Terms Beginning With 'f'

Fraud

What is Fraud?

Fraud is a deceptive action or procedure of actions which are done intentionally to provide the culprit with a gain or result in withhold lawful rights of a person or community or organisation. There are many types of frauds such as credit card fraud, online banking fraud, bankruptcy fraud, tax fraud, security fraud and wire fraud.. The illegal practices can be undertaken by an individual, group, or whole business. (SOURCE: https://www.investopedia.com/terms/f/fraud.asp)

How are frauds committed?

Fraud is committed by either hiding the facts or manipulating the crucial information or making false statements. These actions are undertaken with the aim of gaining befits which may not be achieved without fraudulent activities.

The criminals have access to some information which the victim does not have, resulting in duping the victim. Chiefly, firms or individuals committing fraud have the upper hand over victims due to information asymmetry. The investment in technology for verifying and reviewing information related to the people involved in the process will result in the prevention of most of the frauds.

When are the legal actions taken against fraud?

The victim sues the criminal to recover the duped funds or sue the perpetrator to re-establish the rights, even if the monetary loss did not take place. If the following actions are committed by the perpetrator, then legal actions are taken against the criminal:

  • The criminal has provided a false statement in the form of fact.
  • The criminal has full knowledge that the statement provided to authorities was not true.
  • The criminal intended to dupe the victim.
  • The victim provides the evidence that the victim was relying on the information and facts provided by the criminal.
  • Lastly, the victim has encountered a loss in form of monetary loss or loss of basic rights.

What is Financial fraud?

When a person or organisation harms the financial health or deprives a person of their money through legal practices, deceptive behaviour, or misleading the person, it is called financial fraud. Financial frauds take place through various activities such as investment frauds, or identity theft.

The money lost due to fraud cannot be recovered under many compensation programs. The funds lost may be recovered by civil justice.

The victim should report the crime to law enforcement bodies or the appropriate agencies at the earliest irrespective of the expectations of recovering the money lost. The documents required for reporting the fraud are bank statements, tax statements, credit reports, and regularly update the information to the authorities. (SOURCE: https://cleartax.in/g/terms/financial-fraud)

When are the Types of frauds?

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Identity Theft

When personal information like bank account information, social security number, credit/ debit card information, and name are stolen by someone, then identity theft takes place. Through identity theft, the criminal assumes the victim’s identity and gain access to the accounts and conducts multiple transactions to drain the funds.

Following are the signs that identity theft has occurred:

  • Amount is withdrawn from the account and the transaction is not undertaken by the owner.
  • The messages or mail from the bank stops as the criminal might have changes the phone number or email id.
  • Unfamiliar transactions are reported on the bank or credit statements.
  • When a data breach takes place in the banking institution or the organisations a person is affiliated with.

Actions that can protect the victim from further loss during identity theft include going through the Federal Trade Commission’s (FTC) website that provides the instruction which should be undertaken by the victim of identity theft and recover the amount and identity. Firstly, the victim should contact the organisation through which the fraud might have occurred followed by freezing the account and changing the security PINs and login password. The theft should be immediately reported to the local police or on the FTC’s website.

Mortgage Fraud

The fraud is majorly carried out by mortgage professionals or real states. The fraudster might open a loan account by using someone’s personal information. In few cases, the loans are pushed to the customers with false information or creating high pressure to buy a loan.

Following are the signs that mortgage fraud has occurred:

  • Payments are requested before providing the services.
  • Loan modification is promised in the future.
  • When payment is transferred to third-party account instead of the service providers.
  • The process of loan buying, or property deals is slower.
  • The service providers do not extend complete information or deny answering some of the questions.
  • Sudden enforcement to sign a document.

Debit/credit card fraud

After the loss of debit/credit card, the fraudster gains an access to the personal information and utilise to drain the funds, then fraud occurs. The amount duped depends upon the card limit. Following actions can raise the red flags in the context of fraud:

  • The transactions are not recognised by the card owner.
  • Small transactions have taken place in the past.
  • The transactions might be taken at a distant place or payment is made to an unrecognised organisation.
  • A significant fall in the reported in the bank statement.

Charities fraud

Fake charities ask for the donation for a cause, but instead, the money is used by the organisation of person for their personal advantage. To protect oneself from charity fraud, it is necessary that people check before making the donation.

Federal Trade Commission has listed down the signs which indicate the charity fraud might take place in the future.

  • A person from the organisation will give a visit to collect the amount.
  • The organisation forces to make payment only in cash or through wire transfers.
  • The organisation might utilise the name which sounds like top authentic charity firm.
  • The charity organisation information is not available on the government sites like Charity Navigator.
  • The organisation might create pressure to make payment in a short time.
  • Charity organisation might ask for personal information.

Ponzi scheme (Investment fraud)

The organisation promises the victim a higher rate of return for low risk. In this scheme, the organization uses the investment of a new investor to pay a return to the previous investor. It is also called a pyramid scheme as new investors’ funds are paid to past investors. The fraud intensifies when the new investors are not located by the organization.

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What is Data Mining? Data mining is a process that facilitates the extraction of relevant information from a vast dataset. The process helps to discover a new, accurate and useful pattern in the data to derive helpful pattern in data and relevant information from the dataset for organization or individual who requires it. Key Features of data mining include: Based on the trend and behaviour analysis, data mining helps to predict pattern automatically. Predicts the possible outcome. Helps to create decision-oriented information. Focuses on large datasets and databases for analysis. Clustering based on findings and a visually documented group of facts that were earlier hidden. How does data mining work? The first step of the data mining process includes the collection of data and loading it into the data warehouse. In the next step, the data is stored and managed on cloud or in-house servers. Business analyst, data miners, IT professionals or the management team then extracts these data from the sources and accordingly access and determine the way they want to organize the data. The application software performs data sorting based on user’s result. In the last step, the user presents the data in the presentable format, which could be in the form of a graph or table.         Image Source: © Kalkine Group 2020 What is the process of data mining? Multiple processes are involved in the implementation of data mining before mining happens. These processes include: Business Research: Before we begin the process of data mining, we must have a complete understanding of the business problem, business objectives, the resources available plus the existing scenario to meet these requirements. Having a fair knowledge of these topics would help to create a detailed data mining plan that meets the goals set up by the business. Data Quality Checks: Once we have all the data collected, we must check the data so that there are no blockages in the data integration process. The quality assurance helps to detect any core irregularities in the data like missing data interpolation. Data Cleaning: A vital process, data cleaning costumes a considerable amount of time in the selection, formatting, and anonymization of data. Data Transformation: Once data cleaning completes, the next process involves data transformation. It comprises of five stages comprising, data smoothing, data summary, data generalization, data normalization and data attribute construction. Data Modelling: In this process, several mathematical models are implemented in the dataset. What are the techniques of data mining? Association: Association (or the relation technique) is the most used data mining technique. In this technique, the transaction and the relationship between the items are used to discover a pattern. Association is used for market basket analysis which is done to identify all those products which customer buy together. An example of this is a department store, where we find those goods close to each other, which the customers generally buy together, like bread, butter, jam, eggs. Clustering: Clustering technique involves the creation of a meaningful object with common characteristics. An example of this is the placement of books in the library in a way that a similar category of books is there on the same shelf. Classification: As the name suggests, the classification technique helps the user to classify and variable in the dataset into pre-defined groups and classes. It uses linear programming, statistics, decision tree and artificial neural networks. Through the classification technique, we can develop software that can be modelled so that data can be classified into different classes. Prediction: Prediction techniques help to identify the dependent and the independent variables. Based on the past sales data, a business can use this technique to identify how the business would do in the future. It can help the user to determine whether the business would make a profit or not. Sequential Pattern: In this technique, the transaction data is used and though this data, the user identifies similar trends, pattern, and events over a period. An example is the historical sales data which a department store pulls out to identify the items in the store which customer purchases together at different times of the year. Applications of data mining Data mining techniques find their applications across a broad range of industries. Some of the applications are listed below: Healthcare Education Customer Relationship Management Manufacturing Market Basket Analysis Finance and Banking Insurance Fraud Detection Monitoring Pattern Classification Data Mining Tools Data mining aims to find out the hidden, valid and all possible patterns in a large dataset. In this process, there are several tools available in the market that helps in data mining. Below is a list of ten of the most widely used data mining tools: SAS Data mining Teradata R-Programing Board Dundas Inetsoft H3O Qlik RapidMiner Oracle BI

Identity Theft, also known as identity fraud, is a fraudulent activity in which the imposter gathers personal details of an individual to mimic someone else.

What is Online Banking?  Online banking is a process of undertaking banking transactions via the internet; hence it is also known as internet banking or net banking or web banking or digital banking. Through the electronic payments system, users are enabled to access and perform a wide range of financial and non-financial transactions without the need to visit the financial institution's branch. GOOD READ:  Australian Banking Space Amidst Virus-Induced Volatility; Digitalisation Turning Over a New Leaf What is the Significance of Online Banking Viz-a-Viz Traditional Banking? Online banking offers most of the services which are traditionally offered at the local branch. Users can check account details, access fund transfer and undertake tax payments. Apart from the essential services, users can also avail PPF and other insurance-related facilities, credit card and other such payment services, government schemes, etc.  All these services are available on internet banking outside the regular banking hours, which is why online banking seems to be most convenient for the users. Net banking is considered more comfortable and often less expensive as well.  Most of the brick-and-mortar banks now offer online services. Besides, the online-only banks or Neobanks are also growing in number and popularity because of the increase in demand. Moreover, for any user, it is essential to understand if the net banking experience is right for the needs and specifications. ALSO READ: Banking And Fintech Collaboration: Does The Road Less Travelled Hold Potential? How Does Online Banking Work?  Online banking can be undertaken via:  Accessing the official website of the particular bank on desktop/ computer or smartphone/ tablet Downloading the official mobile application of the bank like any other Android app or iOS app  Unlike traditional banking, users can avail online banking services as per their convenience. There is no need to visit the bank's branch physically. With the fast-moving life, online banking has turned out to be time saving as it can be done from the home, office or on the go - anywhere and anytime.  Below are some key steps involved in leveraging online banking benefits: To begin the services, the bank user needs to go on the bank website or download the mobile app.  Users need to register themselves on the website or the application using the unique id and password. Once the account is created, users can start accessing all the services it offers.  Banking services offered online may vary from bank to bank. Most banks provide the necessary services such as fund transfer, bill payments and viewing account details. Some banks also offer the customers to apply for credit card and avail insurance investment services which they have. Customers can also check the account balance without even logging in. Applying for a loan or making the loan payment can also be done through online banking.  What are the Benefits of Online Banking?  With the substantial growth of internet, everything has shifted to the electronic version. Just like one can shop online or trade online, users can bank online. People have access to various electronic gadgets such as laptops, phones, iPads, which make the banking experience one click away to conduct financial transactions.  Below are some of the key advantages associated with digital banking: The most significant advantage of net banking is - convenience. A lot many services can be availed anywhere, anytime, instead of going to the bank physically.  Online banking can also be done on holidays, which is something impossible in case of traditional banking.  Users can make a transaction without going to the bank counter. No need to fill the forms to deposit and withdraw money.  No need to abide by the working hours of the bank or worry about the weekend. Through online banking, the bank account and relative services are accessible 24x7.  Users only need the electronic device, internet connectivity and account details to access the services.  Banks also share the transaction summary and spending overview onlind. Users can understand where and how much money they have spent. It's easier to track the money trail and summarise the funds that come to your account and funds you are spending category wise.  The transactions are immediately updated and reflected, therefore making the experience very fast. Through net banking, users can also add multiple accounts of the same bank and keep track of them all simultaneously.  Bill payments can also be made online, which saves a lot of time for the users to go to individual entities to make the payments. Users can save on heavy penalties for not paying bills on time. With net banking, credit card bills can be paid on just one click.  The user-friendly experience makes net banking very painless and un-challenging to use.  Most banks have advanced encryption systems and robust cybersecurity in place, which makes online banking very safe to use.  What are the Risks Involved in Online Banking?  Online banking is not full-fledged banking; hence there are limitations with the services it provides. Especially for the first-time online banking customers, the systems may present a few challenges, which is why some people prefer transactions with the help of branch officers.  The baby boomer generation is not very technology friendly, hence they find net banking challenging.  Although most of the banks have robust banking security in place, they still face cybercrimes such as hacking and ransomware. Additionally, online banking is dependent on internet connectivity. Therefore, users who have the internet are only able to access the net banking. Low connectivity issues also make it challenging to conduct banking transactions successfully.  Because of the less awareness, users also fall prey to the online financial fraud and identity theft.  While accessing net banking, banks advise consumers to use their data plan instead of using public Wi-Fi networks to prevent unauthorized access and further damage. Besides, additional security measures are important to be considered while relying on digital banking. ALSO READ: Technology has changed the way we work amid the COVID-19 crisis: A look at in-demand technologies What are the Non-Traditional Neobanks?  Neobanks are the financial institutions which operate purely online. Neobanks are also referred to as smart banks. The growing demand for digital banking has paved the way for neobanks. These banks are accessed through their applications on smartphones/computers.  Traditional banks have branches, but neobanks do not have a physical infrastructure apart from their office. Neobanks also have a different technology from the conventional banks as they solely operate online such as they are based entirely on the cloud, and the technology is built from scratch.  It is essential to understand that the traditional banks which offer online/ net banking services are not neobanks. Neobanks are entirely different entities and operate exclusively online.  GOOD READ: A look at Neobanks and tale of this Self-Styled Neo-lender, Wisr

Sarbanes-Oxley Act gives protection to the employees, shareholders and the general public from any fraudulence practices and error in accounting practices. It is passed in 2002 by the United States Congress to protect the accuracy of corporate disclosure, banned executive loans by the company and whistleblower job protection. The act is created with the goal of better corporate governance and accountability. For the same, it can hold the CEO of the company accountable to the faults in accounting audits.

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