Business Fraud: Pyramid Schemes, Tax Fraud and Money Laundering

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Business Fraud

Business fraud basically involves acts that are a breach of ethics and integrity in a business environment. According to Investopedia, business fraud is any activity undertaken, unethical or illegal in most cases that gives an unfair advantage to the undertaker of the action (Investopedia). Action Fraud, a “fraud report center” in the UK reports businesses of all sizes are vulnerable to fraud and as much as 25% of SMEs in the UK fall victim to fraudsters (Action Fraud).

This paper discusses three common types of business fraud, which include Pyramid schemes, tax fraud and money laundering. Business fraud is highlighted by illegal and unethical business behavior which is very serious in the business world and calls for very punitive measures like lengthy jail sentences, being blacklisted in business and end to very promising careers.

Pyramid Schemes

These are business fraud cases that involve the perpetrators pitching a false or non-existent business to unsuspecting investors who they convince to invest in this business with an apparently huge potential for high returns in the short run. The perpetrators also convince those who have invested in the “business” to recruit others as well. The scheme is successful at first because the perpetrators use new cash flowing in as investment to pay off those who invested earlier. However, this model is not sustainable because the investors tend to grow exponentially until a level when not enough money is raised to pay off all those who invested earlier (SEC, 2013).

It is apparent that pyramid schemes are marketed as investment opportunities with very high potential for huge turnovers in a short time span. This is the reason why so many people buy into these ideas. Th...

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...On Hispanic Community." Www.sec.gov. 11 Dec. 2007. US Securities and Exchange Commission (SEC). 19 Feb. 2014 .

Sharma, Shantanu N. "How is money laundering done and why is it a difficult crime to commit?" 5 Aug. 2012. EconomicTimes IndiaTimes. 19 Feb. 2014 .

Stock, Stephen, Julie Putnam, and Jeremy Carroll. "Inmate Tax Fraud: $100 Million Crime." Www.nbcbayarea.com. 5 Apr. 2013. NBC Bay Area. 19 Feb. 2014 .

Viswanatha, Aruna, and Brett Wolf. "HSBC to pay $1.9 billion U.S. fine in money-laundering case." 11 Dec. 2012. Reuters. 19 Feb. 2014 .

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