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Financial Fraud

Financial fraud is taken very seriously by the government, and if you find yourself accused of these crimes, you’ll need to rely on a skilled attorney who understands the complex laws associated.

Whether you are dealing with large sums of money or everyday transactions, the financial industry is highly regulated as a form of protection. Every party involved is subject to a range of federal laws aimed at making sure dealings are fair, and no one suffers undue losses. Most of these laws center around fraud- when someone is deprived of money, capital, or financial health through deceptive or misleading practices.

What Is Financial Fraud?

In federal law, fraud generally refers to any sort of deception or misleading actions that cause a financial loss to another party, though it can also include non-financial losses. Across types of financial fraud, there is a common definition that includes both knowledge and intent.

In order for something to be considered fraud under these statutes, the accused has to have both known that they were misleading someone and had an intention of gaining something through their actions. Without both of these elements, a fraud case cannot be mounted.

Types of Financial Fraud

A wide range of crimes can be categorized as financial fraud. Below are some examples.

Identity Theft

One of the most well-known forms of fraud, identity theft, involves one person using another person’s identifying information without their permission. This may include names, social security numbers, credit card information, and other personal financial data. The information is used to commit fraud by spending money, applying for credit or other programs, filing taxes, or getting medical care.

Embezzlement

This white-collar crime involves a person who has been entrusted with money, property, or other assets who misappropriates or steals the resources and uses them for personal gain. This is common in the workplace, where an employee may have access to assets they do not legally own. Generally, embezzlement is considered fraud as well as a form of property theft.

Tax Fraud

Any individual or business who purposefully lies on, falsifies, or omits information from their tax filings is committing tax fraud in order to either get a larger refund or owe less money. This can also include claiming false deductions, like classifying personal expenses as business expenses, or not reporting all income properly.

Insurance Fraud

This form of fraud can happen in many ways and be committed by many parties. A claimant may try to secure an insurance benefit they are not entitled to, or an insurer can deny a benefit that is rightfully due to a claimant. Sellers can also sell fake or detrimental policies, while buyers can falsify medical history and other events. All of these actions have financial consequences for at least one other party.

Mortgage Fraud

Like insurance fraud, mortgage fraud can be committed by a number of people involved in the process of obtaining a mortgage. Applicants who lie in order to be issued credit are committing mortgage fraud, as are lenders who do not properly dole out funds. A common scheme involves appraisers who falsely inflate value and then get a cut of the profit, while others may include improperly flipping a house or failing to pay with the intent of foreclosure.

Money Laundering

Money laundering is a way of hiding funds, usually ones that were obtained illegally, by converting them to another form of money. The term refers to making dirty money clean in some way in order to disguise the source and often thwarting tax officials. In order to be considered money laundering, there has to be some form of criminal activity like organized crime at the source of the funds.

Racketeering

When organized groups run an illegal business, or a “racket,” or a crime ring uses legitimate organizations to embezzle funds, it is racketeering. This can include gambling, prostitution rings, drug trafficking, counterfeiting, embezzlement, and extortion. Other forms of fraud may include bank fraud, credit card fraud, securities and commodities fraud, and pyramid schemes.

Penalties for Financial Fraud

The federal laws that define fraud also define the penalties associated with each specific type of crime. Because these are taken seriously and sometimes considered crimes against the government, individuals can face lengthy jail sentences, heavy fines, and probation, along with restitution for any financial damage they cause.

These statutes usually dictate a maximum jail sentence and fine for each crime. For example, fraud committed by defrauding a bank or falsely obtaining assets, known as “bank fraud,” carries a maximum of 30 years in prison and a maximum fine of $1 million. These limits are set per individual act of fraud, which means they can often accumulate. In the case of something like identity theft, every swipe of a credit card that isn’t yours could be considered an individual act of fraud and assigned these charges.

Even if these sentences and fines are not imposed, probation is common in white-collar crimes, including financial fraud. Restitution will usually be ordered, and while not everyone can pay back the large sums of money involved in a crime, they may have wages garnered for the rest of their lives as part of these rulings.

Defense in Fraud Cases

While these charges are serious, financial fraud crimes have a number of legitimate defenses that can be employed by an experienced attorney.

It is first most important to be completely honest with your attorney during initial conversations. If you did commit an act of fraud, they need to know that information so they can help you minimize your consequences in court through legitimate defenses. Share all relevant documentation with them and help them understand the scenario in depth.

The statutes that define financial fraud usually lay out specific criteria that has to be met in order for someone to be found guilty. Proving a single one of those criteria wrong is generally enough to alleviate a fraud charge. Most lawyers will start with the knowledge and intent inherent to fraud. If you can show that you either were unaware of the deceit or did not intend to gain anything, this nullifies a fraud case.

Take embezzlement, for example. There are four elements of embezzlement that must be satisfied by the prosecution:

  • The defendant was in a position of authority that enabled them to commit the crime
  • There is evidence the defendant took, kept, hid, or used the asset without the knowledge and permission of its owner
  • The property was embezzled for the defendant’s own benefit
  • The defendant intended to permanently deprive a person or entity of the embezzled funds or asset

The defense will work to dismantle any of these elements enough to create reasonable doubt in the mind of the jurors. An absence of intent, insufficient evidence, good faith belief, or duress are all valid defenses that may be employed.

These complexities and forms of defense will be best understood by an attorney with a background in financial fraud and other white-collar crimes. In many cases, they can even prevent a trial from moving forward, negotiating a plea deal, or a dismissal of charges if the asset is returned. If there is any chance you may be charged with financial fraud, working with an expert from the beginning of your case can make a huge difference in outcomes.

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