Committing a fraud involves a high risk, but with the prospect of even higher profits, which is what makes it attractive for fraudsters. A majority of frauds go undetected and not all that are identified are prosecuted to extensive investigations required. The investigations may take up to 18 months or even more. Imagine the amount of losses a company can face due to this reason.
The only way to identify such crimes is through establishing rigorous checks and balances to detect any malicious activity in time and protect an organization from external and internal frauds and scams.
Criminal groups that are highly organized and working at an international level benefit through the differences in national legislation. The differences in the legislations of different countries allow these criminal groups to mold and twist their way out of financial and economic crimes. Most frauds are committed when the victims are vulnerable and unaware of the organized crimes that can rob them off their assets. An organization becomes vulnerable when there is a lack of awareness about the code of conduct and no accountability.
Fraudsters can be everywhere – inside as well as outside. The internal threat comes from the employees and the management at every level. These frauds fall under the category of white collar crimes. An employee who has a grudge against their employer may involve into fraudulent activities. The external fraudsters are of course financial and economic criminals.
The economic frauds committed by members of the state result in millions of dollars a year escaping the economy. The criminals invest in other countries so as to hide the money they have earned through fraud. The results can be drastic on a country’s economy.
Take the example of drug trafficking. When the renowned drug trafficker Pablo Escobar started his drug dealing business, he was making millions of dollars in Columbia. He had a circle in the USA where he sold his drugs and made money in his own country. Since the money he earned was in cash, there was a large amount of unregistered money circulating in the economy. The black money resulted in millions going out of the country, unreported. This raised red flags for the governments. The economy suffered a huge loss since the cash flow was not on record.
Drug cartels shouldn’t be allowed to grow so strong that they can control the economies of different states. Although all illegal activities should be nipped in the bud, drug trafficking specifically should not be allowed to grow. Authorities and officials of different states need to work together to prevent and identify any drug trafficking activity.
Authorities such as Drug Enforcement Administration (DEA) work with Interpol to catch drug traffickers from all around the world. The economic effects of these activities can deter the circulation with minimum growth. Although this is not an economic crime, the consequences are both social and economical.
There are frauds that are caused by CEOs of companies violate the use of official assets and steal funds using unethical means. Research has shown that CEOs who commit frauds are usually ones who are middle aged and have been working in the company for 8 to 10 years. This means that a middle aged man who is close to his retirement and has made a good reputation in the company is more likely to commit a crime.
When a person at a high level managerial position gets comfortable with the organization, they understand the ways in which the company operates. When the person knows how something is done, they also get to know the ways they can manipulate the SOPs and commit a crime. When a CEO commits a financial crime, it is termed as a white collar crime.
These crimes take a lot of time and resources to get detected and the culprits have lower chances of getting caught at an early stage. A CEO or a person at a higher managerial position can commit a financial crime where they slowly and gradually transfer funds to their foreign accounts. This too, takes time to get detected. They either transfer funds slowly and in intervals, or plan ahead and transfer all at once and then disappear all of a sudden.
Economic frauds are also committed online. Often scammers email the victims that they would receive a certain amount of money once they transfer a particular amount to their account. These mails are sent to millions across the globe and thousands of people fall prey to this trap.
Other economic frauds include 419 fraud, boiler room fraud, fake invoice fraud, Microsoft fraud, acquisition frauds, romance scams and investment frauds. The victims of these frauds are many and billions of dollars are lost each year by people at the hands of these scams. The best way to stay safe is by ensuring that any information or scheme presented by a person is thoroughly researched. Before getting on board with any offered scheme, every person must do their homework in order to stay safe from falling prey to scams.