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Types of Financial Fraud and How to Avoid Becoming a Victim

Apr 16, 2021 7 min
How to Avoid Becoming a Victim of Financial Scams and Fraud

Types of Financial Fraud and How to Avoid Becoming a Victim

Reading Time: 7 minutes

With the dramatic increase in online purchases globally and a general movement towards digital financial transactions, cybercriminals create various types of financial fraud to hurt your finances. 

Consumers, both online and offline, are being targeted by fraudsters. The medium could be online shopping, emails, social media, telephone, or face-to-face doorstep sales.

In this article, we’ll look at the types of financial fraud and how you can avoid becoming a victim.

Understanding cybercrime

The more people embrace the digital economy, with its ease of use and convenience, the more they become exposed to scams and fraud.

But caution is needed as consumer fraud is increasing in all forms, both online and offline.

In 2019, a survey was conducted by Ipsos that discovered people were more afraid of ” being hacked for fraud/spying purposes” than they were about attacks on their personal safety.

The threat is constant; these criminals never stop and find new and ingenious ways to steal money.

In Europe, 12 billion EUR of financial losses were estimated from people falling victim to scams and fraud in 2019. This number is rising year on year.

In 2020, the US reported 19.7 billion USD lost to phone scams.

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Connected to Criminals

The growing trend for using mobile phones, tablets, laptops, social media, and mobile apps has benefited criminals. The more ways we use to link to our bank accounts, the more cybercriminals can target us. 

In 2019, mobile attacks overtook those that used desktop computers. According to LexisNexis, the threat grows by 56% each subsequent year.

Financial institutions continually attempt to increase security measures to prevent fraudsters from stealing money from their clients.

The problem is that these unsavory individuals are increasingly finding stealthy ways to crack the systems put in place.

Paying the Price

The price you pay for an attack is often more than financial. You can be damaged emotionally and psychologically, with effects that can be long-lasting.

Sometimes the money lost is unrecoverable. If the attackers steal your identity, it can affect credit ratings and take time and resources to resolve.

These combined add to the stress and worry caused by such attacks.

Types of Financial Fraud

There are different types of financial fraud used by criminals. Some of these include:

Identity Theft

Stealing Personal Information 

Someone posing as a legitimate employee from an organization you use (bank, service provider, government department, etc.) contacts you.

This could be by email, phone, or even face-to-face. They ask you to provide specific details to confirm your identity, such as a copy of your passport, utility bills, or other personal information.

Computer or Software Problems 

A person posing as an employee of a large corporation such as Microsoft approaches you by email, phone, or other means.

You are told that there is a problem with your computer and must give them your details to remedy the issue.

This often includes your bank or credit card information. They may tell you they need to take over the operation of your computer remotely to solve the problem or sometimes threaten you with the loss of all information on your computer.

This is not true and is simply a scare tactic. 

Monetary Fraud

Money Investment 

Investing money into something means you will receive an item, service, rebate, or investment gain.

All these are false and lures to make you part with your money. 


You discover some travel, event, or concert tickets online, through an email, or from a person selling face-to-face.

Once you purchase the tickets, either you don’t receive them, or they turn out fake.  

Bank Details  

Someone contacts you, saying they represent your bank, a service provider, or some other legitimate organization.

They tell you there is a problem with your account and need to verify your details. If you don’t comply, they often threaten you somehow.

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Competition Win or Inheritance

You receive a notification by email, phone call, letter, or other means that you’ve won a competition.

An alternative to this is that a member of your distant family has died, leaving you some money.

In both cases, you are asked to pay an administration fee before you can claim the money. Of course, there is no money, and you will end up out of pocket. 

Medical Treatment Fees

You’re contacted by someone claiming to be from a clinic or hospital where a relative is admitted.

You’re’ told they are sick or have been involved in an accident. They suggest your relative can’t pay their medical fees, and you should cover them.

These are just some examples of popular scams; sadly, there are many more!

Having learned the types of financial fraud, below are ways to avoid them.

How to Avoid Becoming A Victim of Financial Fraud

The following safeguards can help protect you from becoming a victim of financial scams and fraud.

  • Bank account and credit card checks
  • Scrutinize information requests
  • Investigate Online payment websites
  • Safeguard Personal information
  • Check what you share on social media
  • Report suspicious activities
  • Beware of too-good-to-be-true deals
  • Keep software up-to-date
  • Two-step verification
  • Destroy documentations you no longer need
  • Keep your cards in Sight
  • Cash Machine Safety
  • Use licensed ticket sales websites
  • Avoid making rushed deposits

Bank Account and Credit Card Checks

When you create a bank account or get a new credit card, it’s essential to monitor the transactions regularly. Look at the transactions on your bank accounts and credit card statements regularly.

Report any suspicious, unknown, or irregular activity to your bank immediately.

Also, your card details are more valuable to criminals than cash, so protect them!

Shield your Personal Identification Number (PIN) whenever you use your card, even if you think no one is looking.

Don’t disclose your PIN to anyone, ever. Don’t write it down; commit it to memory and use memory techniques to make it simple to recall. 

Scrutinize information requests

Never give your full bank details to anyone. If you want businesses or individuals to pay you by direct bank transfer, ensure they are legitimate first. Then only provide the details they need to complete the transaction. You must never give the information to access your bank accounts online – such as your password. Remember that even your bank won’t ask you for this information.
Tell your bank immediately if you’ve provided your account information to a scammer.

Investigate Online payment websites

Before making any payments online, check that the website address (URL) says HTTPS and has a padlock or unbroken key icon at the beginning.

Never make online payments if you are using a public Wi-Fi network. This is an easy mistake if you’re using a mobile phone. 

Safeguard Personal information

There are a few instances when you might need to give someone your personal information (passport image, date of birth, place of birth, maiden name, full postal address, etc.) Remember, the more personal information you divulge, the more it can be misused. Protect and check it thoroughly before giving it to a third party. 

Check what you share on social media.

When you sign up for a new social media platform, it seems innocent enough to fill out your personal details.

Remember, however, that this information can be used to create fake identities and target you with specific scams.

Also, be aware of what you share in public posts; fraudsters can build up a profile of you over time. 

Report suspicious activities

If you suspect you have been a victim of any fraud attempt, even if the effort was unsuccessful, report it to the police or other bodies concerned.

Give as much detailed information as you can. 

Beware of too-good-to-be-true Deals.

If something seems like an absolute bargain and too good to be true, then the likelihood is it is!

Watch out – you’re’ being scammed! Please don’t fall for it.

With additional research, you should be able to tell whether it’s’ the real deal. Put the product or service into an internet search with the word scam and see what comes up.

Check out the company that’s selling and ensure they are legit. Check DMARC record of the email you received. If it doesn’t have the security protocols enabled, chances are you are facing an impersonation attack.

Keep software up-to-date

Keep the software on your PC, phone, or tablet up to date.

This is especially important for anti-virus software, your operating system, and your web browser, as new updates often improve the safeguards to prevent fraud.

Two-Step Verification

Sign up for two-step verification. It may seem like a hassle to go through the process every time, but it is worth the effort to protect you from security risks.

Look at it this way, do you want to take an extra 20 seconds to log into your online banking app, or do you want to risk someone stealing your information and taking your money?

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Destroy documentations you no longer need

Always dispose of any documentation you no longer need to keep, particularly if it shows any of your details.

Don’t’ carry this kind of document in your car, wallet, handbag, etc., unless necessary. 

Keep your cards in Sight.

When making a card transaction in a shop, restaurant, bar, club, etc., always keep the card in Sight.

This helps prevent them from being cloned or additional charges being made to them. 

Cash Machine Safety

Before using a cash machine, look at it closely and ensure there are no signs it has been tampered with.

Also, check for any extra pieces that might have been added, particularly over the card slot or elsewhere.

If you notice anything suspicious, report it immediately. Various cash machine scams range from stealing your card to preventing the cash from being taken out.

This way, it can be stolen by the criminal when you leave. 

If someone tries to distract you while you’re using a cash machine, or if you feel they are too close, cancel the transaction and walk away. Hold-ups at cash machines are common.

Before you use one, look around to see if anyone is watching you.

Use licensed ticket sales websites.

To prevent yourself from becoming a victim of a ticket scam, first, check with the venue where the licensed ticket sales sites are and when the tickets will be released for sale.

If you find a ticket site online, check it has a physical address and a working landline phone number.

Also, ensure there is a refund policy on the website so you can claim your money back if anything goes wrong. 

Avoid making rushed deposits.

Never give upfront cash deposits to tradespeople. Always thoroughly search the tradesperson first, ask for references and check them out on appropriate licensing bodies and trades associations.

Check with family, friends, and neighbors. Don’t be rushed.

Always take your time deciding on using someone’s services. If they are putting pressure on you to commit right away – walk away. 

Final thoughts – Types of Financial Fraud and How to Avoid Becoming a Victim

There are many ways perpetrators of fraud can try to exploit our ignorance.

However, having a good knowledge of the types of financial fraud and how to avoid them safeguards you and stop the criminals in their tracks.

Ensure you never become a victim of financial fraud and scams.