what is financial fraud

 > What is Financial Fraud?

What is Financial Fraud?

Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain. Fraud is a crime, and is also a civil law violation. Many fraud cases involve complicated financial transactions conducted by 'white collar criminals' such as business professionals with specialized knowledge and criminal intent.

An unscrupulous investment broker may present clients with an opportunity to purchase shares in precious metal repositories, for example. His status as a professional investor gives him credibility, which can lead to justified credibility among potential clients. Those who believe the opportunity to be legitimate contribute substantial amounts of cash and receive authentic-looking bond documentation in return. If the investment broker is fully aware that no such repositories exist and still receives payments for worthless bonds, then victims may sue him for fraud.

Fraudsters can contact their potential victims through many methods, which include face- to-face interaction, by post, phone calls, sms and/or emails. The difficulty of checking identities and legitimacy of individuals and companies, the ease with which fraudsters can divert visitors to dummy sites and steal personal financial information, the international dimensions of the web and ease with which fraudsters can hide their true location, all contribute to making internet fraud the fastest growing area of fraud.

"Get-Rich-Quick" schemes are plans which offers high or unrealistic rates of return for a small amount of investment while at the same time promising that such investment is easy and risk-free. Generally speaking, if the offer is too good to be true, members of the public are advised to be wary and should make an effort to verify the validity of the promised high returns. Most get-rich-quick schemes also assert that wealth can be generated with little skill, effort, or time. Illegal schemes or scams are often advertised through spam or 'cold-calling'. Some forms of advertising for these schemes market books or compact discs about getting rich quick rather than asking participants to invest directly in a concrete scheme. It is clearly possible to get rich quickly if one is prepared to accept very high levels of risk - this is the premise of the gambling industry. However, gambling offers the near-certainty of completely losing the original stake over the long term, even if it offers some wins along the way. Nevertheless, many people long for instant wealth, and find these schemes appealing.

The following financial fraud activities are prohibited under relevant legislations administered by Bank Negara Malaysia:

Types of Fraud and How to Protect Yourself


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