Seven misconceptions about fraud and fraudsters


Alara Basul, head of content at Ravelin, a fraud detection firm, dispels seven common misconceptions about fraud and fraudsters.

Fraud has evolved dramatically over the recent years. Last year, The Guardian reported that the value of fraud committed in the UK topped £1bn for the first time since 2011, which prompted warnings about increasing cyber crime and the risk of more large-scale scams.

And there’s no doubt that fraud itself is a mysterious topic – fraudsters are assumed to be untraceable and all of their online activities are somewhat encrypted.

However, there are a lot of misconceptions around fraud and fraudsters in the industry. Here are 7 misconceptions that we’ve uncovered.

1. Fraudsters usually target larger companies rather than small businesses or  personal accounts

This is one of the most common myths we hear about fraud, and this is largely due to the bigger businesses making the headlines. Take Wannacry’s latest ransomware for example, or the latest Uber or Equifax breaches; these companies are of huge scale and are seen as a ‘typical’ target. Alongside these headlines however are several small businesses that have been affected by fraud and don’t make the big headlines.

According to The Small Business Report by Vocalink:

  • 71% of UK small businesses, that have been victims of payments related fraud, believe that it is now the biggest risk to their business
  • 71% also worry that it will be an even bigger issue for them in 2018.

Hackers know that businesses may not have the appropriate resources dedicated to cybersecurity, which could be a reason why small business are so aggressively targeted. And fraudsters will use a variety of methods, such as promo abuse or e-mail phishing to get an ‘in’, anyway they can. There are always new tricks and scams to get hold of account details, personal information and account details – no matter the size of your business.

Businesses big and small should always keep an eye out on accounts and emails to spot anything that may not look right. If you get an email confirming a new payment, or credit card, or even new account subscription, always check internally before submitting any information. We’ve spoken about the basics these tactics in a separate blog post if you’d like more information.

2. Fraud is a victimless crime

Many believe that fraud is victimless crime, where the responsibility is far too difficult to be tracked or simply will not be tracked back to the criminal. This is another false misconception.

Fraud is a national crime. Here’s a general snapshot of fraudulent crime compared to other, supposedly more ‘well known’ crimes.

Estimated number of incidents per year:

  • Bank and credit account fraud: 2,400,000
  • Breaking and Entering: 195,286
  • Drug Possession: 119,312
  • Theft from the person: 83,470

3. Fraudsters don’t fit a certain demographic

Ever wondered what a fraudster looks like? Well actually, they look just like everyone else.

Contrary to popular belief, there is not one definite type of person that fits the profile for a fraudster. Many believe that the typical fraudster will be extremely good at coding, hiding in an underground basement and be untraceable. This is not true.

Fraud comes in every shape and size.

4. Small amounts of fraud for a business doesn’t matter

When a business is first starting out, there is a general misconception that small amounts of fraud won’t really affect the company too much. Actually, even one small chargeback or case of account takeover can largely affect your finances and small amounts of fraud can escalated quickly.

According to Action Fraud: “Fraud affects 1 in 4 small businesses every year. Last year fraud losses to SMEs were estimated at £18.9 billion.” This is a hugely costly figure.

Philip Green, ex-CFO of Deliveroo believes building out a well-rounded team where the issue of fraud is addressed early on is key. “Run a lot of analytics within your team to identify fraud within your business.”

“There’s not enough proactive discussion happening on fraud – it only gets discussed when someone recognises a problem.”

5. Fraud requires a high degree of skill

This is another myth that we come across frequently. Nowadays, anyone can easily be a fraudster. You don’t need any credentials, training, or even experience. Anyone  can easily download a browser, go on the dark web and buy bulk stolen credit card numbers for close to nothing.

Doing this requires no risk and no real technical knowledge required. And it is not a risky business for the perpetrator.

For example, an Uber user misused a promo code that was meant for referring new users, and earned $50,000 in ride credits. He made his promo code publicly available on a Reddit page which resulted in many people finding the code using a Google search and creating new accounts just to get the extra discount.

6. Only criminals indulge in fraud

Fraudsters can be anywhere. Those robbing a bank in their spare time aren’t the only ones associated with fraud. Nowadays, fraud is available to everyone, more so than you would think. Ever downloaded a song illegally? Bought a counterfeit product? Posted a photo online without sharing ownership rights? Technically, you’ve committed fraud. But you’re not a criminal.

And did you know that there are hundreds of different types of fraud? There’s even work-from-home business fraud, where a false advertisement can lure people into believing they can make a lot more cash from quitting their jobs and working from home. These types of fraud are not committed just by criminals.

The misconception that fraud is only associated with criminals is untrue.

7. Banks pay for all the fraud losses

The common misconception that banks are liable for when fraud occurs is only partly true. If your bank account is compromised then of course the bank is liable. If your card is skimmed or the details compromised in a hack then the picture is more complicated.

If you see fraudulent transactions in your account then of course you contact your bank. In most cases the banks will compensate you. This process is called a chargeback. But the bank will take that money from the merchant account of the business where the fraud happened and charge the business a fee for doing so. The end result is more expensive goods for everyone as the businesses have to factor in the cost of losses to fraud into their overall pricing.