How Financial Fraud Evolved and Is It Getting Worse?

Modern commerce has made wealth more accessible and brought economic prosperity throughout the world. However, not all financial boons are acquired through legitimate means. Unscrupulous individuals often resort to fraud to benefit themselves at the expense of others.

How has financial fraud changed throughout the centuries and how can we be more prepared in combating fraudsters in the 21st century?

Tale as old as time

One of the earliest instances of fraud ever recorded was in 300 B.C. and involved a Greek merchant named Hegestratos. He perished while attempting to sink his empty boat to unfairly take advantage of an insurance policy.

As decades, and generations passed, institutions and technologies evolved to facilitate more complex transactions. Of course, this did not deter individuals and groups from catching up with the times.

From the insider trading scandal of 1792 to the deviously clever scheme Charles Ponzi started in the 1900s, financial fraud rose to a whole new different level. As society continues to advance, so will the strategies of fraudsters.

The power of information in the information age

Whether it’s regular consumers or commercial entities, no one is exempt from becoming victims of financial fraud in today’s interconnected and world.

Image of a cute teenage girl posing with piggy bank.

Someone might claim to be a distant relative and ask for monetary support or a company’s computers containing sensitive financial information could get hacked.

More financial crimes are taking place online and criminals are constantly updating their infiltration and extraction methods. You can break them down into different categories. By becoming familiar with what takes place under these categories, you might be able to thwart fraudulent efforts:

  • Pre-Attack – Fraudsters identify their target and find weak spots they can exploit. They will prepare fake emails, outreaches and malware to test your defenses.
  •  Active attack – Fraudsters can deceive you into making an action such as purchasing or simply clicking through a bogus online link.
  • Post attack: Stolen information from your computer, cellphone or other devices are then used for a variety of nefarious purposes — from making transactions with your credit card to demanding a ransom for the return of your data.

Solutions to mitigate these risks range from paying for specialized insurance policies to using services like high-risk credit card processing. Beyond these specific counter-measures, there is a basic overarching framework that can help you become less susceptible to fraud:

  • Use technology to your advantage and verify information sent to you
  • Talk to people you know and trust and ask them to help you verify
  • If you’re not sure about someone’s credibility, avoid making a transaction with them
  • Don’t get too excited about free trials as these often involved the sharing of credit card information
  • Avoid going to questionable websites where your personal data is at risk

Where do we go from here?

It’s impossible to predict exactly how financial fraud will continue to evolve in the next 50 or 100 years. But no matter how shrewd or ingenious criminals become, people with plain old good intentions are also rising to the challenge.

You will often see strangers uncovering scams and publishing them on online platforms like Facebook and Twitter to inform the general public. Ethical hackers are helping consumers and companies better prepare for cyber attacks.

In addition, countries all over the world are recognizing these threats and investing more money in strengthening cyber security. The future isn’t all that bleak.

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