The Annual Impact of Global Fraud Exceeds$1 Trillion
  • That's enough money to end poverty around the world.

    In 2011, the U.S. government spent that entire amount. Ending world poverty would only take 5.1% of that.3

  • We could fund cancer research.

    The National Cancer Institute has spent $90 billion on research and treatment over
    the last 40 years.4

  • Ensure clean water supply and sanitation to the world.

    An evaluation by WHO shows that to supply water to unserved nations would
    cost $22.6 billion.5

Fraud Then and Now

Milestones from the Frontier to the Future.


Step Right Up!

Early fraudsters included snake oil salesmen and other peddlers of patent medicines that were purported to cure all types of ailments.6


The Phony Express?

Congress enacts the Mail Fraud Statute to combat a post-Civil War outbreak of swindles using the mail.7


Calling All Fraudsters

The invention and eventual widespread use of the telephone eliminated the need for face-to-face contact, opening the door for new types of scams.8


Insurance Shop of Horrors

In what may be the earliest high profile case of life insurance fraud, Chicago serial killer H.H. Holmes staged deaths of stolen cadavers and then murdered at least 27 people (many in his custom-built castle-like residence) to collect on their life insurance policies.9


Deceptive Dialing for Dollars

As a precursor to modern day identity fraud, perpetrators would assume the identity of another person, and then call a bank to request a wire transfer from the victim’s bank account. 10


No Payment, No Service!

To combat a common crime of the day, Volney D. Cousins of the American Telephone and Telegraph Company (AT&T) filed for and was granted a patent for an “improvement in Fraud-Detecting Telephone Toll Systems,” where users were prevented by Cousins’ device of evading payment by connecting a ground to the line independently of the coin box 11


The Original Ponzi Scheme

Charles Ponzi initiated what has become the namesake of fraudulent investment operations, where organizers lure investors with the promise of exceptional returns, but then pay returns — and themselves — out of diverted funds rather than profits. 12

1933 — 1934

Black Tuesday Backlash

In partial response to reckless behavior leading to the Stock Market crash of 1929, Congress passed the Securities Act (1933) to “prohibit deceit, misrepresentations and other fraud in the sale of securities,” followed by the Securities and Exchange Act (1934), which created the Securities and Exchange Commission.13


Will the Real Hilda Whitcher Please Stand Up?

Hilda Schrader Whitcher became the first identity theft victim when her actual Social Security number was printed on “demo” cards included in the display pockets of wallets sold by a wallet manufacturer, which caused confused customers to use Hilda’s Social Security number as their own.14


First in Fraud Prevention

The first state insurance fraud bureau was created in North Carolina. 15


New Prescription: Felony

A mere 12 years after the Social Security Act was amended to establish Medicare, Congress passed Anti-Fraud and Abuse Amendments which increased the severity of penalties from a misdemeanor to a felony. 16


Taking Credit

Visa and MasterCard reported $110 million in losses due to fraud. (By comparison, that number is more than $5 billion today.)17


And you are...?

Identity fraud became a federal crime through the False Identification Crime Control Act of 1982 (P.L. 97-398), and it is codified at 18 U.S.C. §1028. 18


The Morris Worm

Robert Tappan Morris, a then undergraduate at Cornell University, became the first person convicted under the 1986 Federal Computer Fraud and Abuse Act for his introduction of the first Internet worm virus.19


The Internet: A World Connected

The culmination of much research from various contributors, the first true Internet browser was introduced in 1991, enabling us to efficiently navigate interconnected computer networks via the World Wide Web. The Internet is not only the most powerful communication medium to exist to date, but is arguably a huge boon for fraudsters, who can use it to inflict significant damage without ever leaving their computer monitor.20


Point, Click and Pilfer

The advent of e-commerce spurred the emergence of new types of credit card fraud that involved the Internet. 21


Identity Theft Costs Increase

Costs from identity theft, which is a component of identity fraud, increased to $745 million. 22


A Federal Offense

Identity theft was designated a federal crime via the Identity Theft Assumption Deterrence Act (P.L. 105-318). 23


Take a Number

The Internet Fraud Complaint Center, a partnership between the FBI and NW3C, was established to “adequately identify, track, and investigate new fraudulent schemes on the Internet on a national and international level.” 24


Just What the Doctor Didn't Order

At $1.7 billion, the Columbia HCA case involved the largest ever settlement for health care fraud from the overbilling of Medicare and Medicaid. 25


I Swear...That Dent Wasn't There!

Bogus and abusive auto claims increased to between $4.3 billion and $5.8 billion. 26


The Growing Epidemic

According to a study by the Federal Trade Commission, identity theft impacted 3.25 million Americans, costing consumers about $5 billion year, and $50 billion for businesses. 27


A Modern-Day Ponzi Scheme

Bernie Madoff was arrested. His $65 billion Ponzi scheme is considered the largest stock fraud (and largest accounting fraud) by an individual in U.S. history. 28


I'll Take a House with That Shady Loan

Losses from mortgage fraud were estimated at between $15 and $25 billion based on suspicious activity reports (SARs) from federally insured financial institutions. This figure does not even take into account fraudulent activity related to independent mortgage companies and other non-federally funded institutions. 29


Crooked Bumper, Crooked Claimant

The incidence of questionable insurance claims from staged automobile accidents rose nearly 50 percent from 2007, according to the National Insurance Crime Bureau. 30


Dubious Debits

Credit card and debit card fraud resulted in losses amounting to $5.3 billion in the United States ($11.27 billion globally).31


Record Medicare Fraud Ring Busted

Occurrence of one of largest Medicare frauds in modern history, totaling $450 million and involving 107 people, including health care providers, in seven U.S. cities. 32


Cyber Fraud Complaints Surge

Consumer complaints to the Internet Crime Complaint Center (formerly the Internet Fraud Complaint Center) totaled 289,874, with an adjusted dollar loss of $525,441,110. 33


Liar, Liar, House on Fire

Fraudulent property and casualty insurance claims amount to $32 billion/year. 34


Password, Please

Account takeover fraud hits a new high and comprises 28 percent of all identity fraud losses (totaling $5 billion), with highest increases among utilities and mobile phones. 35


Charting the True Cost of Fraud

Merchants lost, on average, 0.68% of revenue – a 33% greater proportion than the previous year, and incurred more costs in addition to their fraud losses, with each dollar of fraud costing them $3.08, compared to $2.79 in 2013. 36

2015 And Beyond...

The Future of Fraud

Fraudsters have not changed much over time. The snake oil salesmen of yesteryear are not fundamentally different from those who commit online phishing schemes today. Globalization, improvements in infrastructure and changes in technology – particularly the advent of the Internet – have aided the modern fraudster’s cause.

As we move into the next decades, it remains to be seen how fraud will evolve to accommodate emerging computer network architectures and forms of data management, virtual currencies, identification technologies, and other real or prospective technological or cultural advancements.

If anything, fraudsters will continue to become more organized and sophisticated and inflict greater amounts of damage as they adapt their schemes to society’s developments.

A Prolific Problem

The Impact of Fraud by Industry.

LEXISNEXIS Risk Solutions

A New Solution to the Fraud Problem

Fraud has become more pervasive and costly over time, and today’s criminals are more savvy and sophisticated than ever before, with some fraud schemes affecting multiple organizations – or even multiple industries. Learn about a new way to approach the fraud problem. It’s the LexisNexis® Fraud Defense Network, and it brings together professionals and organizations for the first ever cross-industry fraud prevention effort.

For more information, visit,

or call

Toll Free: 844-AX-FRAUD (844.293.7283)


  1. Kaspersky Lab "Global IT Security Risks 2014 - Online Financial Fraud Prevention"
  2. Kaspersky Lab "Global IT Security Risks 2014 - Online Financial Fraud Prevention"
  3. Jeffrey D. Sachs "The End of Poverty: Economic Possibilities of Our Time" (New York: Penguin Press, 1996)
  4. National Cancer Institute
  5. World Health Organization "Global Costs and Benefists of Drinking Water Supply"
  6. History of Patent Medicine: Patent Medicine Exhibit: Hagley Museum and Library. Hagley Museum and Library, n.d. Web. "Browse the Exhibit"
  7. "In the Nation’s Service: A Chronology of the United States Postal Inspection Service." In the Nation’s Service. n.d., Web.
  8. “Special Exhibit: Communications”: The Telecommunications History Group, Inc., n.d., Web.
  9. Bartlow Martin, John. "The Master of the Murder Castle." Editorial. Harper's Magazine Dec. 1943: Web. .
  10. "The History Of Wire Fraud." n.d., Web.
  11. U.S. Department of Commerce. United States Patent and Trademark Office. Cousins, Volney D. Fraud Detecting Telephone System. US Patent 1,222,077, filed March 2, 1916, and issued April 10, 1917
  12. Zuckoff, Mitchell. Ponzi’s Scheme: The True Story of a Financial Legend. New York: Random House, 2005.
  13. "Federal Securities Laws." Securities and Exchange Commission, And Bumgardner, Larry, J.D. "A Brief History of the 1930s Securities Laws in the United States – And the Potential Lesson for Today." Unpublished Manuscript, n.d. Available here:
  14. Biegelman, Martin T. Identity Theft Handbook: Detection, Prevention, and Security. Hoboken, N.J.: John Wiley and Sons, Inc., 2009., p. 14
  15. Coalition Against Insurance Fraud, Study of State Insurance Fraud Agencies, 2011.Web. .
  16. Congressional Research Service. Health Care Fraud: A Brief Summary of Law and Federal Anti-Fraud Activities: 97-895. Swendiman, Kathleen S., and O’Sullivan, Jennifer. Washington, D.C.: Library of Congress, Sept. 24, 1997. Available here:
  17. "Credit Card Fraud." LawyerShop Site., n.d., Web.
  18. False Identification Crime Control Act of 1982, HR 6946, 97th Congress. No. 97-398, 96 Stat. 2009 (Dec. 31, 1982), adding 18 U.S.C §§1028, 1738. Available here:
  19. Silverman, Jacob. "10 Famous Hackers and Hacks”: Discovery Channel,, Web.
  20. Peter, Ian. “History of the World Wide Web”: Net History, 2004. Web.
  21. "Fraud Library - History of Credit Card Fraud." The Fraud Practice, 2011. Web.
  22. U.S. Department of Justice. Identity Theft: A Fast-Growing Crime. FBI Law Enforcement Bulletin, Volume:69 Issue:8; Edited by John E. Ott. Rockville, MD, August 2000. Abstract found here:
  23. S.R. 105-274. The Identity Theft and Assumption Deterrence Act of 1998, S 512, HR 1813, 105th Cong., 2nd session, Congressional Record 144, Issue 139: H9993-9998 Available here:
  24. U.S. Justice Department press release from June 26, 2003 summarizing terms of criminal and civil settlement.
  25. Subcommittee on Technology, Terrorism, and Government Information. Examining the Incidence of Cyber Attacks on the Nation’s Information Systems, Focusing on Removing Roadblocks to Investigation and Information Sharing. 106th Congress, 2nd sess., March, 2000. Judiciary Committee Print 106-839. Available here:
  26. Coalition Against Insurance Fraud, Auto Insurance Statistics, Source: Insurance Research Council, Nov. 2008, Web. .
  27. Federal Trade Commission Identity Theft Survey Report, Prepared by Synovate, McClean, VA, Sept. 2003
  28. Honan, Edith and Wilchins, Dan; “Bernard Madoff arrested over alleged $50 billion fraud.” Reuters, Dec. 12, 2008.
  29. Source: U.S., Department of Treasury ’s Financial Crimes Enforcement Network ( FinCEN ), FBI, TowerGroup, as reported in the LexisNexis Mortgage Asset Research Institute (MARI) 11th Annual Report to the Mortgage Bankers’ Association; Butts, Jennifer and Donahue, Michelle; March 2009, p. 7.
  30. “Staged Accident Questionable Claims Up 46 Percent from 2007-2009,” National Insurance Crime Bureau, May 2010, Web.
  31. The Nilson Report, Issue 1023, Aug. 2013. Read a summary here:
  32. Cunningham, Paige Winfield; “Authorities uncover $429 million in Medicare fraud.” Washington Times, Oct. 4, 2012.
  33. Internet Crime Complaint Center, 2012 Annual Report, National White Collar Crime Center, 2013. Available here:
  34. “Up Front.” Insurance Information Institute, Oct. 2014, Web
  35. 2014 Javelin Strategy and Research Identity Fraud Report, May 2014. Available here:
  36. 2014 LexisNexis® True Cost of FraudSM Study; August 2014, p. 6. Available here: