Financial fraud: article of the Criminal Code, responsibility

Achieving enrichment using illegal methods and schemes is called fraud. Financial crimes are understood as acts that encroach on legal relations in education, distribution and use of the finances of the state, business entities, and citizens.

Types of financial crime

Fraud is not a one-time act, it is a series of thoughtful actions leading to one’s own enrichment at the expense of other people's funds.

The following types of criminal activity.

• Trading insider information. Using classified data to manipulate the value of securities.
• Fraud with accounting documents, management reporting. Entrepreneurs misrepresent reporting to conceal income or tax evasion.
• Opening of enterprises engaged in illegal activities. A common type of scam is financial pyramids.
• Credit fraud. Getting a loan by providing false information or withholding important data.
• Frauds with citizens' data, including in the Internet space. The most popular scam is called the “Gift of Fate”. It consists in the fact that the scammer, using your personal data, informs you that you have become the owner of a prize or inheritance. To receive money, you just need to provide your bank account or card details, or the obligatory payment for the proposed details has been transferred. You will transfer funds, but you will not receive the promised remuneration.

Financial crimes are carefully thought out. In one, several types of financial fraud can be combined. For example, when illegally obtaining a loan, unauthorized use of personal data and fraud with financial statements occur simultaneously.

Signs of Fraud

All financial scams have similar signs:

• deceitful actions;
• unlawful seizure of another's property, including the acquisition of rights to it;
• distortion of information;
• breach of trust.

What is a financial pyramid?

Signs of financial pyramids:

• one hundred percent promise of a stable good income;
• payments to participants at the expense of the proceeds of new investors;
• distortion of information on the financial situation, on the activities of the company;
• lack of the right to conduct activities to raise funds of citizens;
• short working life of the company (average working period from one quarter to six months);
• aggressive media advertising.

Types of financial pyramids

The typology of financial fraud directly resonates with the main types of existing financial pyramids:

• A financial organization that offers to develop by continuously attracting new investors from the virtual space (network marketing). The expansion of the Internet space, social networks creates fertile ground for the prosperity of companies built on the principle of pyramids. A striking example is MMM, which affected millions of Russian citizens.
• A company offering to invest in non-existent or doomed projects.
• A pseudo-professional participant in the Forex market advertising activities on trading floors under special conditions.
• A pseudo-credit organization (microfinance organization or pawnshop) that carries out financial fraud with loans and promises to solve any client problems with obtaining, refinancing or co-financing a loan.The company undertakes for a certain percentage of the loan amount to resolve the issue with the termination of the loan agreement and the full repayment of accounts payable. Having received the client’s money, the pseudo-credit cooperative terminates any cooperation with him and does not fulfill his obligations to repay the loan.
• A pseudo-famous company posing as a well-known brand.

History of financial pyramids

The first pyramid was organized by Charles Ponzi in 1919. In his company, people were promised an increase in capital by one and a half times in forty-five days.

The second largest enrichment scam was a woman - Don Branca, who opened in 1970 a bank that promised depositors incredible interest income. The bank went bankrupt after almost fifteen years of existence.

In 2005, three thousand participants lost their savings as a result of the collapse of the Double Shah pyramid in Pakistan.

In Russia, there were three outbursts of the most popular type of financial fraud for our country, namely the creation of pyramids:

• 1990s - the creation of classic pyramids;
• 2008-2009 - the creation of investment companies doomed to failure;
• From 2010 to the present - the creation of credit cooperatives, the active work of financial market participants.

Insider Trading

Market manipulation, the use of insider information (secret information about the bidder), the publication of which affects the quotes of securities, is regarded as fraud in the financial market.

Securities traders should always consider the risk of being tricked by market manipulation and illegal use of classified information.

Fraud protection

Scammers come up with more and more new methods of involving people in their criminal designs. The legislative power that develops laws cannot always protect private investors and citizens from the risk of being drawn into criminal schemes. People should expand their financial knowledge, exercise prudence, vigilance and be reasonable when placing their savings. As a rule, citizens independently and voluntarily transfer to the criminals their money, property or rights to it.

In which case to apply for financial fraud to law enforcement agencies? This is necessary if:

• In the organization where the funds are invested, there are signs of financial pyramids.
• Invested funds are not returned to the investor in a timely manner due to financial frauds.
• Lost property or right to it as a result of financial fraud.

Articles of the Criminal Code

The state provides liability for crimes in the financial sphere as acts recognized as unlawful and causing material damage to persons and organizations. According to the Criminal Code of the Russian Federation, financial fraud is punished depending on the gravity and corpus delicti, the presence of extenuating circumstances.

Articles of the Criminal Code of the Russian Federation provided for financial fraud:

For financial fraud, the article provides for real imprisonment from two to ten years:

The question of what measure of responsibility will be applied in a particular case is decided by the judge during the judicial proceedings. The real term for financial fraud can be up to two years under paragraph 1 of the article and up to ten years under paragraphs 4 and 7.

Composition of a crime in fraud

To recognize the transaction as illegal, it is necessary to collect a full evidence base. In financial fraud, the corpus delicti is deceiving the injured party, misleading her, or abuse of her trust. Deception of a person can be active and consist in a special misrepresentation of the owner of the property by giving him inaccurate information. Non-reporting of legally significant circumstances is recognized as a passive deception of the injured party.

Bank Fraud

The most common crime in the banking sector is credit fraud:

• registration of credit loans to non-existent borrowers;
• obtaining loans without the knowledge of borrowers;
• loans forged documents (falsification of passports, income statements, accounting and management reports);
• obtaining loans withholding valuable information (non-reporting of information on existing obligations, including collateral, the availability of enforcement proceedings and so on).

Financial fraud with loans is characterized by the provision of false or false information to the institution with the aim of misappropriation of funds. Fraud in the banking sector, as a rule, is carried out with the participation of employees of banking institutions who have access to confidential information that opens up opportunities for fraudulent acts.

In addition to frauds with loans, there are other fraudulent schemes in the banking sector:

• transferring funds to incorrect or dummy accounts;
• unauthorized debiting of amounts from accounts of private and corporate clients;
• the use of counterfeit banknotes in exchange transactions.

Internet fraudsters

In modern times of intensive development of Internet technologies, scammers are actively exploring virtual space. Internet fraud is practiced in the following forms:

• unauthorized use of personal data of citizens (usually protective passwords) in order to assign their funds from virtual wallets, bank cards, accounts;
• frauds with virtual currency (bitcoins);
• breach of trust through electronic correspondence in the virtual space and requests to transfer funds to the indicated accounts of nominees.

Evidence of fraud, involvement in and complicity with it is an impossible task even for experienced lawyers and law enforcement officials. It depends on their qualifications whether the perpetrators will be punished and with which: penalties or imprisonment.

Committing any crime, the fraudster is surely guided by the psychology of people's behavior (desire to get rich quick, careless, trusting). Financial fraud carefully and diligently thought out. Experienced swindlers are able to deceive almost any citizen, lulling his vigilance.