By Kori Eskridge, Fall 2014 Student Intern
Financial fraud can come in a variety of different forms. Mortgage scams, pyramid schemes and international solicitation phone calls and emails, to name a few, can all be types of fraud. Financial fraud is extremely prevalent in our society and the number of victims continues to rise. According to the FBI’s Financial Crimes Report to the Public, cases of investment fraud have increased by 52% over the last 8 years. One report stated that Americans alone lose over $50 billion annually to the hands of fraudsters and con artists. Below are a few reasons that financial fraud has become such a big issue:
- Under-reporting: The majority of financial fraud cases go unreported. Some investors might be embarrassed that they fell prey to a fraud tactic. Others might feel that reporting would not have made a difference. Still others just don’t know where to go for help. But whatever the reason, under-reporting is a huge reason that financial fraud continues to be so prevalent.
- Demographic and Economic Factors: Economic factors have a huge influence on how people choose to invest their money. In times of economic downturn or recession, personal and household income can plummet. Many times, people are faced with difficult decisions on how to spend their money and, unfortunately, this is a prime time for fraudsters to strike. Investors might be induced to take risks that they wouldn’t otherwise by the promises of quick returns and high yielding accounts and fail to take into account that typically the possibility of quicker or higher returns comes with increased risk. Our recent economic times have added to the risk investors seem to be willing to take to earn back money they have lost.
- Lack of Resources: While there are various agencies that serve to protect investors and prosecute fraudsters, the sheer number of cases annually is overwhelming. In 2009, President Obama established the Financial Fraud Enforcement Task Force to help other agencies, like the Securities and Exchange Commission and FINRA to investigate and prosecute financial crimes. But even with these additional resources, financial fraud continues to be a big problem.
Be on the lookout for my next post, which will discuss how the Task Force is working to target financial fraud on a national level. I will include more times on how you can avoid becoming a victim. Remember, the more information you have, the better equipped you are to protect yourself from fraudsters and con artists.