How to Spot Fraud

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1Evaluating Potentially Fraudulent Proposals

2Reviewing Your Records

3Avoiding Fraud

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Tips and Warnings

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Generally, fraud occurs anytime someone tries to get money or other benefits from you unfairly. Fraudsters target both individuals and businesses in a variety of ways. To spot fraud, examine carefully any offer or proposal you receive. If it's an investment or job opportunity that sounds too good to be true, it probably is. However, these scams are only the tip of the fraud iceberg. In almost every context, there are people who are looking to get an unfair gain by tricking others. If you think you've been a victim of fraud, check your financial records carefully and do what you can to protect yourself from fraud in the future.

Steps

Method 1

Method 1 of 3:

Evaluating Potentially Fraudulent Proposals

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   Watch for guarantees or excessive promises. Particularly with investment proposals or money-making opportunities, a fraudster will often guarantee that you will make double the money you invested quickly or pull in a massive income only working a few hours a week. However, nothing is guaranteed in the investment world and you'll seldom secure riches without putting in significant time and effort.

   • It's common to put money down for an investment opportunity, but not necessarily for a working opportunity in sales or marketing. If you're asked to put money into such an opportunity, the company may categorize this as an "investment." However, these are not investment opportunities.
   • If a proposal promises you'll double or quadruple your investment, it is almost certainly fraudulent. Those types of returns can't possibly be guaranteed.
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   Take your time to research any proposal or opportunity. Fraudsters typically pressure you to make a decision right away. They imply some level of urgency or say opportunities are limited. They say these things because they want you to jump without taking the time to research them further. They know that if you start to look into the issue more deeply you'll likely discover that it's fraudulent.

   • In some situations, they may threaten you with civil or criminal penalties if you don't comply with their request. They may tell you that there's a warrant out for your arrest, that you'll lose your job, or that your property will be confiscated.
   • To find out if any of the threats are real, contact the authority they mention directly. For example, if they claim your local police department has issued a warrant for your arrest, call your local police department and find out if that's true.
   • Search online for information about the company and the product or opportunity offered. If they're claiming to be affiliated with a major company or brand, check the website of that company to find out if the affiliation is real.

   Tip: When in doubt, simply ignore the offer and cut off all contact with the potential fraudster. You'll be no worse off than you were before and potentially better off than you would be if you fell for a scam.

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   Verify the credentials of anyone who contacts you. Fraudsters want to seem authoritative, so they'll typically include various credentials or accomplishments to encourage you to trust them more easily. You can look into these relatively easy by searching online for the institution or organization that provides those credentials.

   • In some cases, the credentials themselves may even be completely made up. For example, they may claim to have a license or certification that doesn't actually exist. This is part of the reason they want you to make your decision to act on their offer or proposal quickly – they don't want you to look into their credentials and discover that they're bogus.
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   Authenticate changes to standard protocol independently. Fraudsters often send emails to employees telling them that payments will be made differently or that a new system is being used for processing orders and payments. If an employee switches over to this "new" system, payments will go to the fraudster instead of the company or individual where they were supposed to go. Often, you won't find out that this has happened until the company or individual you owe contacts you demanding payment.

   • If you work for a company and get an email like this telling you to send payments or other information to a different place than you normally do, contact the department in charge and confirm that the information is legitimate before you proceed.
   • If you own a business, make sure your employees know who to contact if they get these types of emails and train them to confirm a change was made before acting on it.

   Tip: If you suspect an email is a scam, don't reply to the email directly. You'll likely be directed back to the scammer. Instead, send a separate email to the email address of the person in charge of that area, or forward the email and ask if it came from them or if they know anything about it.

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Method 2

Method 2 of 3:

Reviewing Your Records

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   Check your accounts regularly for discrepancies. Your bank and credit card companies issue a statement every month. While it's important to review your statements and reconcile them with your own records, it's also helpful to check your accounts online more often, especially if you frequently make purchases online.

   • Keep receipts or confirmation emails so you can compare them to your statements and other account records. After you've reconciled your accounts, you can throw these away unless they're related to a tax-deductible purchase.
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   Report questionable or unauthorized transactions immediately. If you see a transaction on your statement that you don't recognize or don't have a receipt for, contact your bank or credit card company immediately to dispute the transaction. You have a limited time, typically 30 days after your statement is issued, to get your money back for fraudulent transactions.

   • Depending on the type of transaction, you may be able to block future transactions from going through. Your bank or credit card company may charge a fee for this service.
   • If you're looking at your account online, you may be able to get more information about the transaction and file a dispute directly from your online account without having to call your bank or credit card company.
   • Keep all documents related to your transaction dispute for your records. If you're talking to a customer service representative on the phone, write down the date and time of the call along with the name of the representative you spoke with.

   Tip: It's a good idea to have one credit card that you only use for online purchases. This makes it simpler to identify fraudulent transactions because you won't have to look at several separate statements.
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   Monitor your credit report for changes. Sign up for a free credit monitoring service, such as Credit Karma, Credit Sesame, or WalletHub. With these services, you can keep up-to-date with any changes to your credit report. If you see something that you don't recognize, you can dispute it a lot more quickly before further damage is done.

   • For example, if you see an inquiry from a company you're not familiar with, this could mean that someone is trying to use your identity to open credit accounts in your name. Likewise, you want to watch for new accounts that you didn't open.
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   Compare service or insurance statements to your own records. Bank account and credit card statements aren't the only places where you can uncover potentially fraudulent activity. Your insurance statements and other statements for recurring services may include services or other items that you didn't receive. This is also evidence of fraud, even though you may not be the direct victim.

   • For example, a doctor or healthcare company might charge your health insurance for services or healthcare devices that you never received.
   • If you see an unfamiliar entry on any insurance or service statement, contact the company that issued that statement and let them know. They will proceed from there to handle the situation.
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Method 3

Method 3 of 3:

Avoiding Fraud

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   Keep usernames and passwords secure and private. A legitimate company will never contact you and ask for your username or password. If anyone asks you for your username or password for any reason, view it with suspicion.

   • Fraudsters often use this method to gain access to company computer systems, so this is particularly important in the work context. However, you may also have fraudsters ask for your username or password to a personal account. For example, someone might claim they are from tech support and are fixing a problem with your account and need your password.
   • If you get a communication like this from someone you know, contact them directly and tell them about the email or other message. Most likely it came from a fraudster and not from them.
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   Refuse complicated or unusual payment methods. Legitimate companies tend to prefer simple, mainstream payment methods, such as credit cards or payment services such as PayPal. If someone wants you to pay in gift cards, or wants to pay you more than they owe you and get the difference back, the transaction is likely fraudulent.

   • Anyone proposing an unusual payment method will typically tell you that they've been scammed before and they're doing this to protect themselves. Don't buy it. A mainstream payment method protects both of you, not just them.
   • If you're buying something through an auction site or from an individual seller on a marketplace site, use the payment methods established for that site. Don't agree to pay the person using an off-site method (unless they are local and you are meeting them in person to complete the exchange).
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   Insist on information from anyone who contacts you demanding money. Fraudsters may exploit your fear by telling you that you owe money and will be arrested or sued if you don't pay the money immediately. However, if they are a legitimate debt collector, they are required to send you written information about the debt.

   • Take down the name of the person who contacted you and the name of the company they claim to work for. Then go online and search the name of the company. Pay attention to reviews from other people. If you see a lot of reviews saying the phone call is a scam, you can safely ignore it.
   • Don't give anyone calling you and asking you for money any personal information. In particular, don't give them any financial information, such as your bank account or credit card company.

   Tip: Fraudsters will often ask you to "verify" your information, implying that they already have it. However, they don't have it. When you "verify" your information, you're actually giving it to them for the first time.
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   Shred all documents with sensitive information before throwing them away. Fraudsters often go dumpster-diving for personal information, such as names, addresses, phone numbers, and account numbers, that they can use to steal your identity. Any mail or other documents that include any of this information should be shredded and disposed of securely.

   • If you don't have a shredder at home, you can use a professional shredding service.
   • Government agencies and nonprofit organizations also hold shredding events periodically to raise community awareness about shredding sensitive documents. Search the internet with "shredding event" and the name of your city or town to see if there's an event coming up near you.
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   Train employees to recognize potentially fraudulent activities. Fraudsters target businesses as well as individuals. A large corporation could potentially lose millions of dollars to fraud as a result of a single low-level employee providing the username and password they use to access the workplace network. If you own a business, teach your employees about the warning signs of a potentially fraudulent email.

   • Make sure they know never to send their usernames or passwords over email.
   • They should also know that if they get an email announcing an abrupt or immediate change to standard company policy or protocol, they should reach out independently to higher-ups to confirm if the change is legitimate.
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Tips

• If you spot fraud, report the activities to the appropriate law enforcement agency in your area. Most countries have a national agency that handles fraud but you can also go to your local police agency.
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