Different Types of Fraud 2 years ago

 

Are you considering starting a business with someone? Have you noticed some inconsistencies with their background or presentations?

 

Inconsistencies are the primary red flag when assessing a potential partner; although it may seem obvious, it can be quite simple to overlook. 

 

No matter how long you've known someone–Never place too much confidence in someone who displays inconsistency because doing so could later harm your business.

 

Here are common types of fraud committed in government agencies that can also happen in business:

  • Procurement fraud: A fraudulent procurement practice, the purchase of substandard goods, and accepting kickbacks for recommending linked entities to contracts 

  • Plunder: the accumulation of ill-gotten money by a public official through a combination or series of overt crimes.

  • Corruption: Officials who misuse public funds or give public positions or contracts to their acquaintance who demands or accept payment or privileges in exchange for services

 

Meanwhile, here are different types of fraud to watch out for when doing business:

1. Identity Fraud

It's a common type of fraud, especially now that we are in a digital era. Anyone can easily pose as a supplier or investor by providing a credible history, level of experience, or financial records. These individuals typically target those who are just starting a business or those needing investment.

Before entering a partnership with anyone, check their licenses and if their businesses are registered to DTI or SEC

 

2. Financial Statements Fraud

An impressive financial record doesn't mean it's always good because it is simple for certain people or organizations to fabricate financial records to display impressive financial performance. 

Here are some of the things you should carefully examine before entering a deal or partnership:

  • Non-existing Inventory

  • Debts with special purpose

  • Delayed expense recognitions

  • Non-disclosure of receivables and payables

  • Multiple Reimbursements

Note that Financial statements are complicated, making it difficult for non-accountants to understand but are simple for fraud to hide the theft. 

 

3. Payroll Fraud 

The most frequent type of fraud that occurs whenever payroll records are obscure is having 'ghost employees. This is accomplished by manipulating the payroll system and paying these non-existing employees by transferring the money to their relatives, acquaintances, or even to their own bank accounts.  

Here's what you can do to avoid them:

  • Perform a background check for each employee

  • Hire an expert to do a payroll audit

  • Create an effective payroll system.

 

4. Asset Misappropriation Fraud

Asset misappropriation is when a company's assets are misused for personal advantage by individuals tasked with managing them. Misappropriation of assets includes:

  • Drafting fraudulent checks 

  • Forging signatures 

  • Embezzlement or issuing false invoices

The most common crime committed for asset misappropriation is estafa. Should you find anyone in your organization committing such a crime, you should take immediate action to protect yourself and your organization by consulting a legal expert

 

Apart from doing business with someone, you can also spot fraud from those offering investment opportunities. You can spot fraud from the following scheme:

Ponzi Schemes

Scammers will usually encourage investors to put in large sums of money in a business with high rates of return and low risk. Then that money will be collected and used to pay those investors who joined first until they run out of investors and money to circulate in the scheme.

 

Pyramid Scheme

This is almost similar to the Ponzi Scheme, but pyramid schemes use a ‘multi-level-marketing’ or building a pyramid of investors. This promises a return by ‘recruiting’ more members to finance it and pay returns to the earlier investors. 

 

Pump-and-Dump

The goal of this scheme is to ‘pump’ or increase the value of certain stocks or investments by creating ‘hype’ or using deceptive and overstated claims to encourage investors to invest large sums of money. Once it increases its value, scammers will start selling or ‘dump’ their shares at a high price, leaving other investors with an inflated price.

 

Times have changed, and scammers have evolved. Many are now taking advantage of those who are susceptible to these kinds of fraud. 

 

Knowing what to look for is vital to any preventive effort, especially in light of how often and in what forms fraud occurs within businesses. If you think it's too good to be true, you should consult an expert.

 

Get any evidence you have, take screenshots, take any other actions necessary to preserve the evidence, and consult a legal expert that can help you.

Business Startup Law Fraud

AIC Grande Tower Garnet Road
Ortigas Center, Pasig City
Metro Manila Philippines

Mobile No. +639451244898
digestph@gmail.com
Please read our FAQ before contacting us.