What Are the Different Types of Fraud Investigation?

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  • Written By: David Bishop
  • Edited By: Angela B.
  • Last Modified Date: 21 January 2020
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Fraud is a criminal behavior that generally involves making a profit by lying or otherwise misrepresenting information. Common types of fraud include false advertising, tax evasion, investment schemes, identity theft and insurance fraud. A fraud investigation in the United States can be carried out by police or revenue agencies, insurance investigators or entities such as the Securities and Exchange Commission. In the U.S., penalties for criminal fraud may include fines and incarceration.

False advertising is a fraud perpetrated by a company on its customers and usually involves false or misleading marketing claims. This can be a serious criminal matter if the claims lead to consumers being harmed by a product. A fraud investigation involving false advertising in the U.S. is usually performed by the Federal Trade Commission (FTC). Consumers can also seek recourse for false advertising in the civil court system and may choose to participate in class action lawsuits if the fraud affects enough people.

Tax evasion is another type of fraud in which a person illegally attempts to avoid his or her tax liability. In the U.S., a federal tax fraud investigation is handled by the Treasury Department. Tax evasion may also involve state or local agencies if the fraud investigation concerns property or sales taxes.


Investment frauds such as Ponzi and pyramid schemes cheat many investors out of hard earned money each year. These schemes usually involve supposedly high-interest investment returns that are actually being paid out of the principle of the investors. Fraud investigations of this type can be handled by different authorities, depending on whether the scheme was enacted across state lines, and may involve the Security and Exchange Commission if investment rules were violated. These types of frauds can wipe out a victim's retirement and other savings.

Insurance fraud can take several forms. One simple insurance fraud involves someone filling a false claim of theft for a valuable item. More complicated auto insurance frauds require teams of criminals insuring vehicles that have already been damaged in accidents and then filing claims. Other unscrupulous people will fake injuries related to accidents or the workplace to collect on liability or workman's compensation. Insurance companies often employ special fraud investigators to monitor this activity and work closely with local law enforcement when there is evidence that a fraud has taken place.

Identity theft is a growing problem in the electronic age. Unscrupulous hackers acquire personal data and use it to steal money directly or engage in credit card fraud. These types of frauds can have a huge impact on a victim's credit rating. Electronic fraud is a serious criminal matter and is investigated by lending companies and federal and international police agencies.


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