Got Fraud? The Thief Could Be Someone You Know

For many years I was a fraud investigator, researching cases of fraud after the fact.  My job was to find out who committed the fraud so we could report them to the police, or try to get the money back for the bank.  It was an interesting job.  And it opened my eyes.

I spoke to thousands and thousands of victims of fraud over the years.  I interviewed them, always asking the same questions.

  1. Do you still have possession of your cards?
  2. Do you know anyone that might have had access to your bank account?
  3. Did you have any recent visitors in the house?
  4. Do you know anyone that goes to those merchants frequently?

I recorded their answers in detail and kept records of the responses.  Over the years as I poured through the data and thought back over my conversations, I realized something very important.  I realized that when someone was a victim of fraud, we would oftentimes figure out at the end of the investigation that it was someone that the knew that perpetrated the fraud.

I would always ask the same questions to victims of fraud because many times they would help me understand who might have committed the crime against them.  Unfortunately, I would find many times it was committed by someone they know.

When Fraud Occurred 40% of the time, the Victim Knew the Perpetrator

It is sad.  Most of my investigations during those years revealed a shocking statistic.  About 40% of the time we would find out that when a credit card was used fraudulently, that the perpetrator of the fraud was either a family member, friend or guest in the house.

We called it “Friendly Fraud” but it wasn’t so friendly.  In fact it was some of the worst fraud because it often crushed the people I was trying to help to find out that someone that they knew and trusted could do something so horrible to them.

And the financial impact of friendly fraud is pretty outstanding, costing the industry close to $11.8 Billion a year according to a Visa study.  This is an interesting article I read on it – Friendly Fraud is an $11.8 Billion Dollar Problem.

Key Factors I Found Associated with Friendly Fraud

Pretty soon, I began to notice the patterns of friendly fraud.  I was able to open up new case files and immediately the hair would stand up on the back of my neck.

There were some patterns that evolved and these were the big ones:

  1.  Small ATM Charges – When I saw that customers had many smaller dollar ATM charges $200 or less over many days it was almost always involved in friendly fraud.  Sadly most of the time I would find out that a drug addicted family member or friend was stealing from the victim.  You see, fraudsters always take out maximum cash withdrawals because they do not know how soon the customer will notice and report.  Friendly fraudsters take out smaller withdrawals because they always want to put the cards back without being noticed.
  2. Elderly Consumer – If a banking customer was over 75 and fraud occurred close to their homes, it almost always ended up being a son, daughter or grandchild that was abusing them.  I don’t know why, but this type of elderly abuse was rampant.  Sadly, the elderly grandparents would never ever press charges and always ended up paying the bills.  What made it even more tragic is that the fraud would then continue indefinitely until the account was maxed out.
  3. Embarrassing Charges – I would often find that certain types of activity were disputed as fraud but we would often find that the customer or someone they knew in the house had used their card.  These include charges for adult industry digital services, escort services or very high bar bills in seedy locations.  Many time customers had to claim fraud so that something the did was not discovered by their other family members.
  4. Fraud Occurring Over Many Days – Most credit card fraud has a lifespan of less than 2 hours.  Some cases may stretch into 2 days if they go undetected by the bank.  When we saw fraud schemes that occurred over more than 7 days, there was a high likelihood that the fraud was perpetrated by someone the customer knew.

Key Reasons Why Banks Might Deny Your Claim if Friendly Fraud is Involved

It’s important for consumers to realize that if someone you know committed the fraud, it might cost you more than if it was a complete stranger.

If son or daughter committed the fraud– If a son or daughter used your card without permission and you are responsible for them, the bank may scrutinize your claim and not reimburse you.

If you loaned your card and the person used it for more than you allowed – If you loaned your card to someone you know to purchase groceries and they went out and bought $10,000 in jewelry, you will be held responsible because you knowingly gave your card out.

If you give your card to someone to make a small purchase and they later make a purchase for $10,000 worth of jewelry your bank might hold you responsible due to “implied consent”

If someone used your card years after you loaned it to them – Even if you gave your card to someone 2 years ago and they came back and used it again the bank may hold you responsible under the notion of “implied consent”.   The person could argue they thought they could use it because you had let them before.

If it’s someone you know and won’t press charges –  If someone you know used your card and you refuse to press charges, or sign an affidavit or file a police report the bank may determine that they will not reimburse you.

If a husband or wife uses your card without permission – Disputes occur in divorces all the time but in certain states if your husband or wife uses the card without your permission they may still hold you responsible under “community property.

Never Give Your Card Out, Never Write the PIN on the Card

There are a few ways to stop friendly fraud.  The two best pieces of advice I can give are; 1) never give your card to anyone ever, and 2) don’t write your PIN number on the card.

These are the two most common ways that I saw friendly fraud occur.

I hope you enjoyed the post, please feel free to reach out if you have any questions for me.