Types of Fraudulent Activities

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Types of Fraudulent Activities
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• A fraud could take the form of misstatement of an
  information or misappropriation of the assets of
  the entity. Components in a fraudulent activity
  include dishonest intention, Use of deception
  (trick), Personal advantage or loss to a third
  person, Financial/asset loss to an organization
  and may involve financial misstatements. A. Fraud
  for Personal Gain
• Bribery
• Money, gift or other favours offered to procure
  for illegal or dishonest action or decision in
  favour.
• 2. Conflict of Interest
• Circumstances wherein the officials are in a
  position of trust and in discharge of their
  duties face a competing professional or personal
  conflict of interest.Read more
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  tivities.htmlCopyright Taxguru.in

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• B. Corporate Frauds/ Irregularities
• Advance Billing
• A situation where the company officials indulge
  in booking fictitious sales in anticipation of
  actual sales. This results in misrepresentation
  of revenue in the books thereby misleading
  financers and stakeholders.
• 2. Shell/ Dummy Company Schemes
• A shell or dummy company represents a fictitious
  company or a paper company to transfer profits
  or funds from the main company. This could
  involve fictitious bills (mostly for services
  rendered or consultancy charges that cannot be
  corroborated) which are used in the name of dummy
  companies diverting the funds taken from banks
  and financial institutions.

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• 3. Money Laundering Activities
• The person indulging in money laundering looks
  for avenues with weak banking controls for
  converting illegal money through the banking
  system. This person indulging in activity looks
  for avenues to enter into benami (could be
  called name lending) transactions. Companies with
  extensive cash handling and inadequate
  identification process of source of money are
  susceptible to money laundering activities.
• C. Fraud at Operational Level by Employees
• Tampering of Cheques
• Tampering of cheques and in any digital mode of
  payment and activity that leads to
  misrepresentation such as payee name being
  altered, or preparation of cheques or payments in
  system without remittance or issue of the cheques
  to entitled payee, etc., are methods that may
  lead to falsification of accounts.The name of
  the payee in the cheque or other digital mode of
  payments issued for payment could be fabricated
  to wrongly codify and book against an improper
  account head. A person draws cheque or payment
  voucher in system fraudulently in his name or
  converts a cheque drawn on a third party to his
  advantage.Read more at https//taxguru.in/finan
  ce/types-fraudulent-activities.htmlCopyright
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• 2. Off Book Frauds Skimming
• In skimming the perpetrator misappropriates the
  cash before these are recorded in the books or
  before the sale. These frauds are difficult to
  detect as the cash or collection is taken off
  before the accounting entries are made in the
  books. This situation arises especially in
  unorganized markets and in rural economies where
  banking habits are relatively underdeveloped. The
  process gaps allow an employee to divert the cash
  collected to his personal account under the
  pretext of safeguarding cash.
• 3. Cash Larceny Cash or funds mis-appropriated
  after the accounting entries are already passed
  in the books is an age-old practice that has
  manifested into innovative means in the digital
  era.
• When there are delays in accounting of cash
  collections and there are no laid down cash flow
  controls. The cash/ collection shortage is
  covered up by declaring and accounting the
  shortage as cash/ cheque in transit.Read more
  at https//taxguru.in/finance/types-fraudulent-ac
  tivities.htmlCopyright Taxguru.in

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•  4. Teeming and Lading (Lapping) Cash deposits or
  cheques collected from customers are overlapped
  with the collections from subsequent customers
  and the amount collected is diverted to a
  personal account.
• 5. Expense Reimbursement Schemes Involve
  employees resorting to treating their personal
  expenses as incurred for business purposes and
  claiming reimbursement. For instances claiming
  medical or gift expenses that were not incurred
  or employees travelling together in a single cab
  but indulging in multiple claims
  individually.Read more at https//taxguru.in/fi
  nance/types-fraudulent-activities.htmlCopyright
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• 6. Payroll Fraud The payroll fraud could include
  payment to non-existent employees or in a
  contractual arrangement inflating the manpower
  resources than those deployed while billing the
  client. It may include showing higher pay than
  actual disbursement to employees/ workers, etc.
• 7. Commission Schemes Exaggerates the sales
  through fictitious billings to earn higher
  commission or alter the prices of the products
  sold from those stipulated by the company or
  share the sales volumes achieved with other
  employees to share higher commission. Tags
  fraudsRead more at https//taxguru.in/finance/t
  ypes-fraudulent-activities.htmlCopyright
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