what is Fraud?

What is Fraud?

Learn about Fraud with Mukul Dev
YouTube video
Iski Topi Uske Sarr 1998

The scene shows Raj (played by Mukul Dev) visiting a jewelry shop. He is enamored with the necklace and immediately grabs the necklace box from the shopkeeper. The necklace costs Rs. 11,500 and Raj pays him Rs. 1,500 and says the balance he can collect from his sweet shop. Meanwhile, his friend Jai talks to the sweet shop owner and places an order of 10,000 ladoos (sweet).

Raj & the shopkeeper reach the sweet shop. Raj speaks to the sweet shop owner and says please give 10,000 to him. Jeweler happily sits to collect his 10,000. Chaos ensues when they realize he is talking about Rs. 10,000 while the sweet shop owner is talking about 10,000 ladoos. Raj and Jai absconded and made a profit of 9,500 on the necklace. In this blog, Learning Perspectives will explore the meaning of fraud.

What is Fraud?

Fraud is a deceptive act that is designed for unethical gain. In simple words, fraud is committed to unlawfully making a gain at the expense of someone else. Similar to the scene that you saw. Raj & Jai deceived both shopkeepers and in the process made a gain by stealing the necklace.

This scene was a small example of fraud. Large frauds are committed on a bigger scale. Enron, Harshad Mehta, and Satyam cases are large frauds that were committed and affected the economy of the country. These are done by falsifying records, and reports or creating fake entries.

Types of Frauds:

Financial or Accounting frauds:

These frauds are characterized by manipulating financial statements. This is done to create a false image of the company. It could either depict the good or bad health of the company to benefit some people. It can mislead all the investors, shareholders, lenders, employees, etc.

Insurance frauds are also quite common. These are conducted when a false claim is presented to the authority. If not proven then the claimant can receive the money. This is an insurance scam.

Ponzi schemes, and pyramid schemes:

These schemes are also fraudulent in nature. These schemes promise high returns to investors in a short period of time. Ponzi schemes manipulate investors and trap them to pay more for the scheme.

Money Laundering & Embezzlement:

Money laundering is a financial crime. It means making money through illegal ways and covering it up in such a way as to make it look ethical. Embezzlement is generally used in cases of theft or breach of trust. It is considered financial fraud.

Misappropriation of funds:

Misappropriation literally means unauthorized and illegal use. Misappropriation of funds can have serious consequences, it can cause imprisonment. The Indian Penal code 1860 (IPC), penalizes dishonest misappropriation of property, cheating, dishonesty inducing delivery, property, and forgery.

All financial frauds have consequences. Some may have a stricter punishment and some may only have a penalty. It depends on what kind of fraud is being committed.

Leave a Reply