In what is fast becoming a more internet-centric world, certain crimes have migrated to cyberspace. Fraud is certainly no exception. This article takes a look at fraudulent activities both on the internet and in the corporate world.
In law, the definition of fraud varies depending on the jurisdiction, though it can be described as an intentional deception that is carried out in order to receive a personal gain or to damage another person or thing. This gain is often of a monetary nature. It is usually defined as a white-collar crime, understood as being a crime that is financially motivated and non-violent. Though fraud and other white-collar crimes are not always considered to be as serious as violent crimes, at least not by the general public, the law takes a dim view of criminal activities that are financially motivated. Sentencing therefore tends to be heavy.
The most common frauds on the internet are relatively small in scale but large in scope, targeting individuals but affecting potentially millions of people. Most fraudsters aim to obtain personal information (passwords, online banking information, card details, etc.) from people with the intention of making fraudulent purchases or carrying out some other fraudulent crime.
So-called ‘phishing’ is one of the main methods of gaining this information. This entails putting together a message or e-mail purporting to be from the target’s bank or PayPal account, for instance, to prompt them to enter personal information that can then be stolen and misused.
In 2010, the Serious Organised Crime Agency (SOCA) in the UK estimated that online fraud is worth around 3.5 billion a year.
Fraud does not only affect individuals. The recent scandal of the fiddling of Libor (London Interbank Offered Rate) was one such example, with perhaps the most famous recent case being that of purported financier and stockbroker, Bernie Madoff.
Madoff ran what appeared to be a successful investment house, which was in fact hiding a Ponzi Scheme that brought about the largest financial fraud in US history. The scheme was estimated to be worth $65 billion, though the courts finally settled on a figure of $18 billion. It just shows that fraud can flourish at all levels and can cause frankly astonishing damage.
Another area that attracts a lot of media attention is tax evasion, which is not to be confused with tax avoidance. The latter utilises legal techniques to minimise the tax burden for companies and individuals. However, fraudulent techniques can also be utilised to avoid certain VAT and tax liabilities, not to mention put into use to facilitate money laundering through sometimes unwitting businesses.
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In short, serious fraud is a crime that has always existed, but which has mutated and adapted to the new online world. New methods have been devised in order to set up those deceptions that lead to the gains being made, which means that lawyers and other legal professionals dealing with this area need to keep up to speed with developments that can change from day to day.
Maria lives in London and blogs on various financial topics, including tax evasion, serious fraud and white-collar crime.