What is Fraud and When is it a Felony?

Fraud can be a very serious felony charge, and there are many aggravating factors that can make the charge even more serious with even worse penalties. Fraud is a pretty broad word; it pretty much covers any type of deception for some kind of gain, whether monetary or otherwise. However, this is another law where intent is vital and must be proven in order to proceed with a fraud charge.

Fraud can occur on both criminal and civil levels, typically depending on the severity and methods used. In criminal cases, they must be serious enough that the federal or state government comes in and decides to prosecute. Victims of fraud typically pursue charges civilly, and a single crime can be convicted in both courts. In criminal cases, they’re typically going to be felony charges with prison time and fines. Civil cases will most likely result in requiring the defendant to pay restitution to the victim, usually in the amount of the fraud and any other damages the victim may claim. There is a large variety of types of fraud, and they vary based on what the scheme is, how it’s carried out, who it targets, what type of value is involved, and more. Most are covered by 18 U.S. Code Chapter 47, which concerns fraud and false statements, making a good majority of these crimes federal felonies. Following is a rather comprehensive list detailing these types, but there are bound to be more that could be added.

Affinity Fraud

Affinity fraud matters less about what the fraud involves and more about who its victims are, but most of the time these will be investment scams. These victims have often been preyed upon because of some group they are in, religious, racial, professional, or otherwise, often by convincing respected leaders of their validity, leading others to follow. They may be a part of the group themselves, or they’re at least pretending to be, giving them an in with the community they’re looking to target. Most of the time these will be investment scams

Advance Fee Fraud

This type of fraud occurs when a scammer asks for money up front for something – a product, investment, service, etc. – with no intention of following up with their side of the deal. However, this is most closely associated with the investment process, where they take advantage of unsuspecting investors by charging them fees, taxes, and other expenses that they claim will be returned. Other schemes may involve offering to sell stocks for an upfront fee, pretending the victim has won the lottery and needs to pay a fee to get the money, or pretending to be legitimate firms to help investors recover money they lost through the stock market.

Account Takeover Fraud

This can be a very serious crime depending on the account hacked and how much was purchased, but it typically involves a hacker obtaining login information from someone without permission, usually with malware or some other technical method, and then using the account to make purchases and more. Because this is often committed through the use of computers and other technology, this will usually be a form of wire fraud, a felony charge that will be discussed later. Accounts taken over are typically bank accounts or credit card accounts, but in today’s age of online ordering, websites, and apps, all offering their own purchasing methods, it can be any number of types of accounts. Reputable sites should have some form of authentication for you to access your account.

Bank Fraud

This crime is pretty serious, coming with a possible conviction of 30 years in prison and a million dollar fine. Bank fraud is basically any type of manipulative behavior or dishonest information in order to scam a bank in any way, usually to take money that isn’t their own.

Bankruptcy Fraud

This is one of the types of fraud that qualifies as a white collar crime, and it all involves someone filing bankruptcy and using dishonest practices for their gain. It can happen in one of four ways. The first is concealing assets so that they don’t have to give them up in the process, which is the most common. Second is giving false information on the forms required, which can also result in a perjury charge. It’s also illegal to file for the same bankruptcy multiple times, whether with different information or in different jurisdictions. Finally, this can occur by trying to bribe the court trustee.

This is enforced by 18 US Code Chapter 9, which requires proof that the defendant knowingly was deceptive about a fact in their case, even if they just intended to file in a manipulative way. This penalty comes with up to five years in prison and a $250,000 fine.

Corporate Fraud

Corporate fraud usually occurs when an employee or company using confidential information or their special access to something for their personal gain. They’re often hidden under layers of protection to avoid detection, often fitting seamlessly in with normal business practice. It can also involve a company being dishonest about their product or service, knowing that it’s ineffective, not what it says it is, or disguising some issue with the product. Other cases are when funds that were given for investments or other specific reasons, but are actually being used for another, deceptive purpose, or misrepresenting the true facts of the company to investors. Charity fraud, which is collecting donations with the pretense that they’ll be used for some charitable aid but not donating them, can also be a type of corporate fraud.

Debit and Credit Card Fraud

15.4 million people were affected by this type of fraud in 2016. Most people are probably already familiar with this, or had it happen to themself, but debit and credit card fraud is when someone steals another’s identity in order to access their debit or credit card information to withdraw cash or make purchases. This can be a type of account takeover, but the other type is application fraud, which is opening an account in someone else’s name. They may also use a method called skimming, which is when employees use their client’s information to commit this fraud, also a type of corporate fraud.

Elderly Fraud

This is another type of fraud that relies more on the victim targeted versus the type of scam occurring. Senior citizens are often seen as easy victims for fraud, and this is a form of elderly abuse. The US government has many laws protecting their elders, and this can be an aggravating factor in most crimes. The National Council of aging believes that senior citizens are swindled out of a total of $36.5 billion every year. Most of the time, criminals will try to scam elders out of their money through tricks like telemarketing or pretending to be legit organizations, like Social Security, that require their money for some reason.

Health Care Fraud

Health care fraud occurs either by a member or a health care professional. When it occurs by a member of an insurance company, it usually involves: them giving false information when signing up to receive lower premiums than they would; selling their prescription drugs; and loaning their insurance cards out for others to use. Practitioners may: perform unneeded procedures for the profit; report multiple times for the same procedure or for a procedure that was never done; sell prescription drugs, alter medical records, waive copays, and more. Prosecuted under 18 U.S. Code §?1347, this can come with serious penalties – up to ten years in prison and a fine, which increase when serious bodily injury occurs – which raises the prison sentence to 20 years. If it results in death, they can be imprisoned for life.

Identity Theft

This section is also pretty broad, including obtaining any type of personal or identifying information from someone without their permission, usually through some kind of scam or hacking. They will often use the information to open up accounts, request loans, file tax returns, or any other number of uses for the information that they can benefit from. It can also include physically stealing a wallet, debit and credit cards, a license, ID card, or other information, or even watching someone put in their pin at an ATM or overhearing them give someone their credit card number. However, the rise of technology has made this much more difficult to control, investigate, and prosecute, offering more opportunities to obtain information easily. This has been governed since 1996 by the Identity Theft and Assumption Deterrence Act, which allows the Secret Service to pursue cases where someone:

(1) receives, acquires, obtains, purchases, sells, transfers, traffics in, steals, possesses, or uses any personal identifier, identification device, personal information or data, or other document or means of identification of any other entity or person; (2) assumes, adopts, takes, acquires, or uses the identity of any other entity or person; or (3) attempts, solicits another person, or conspires with another person to commit such offense.

Insurance Fraud

This can be perpetrated by both insurance members and practitioners, often taking the form of either not reporting information or filing multiple or unnecessary claims, respectively. It can happen in any type of insurance industry – not just health care. Scammers may attempt to fake an injury, accident, arson, destruction of property, or some other insurance claim to cash out on the false incident, which is hard fraud. Alternatively, soft fraud is just little lies here and there that allows the member or a practitioner to get more money or pay less than they are allotted.

Investment Fraud

As it sounds, these schemes involve investments, but there’s quite a few ways to go about it. In the form of corporate fraud as well, insider trading can occur, which is when someone with confidential knowledge about a stock’s worth or its future either buys or sells in order to gain a profit, convinces others to make decisions based off of this information, or deceives them with false information. Also in the realm of corporate fraud is not reporting accurate numbers to investors, influencing their decisions on investments. There’s also the method of raising up talk about a low-selling stock in order to get excitement, and thus sell for higher returns.

Mail Fraud

The mail fraud statute has been around for a long time – since 1872. What initially began as a basic law or the US Postal Service has been expanded over the years, now including FedEx and UPS. A prosecutor must prove that the defendant had a scheme devised to steal mail or even just intend to use the mail system as part of their overall plan. It can also involve sending inaccurate information through the mail to submit to various places.

Perjury

The act of perjury can be applied to anyone who took an oath to tell the truth in any type of official trial, jury, family law court, bail hearing, Congressional hearing, or civil law suit, especially in a case where the United States has required an accurate statement to an officer or any other person, or who fills out some sort of form, certificate, or any other document. It can result in up to five years and a fine, under 18 U.S. Code §?1621. It must be proven that there was an oath to tell the truth, a statement was made, they had intent to not tell the whole truth, there were extreme inconsistent stories, it was made in some sort of official proceeding, or the mistruth was relevant to the case. It can still be prosecuted even if it didn’t make a difference in the outcome of the case, and it’s pretty much always a felony charge.

Ponzi and Pyramid Schemes

Ponzi and pyramid schemes are similar in the fact that they both involve recruiting lower levels to help pay for the higher levels under the guise of an investment – Ponzi – or franchise -pyramid – opportunity. A type of investment fraud, Ponzi schemes offer high returns on investments, usually too good to be true, but there often is no investment opportunity at all, and instead, the money is being pocketed by those higher up to pay the people above them, leaving the bottom at a loss.

Pyramid schemes typically look like a company where individuals can run their own franchise by selling a product, but they have to pay large amounts upfront to purchase the products themselves before they can turn around and sell it for a profit. Oftentimes there is no profit, and they instead look to gain an income through recruitment commissions, getting people to join below them in order to benefit off them. The higher levels will boast of their success, while the lower levels find themselves deeper in debt.

Tax Fraud

Tax fraud occurs when any type of deception or false information occurs surrounding a tax filing. It can happen by intentionally not filing a return, not paying what they owe, not reporting all income, making incorrect claims, or filing a wrong return in any way. The IRS pursues these crimes, making it always a felony on a federal level. The section regarding it, 26 U.S. Code § 7201, defines those guilty of tax fraud as someone who “willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof.” It results in up to five years in prison and a fine of up to $100,000 for individuals and $500,000 for corporations, along with the cost of prosecution.

Telemarketing Fraud

This refers to any type of scheme that occurs over the phone, making it a federal crime because a phone crosses interstate wires, as will be further discussed in wire fraud. Most cases are when scammers will call, pretending to be selling something, giving a prize, acting as a charity, or offering investment opportunities, business opportunities, loans, medical study participation, or with some other excuse for needing credit card information. They’ll then use this to gain access to the credit card and potentially more aspects of the victim’s life and property. It usually comes with up to five years and requires restitution to be paid, and it has aggravated charges for elderly abuse, as outlined in 18 U.S. Code Chapter 113A.

Wire Fraud

Wire fraud refers not as much to the crime committed, or even the victim targeted, but rather the communication used to commit the fraud. It’s defined by 18 U.S. Code §?1343 as a scheme that takes place over “wire, radio, or television communication in interstate or foreign commerce,” which is pretty much anything technological, like a phone, computer, the internet, faxes, and anything else that is used to communicate between the state in the nation or abroad. It comes with up to 20 years in prison and a fine, or 30 years and a million dollar fine if it involves posing as a charity for a presidential-declared national emergency or a financial institution. Punishments can vary based on how much damage occured, who was targeted, how large the scheme was, and the methods involved. Because so many of these crimes take place in this manner, a large majority of fraud cases will be covered by this law, making them federal felonies. All of the crimes on this list are considered serious crimes and will not be taken lightly.