Financial Fraud In India : Cleanse Society’s Wealth

On June 7, 2015

Since last one decade, size of financial fraud increased along with economic growth statistics. Development reforms, market expansion and growing Purchasing Power Parity terms envisaged magnitude of fraud immeasurable. In every scam, frauds and cheating, the end beneficiary is common citizen and the economy of the nation. It is inevitable to know types of fraud, approaching roots, safeguard measures to avoid endless nightmares.

Fraudsters mainly focus to steal;

Gaining victims’ trust and confidence;
Using false information to induce victims to invest in or purchase products that don’t exist; or
Stealing identifying information.

Public sector banks in India have cumulatively lost a massive sum of Rs. 22,743 crore due to cheating and forgery in the last three years alone, according to a report by Hindustan Times. Indian Overseas Bank is the worst hit with a loss of Rs. 3,200 crores as against State Bank of India (SBI) which lost Rs. 2,712 crore, between April 2010 and September 2013, the number of bank fraud cases has shown a slight decrease yearly but the amount of money lost has been increasing year on year. The India Risk Survey (IRS) 2014, by FICCI-PINKERTON evaluation: corruption, bribery, corporate fraud; accounts 10.16% out of 15% scale, as the highest, bagged top rank despite of previous year’s lower ranks. Also KPMG’s “India Fraud Survey 2012” stated that 71% respondents claimed fraud is an inevitable cost of doing business in India.

These numbers are likely the tip of the iceberg. Experts in the field notice, large amount of this iceberg goes underreported. Reporting one’s victimization is complicated by feelings of shame and guilt, as well as other complex factors, such as:

• Lack of knowledge and awareness;

• Feeling that, reporting wouldn’t make a difference;

• Fear about legal or financial control;

• Threats and intimidation from the perpetrators;

• Loss of esteem or prestige in a victim’s social group;

• Lack of confidence in the ability of authorities to respond and assist.

Since technology became an integral part of our life, Identity Theft admonishes to destroy our economic diaspora. It involves the illegal access of an individual’s personal as well as financial information. Thus, it results, huge financial loss and serious damage to victim’s financial history. The roots are many; such as credit card skimming, hacking, phishing, dumpster driving, manual stealing etc.

Investment Fraud: is another term we usually learn from media and may be from self-experience. Fraudsters use different techniques to induce customers such as; stocks, bonds, notes, commodities, currency, or even real estate and so on. If examine deeply, we can find where ever we see a “good” presented as “too good” would be a signal to cheat a customer. Interestingly, experts say that the victims range is not out of educated class. Most of the incidents indicates that the major target of fraudsters are not uneducated or poor, rather victims are always financially sound, well-educated and self-reliant, in between of the age range of 30-55, showcase how careless we are in financial matters.

Lending fraud: is not so familiar with all types of people, because it operates with definite targets. Out of ten targets, fraudsters hook at least four victims. Here two types of fraud activities; one is doing by the institutions and other is directly against general public. For the first case we can see 2010 fake housing loan scam and many others. Second category fraud happens on the ground, where fraudsters can connect with victims directly. This fraudulent activity can also include loan modification, foreclosure prevention, and other lending fraud, i.e. a consumer is promised a service related to a mortgage (whether new or refinanced) in exchange for an up-front fee. Unfortunately, many of these loan modification and foreclosure prevention, fraudsters take the pre-paid money and disappear before providing any services to the victim. Some types are indicated below;

Appraisal fraud: loan officer fraudulently overvalued an appraisal to make a sale.

Mortgage rescue and loan modification scam: an advance-fee scam where home owners are lured with promises to save them from foreclosure or lower their mortgage payments—in exchange for an advance or monthly fee. Sadly, many of these home owners never get the relief they have been promised.

Reverse mortgage scam: while they can be useful products, reverse mortgages have been associated with high fees and aggressive marketing as an easy way for retirees to finance lifestyles—or to pay for risky investments—that can jeopardize their financial futures. In some cases, a victim pays an advance fee to obtain a reverse mortgage that is never provided.

Loan origination scheme: perpetrator originates a loan using false information (e.g., misrepresenting the buyer’s income or employment).

Marketing Fraud: is so popular in our daily life. If you having a mobile phone, at least once you read the attractive message received from unknown sender. Usually fraudsters engage with victims via false promises of cash prizes, services, goods, or good works in exchange for fees, donations, or purchases. This crime may be committed through the mail, telephone, email, television ads or infomercials, or any other form of mass or personal communication.

It is pertinent to note that, once a person victimized any of those frauds, it would be impractical to return their loss. The finest idea of not to become a “victim” is awareness.

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