What is financial fraud?

Scams can come up where you least expect them. Get some pointers on how to spot some common types of financial fraud and scams.

Though money scams can happen any time of year, tax season can be prime time for fraudsters. That's why it's an especially good time to watch out for signs of financial fraud. Get to know some common money scams, learn how to recognize the warning signs, and find out how to avoid becoming a scam victim in this guide to staying aware of the different types of financial fraud.

 

What is financial fraud?

Financial fraud can happen to anyone, from senior citizens to young adults. No matter the age of the victim, however, most types of financial scams follow the same general framework. Financial fraud scams are scripted actions designed to deceive the victim while providing the perpetrator with an illegitimate financial advantage.

 

Types of financial fraud: Common money scams

Financial fraud can take shape in many ways, and recognizing common money scams isn’t always easy. Read on to familiarize yourself with some common types of financial scams:

  1. Social engineering scams: Perpetrators of these scams may get access to your bank account or trick you into sending them money by posing as someone who is trustworthy to try to get you to share personal information or money. They may try to convince you that they are an IRS agent, someone from your bank, or even a friend or family member.
  2. Ponzi schemes: A type of investment fraud, a Ponzi scheme requires investors to recruit new investors, whose funds pay returns to those with higher positions in the scheme. If the math doesn’t add up, you’re promised a positive return no matter how the market reacts, or you can’t seem to cash out, you might have a Ponzi scheme on your hands.
  3. Charity fraud: This happens when people claim to be collecting funds for charitable causes, which never receive the donations. Fraudulent charities tend to appear after disasters, when they have the best chances of taking advantage of generosity. 
  4. Sweepstakes scams: These schemes center on fake lotteries and sweepstakes, which may require you to provide personal information or pay a fee to collect your winnings. If you learn that you won a sweepstakes you never entered or that you have to pay to get your prize, consider it a likely money fraud attempt.

 

How to avoid different types of financial fraud

Since financial fraud can be expensive and difficult to recover from, your best bet is to avoid money scams altogether.

Make a policy of never giving out bank account numbers, credit card numbers, Social Security numbers, or passwords over the phone, especially if you didn’t initiate the call.

It’s also a good idea to research before you act. Read about charities before giving, and only donate through official channels. If you receive a call from an IRS agent, request the person’s agent number, and then call the IRS to confirm it’s legitimate. If you get a call from your bank, take notes and then call your bank directly using a phone number from a known, trustworthy source rather than responding to a solicitor.

 

Want to learn more about what you can do to help prevent financial fraud?

Related content

How to keep your assets safe

5 tips for seniors to stay a step ahead of schemers

Fight the battle against payments fraud

Fraud prevention checklist

Reviewing your beneficiaries: A 5-step guide

How to protect your digital assets in your estate plan

Proactive ways to fight vendor fraud

The latest on cybersecurity: Mobile fraud and privacy concerns

Cybersecurity – Protecting client data through industry best practices

Post-pandemic fraud prevention lessons for local governments

Cybercrisis management: Are you ready to respond?

White Castle optimizes payment transactions

Webinar: Approaching international payment strategies in today’s unpredictable markets.

Increase working capital with Commercial Card Optimization

The surprising truth about corporate cards

Automate accounts payable to optimize revenue and payments

How to improve digital payments security for your health system

How to avoid student loan scams

Protecting cash balances with sweep vehicles

How to prevent fraud

Keep your finances safe and secure: Essential tips for preventing check fraud

How to spot an online scam

What is financial fraud?

Authenticating cardholder data reduce e-commerce fraud

Mobile banking tips for smarter and safer online banking

Why Know Your Customer (KYC) — for organizations

Protecting elderly parents’ finances: 6 steps to follow when managing their money

Is your employer long term disability insurance enough?

Why a mobile banking app is a ‘must have’ for your next vacation

Money muling 101: Recognizing and avoiding this increasingly common scam

From LLC to S-corp: Choosing a small business entity

Is online banking safe?

How-to guide: What to do if your identity is stolen

8 tips and tricks for creating and remembering your PIN

Recognize. React. Report. Caregivers can help protect against financial exploitation

Recognize. React. Report. Don't fall victim to financial exploitation

Webinar: U.S. Bank asks: Are you safe from fraud?

Learn to spot and protect yourself from common student scams

The password: Enhancing security and usability

BEC: Recognize a scam

Hospitals face cybersecurity risks in surprising new ways

4 ways to outsmart your smart device

Webinar: How to stay safe from cyberfraud

Webinar: CRE Digital Transformation – Balancing Digitization with cybersecurity risk

Hospitals face cybersecurity risks in surprising new ways

Webinar: CRE Digital Transformation – Balancing Digitization with cybersecurity risk

How you can prevent identity theft

What you need to know about identity theft

Authenticating cardholder data reduce e-commerce fraud

Disclosures

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.