraud encompasses a wide variety of ways to scam victims out of money, and technology has just made it that much easier to accomplish, providing new ways to scam and methods of communication everyday. The law rather broadly protects all of these types of frauds that involve misrepresentation of a product, service, investment, or some other exchange, or stealing information or money from someone. Coming from federal charges, these felonies can come with rather severe penalties, often requiring prison time, high fines, and complete restitution. As scammers often prey on senior citizens, this is often considered an aggravating circumstance that comes with worse penalties involved. These serious crimes happen more often than we think, and scammers get trickier with their tactics every day, so vigilance on the internet and phone calls is essential to avoid being a victim of fraud in any way.