Financial frauds have become a powerful foe in today's connected, digital world, lurking in the background of our daily lives. These misleading tactics, which range from sophisticated Ponzi schemes to cunning phishing emails and fake bursaries or grants to students looking to pay for university, prey on unwary people and result in both money losses and emotional suffering. No one is immune to the damaging impacts of financial frauds due to their exponential growth in breadth and sophistication. This essay delves into some of the complex network of financial fraud, uncovering its mechanics and illuminating the severe devastation it causes to people, families, and communities. 

From the objectives of Islam is the preservation of wealth, and as such Islam's perspective on the evils of fraud and scams is anchored in its text, the Quran and Hadith (Prophetic Tradition of Prophet Muhammed). Although modern terminology like "fraud" and "scams" are not mentioned in the Quran or Hadith specifically, they do contain teachings and warnings about the traits of scams, such as dishonesty, deception, and unethical financial practices. The following verses from the Quran and Hadith are pertinent:

1. Allah Almighty says:

وَلَا تَأۡكُلُوٓاْ أَمۡوَٰلَكُم بَيۡنَكُم بِٱلۡبَٰطِلِ وَتُدۡلُواْ بِهَآ إِلَى ٱلۡحُكَّامِ لِتَأۡكُلُواْ فَرِيقٗا مِّنۡ أَمۡوَٰلِ ٱلنَّاسِ بِٱلۡإِثۡمِ وَأَنتُمۡ تَعۡلَمُونَ١٨٨ [البقرة: 188]

And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful](188)¹

This verse emphasises the prohibition of wrongfully devouring wealth, which includes deceptive and unjust financial practices.

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2. And He says:

وَلَا تَأۡكُلُوٓاْ أَمۡوَٰلَكُم بَيۡنَكُم بِٱلۡبَٰطِلِ وَتُدۡلُواْ بِهَآ إِلَى ٱلۡحُكَّامِ لِتَأۡكُلُواْ فَرِيقٗا مِّنۡ أَمۡوَٰلِ﴿يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ لَا تَأۡكُلُوٓاْ أَمۡوَٰلَكُم بَيۡنَكُم بِٱلۡبَٰطِلِ إِلَّآ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٖ مِّنكُمۡۚ وَلَا تَقۡتُلُوٓاْ أَنفُسَكُمۡۚ إِنَّ ٱللَّهَ كَانَ بِكُمۡ رَحِيمٗا٢٩﴾ [النساء: 29]

O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves [or one another]. Indeed, Allah is to you ever Merciful(29)²

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3. And Allah says:

﴿وَيۡلٞ لِّلۡمُطَفِّ١

Woe to those who give less [than due](1)

ٱلَّذِينَ إِذَا ٱكۡتَالُواْ عَلَى ٱلنَّاسِ يَسۡتَوۡفُونَ٢

Who, when they take a measure from people, take in full(2)

وَإِذَا كَالُوهُمۡ أَو وَّزَنُوهُمۡ يُخۡسِرُونَ٣ [المطففين: 1-3]

But if they give by measure or by weight to them, they cause loss(3)

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"Woe to those who give less [than due], Who, when they take a measure from people, take in full, But if they give by measure or by weight to them, they cause loss."

These verses admonish individuals who engage in deceptive practices when measuring or weighing commodities, emphasising the need for trade fairness.

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In terms of the Prophetic Tradition there are several narrations connected to our topic of discussion, from them are the following:

1. The Messenger of Allah (peace be upon him) stated: "The buyer and the seller have the option of cancelling or confirming the bargain unless they separate, and if they spoke the truth and made clear the defects of the goods, then they would be blessed in their bargain, and if they told lies and hid some facts, their bargain would be deprived of Allah's blessings."⁴
2. And He (peace and blessings be upon him) said: "He who cheats is not one of us."⁵
3. And in the narration reported by Abu Hurayrah (may Allah ble pleased with him), he (peace and blessings be upon him) said: The Prophet (ﷺ) said, "Don't keep camels and sheep unmilked for a long time, for whoever buys such an animal has the option to milk it and then either to keep it or return it to the owner along with one Sa’ of dates."⁶
4. And He (peace and blessings be upon him) said: “Do not go out to intercept the riders for trade, do not urge a buyer to cancel a purchase already agreed upon in order to sell your own goods, do not artificially inflate prices; no town-dweller should sell on behalf of a Bedouin; and do not let milk accumulate in the udders of camels and sheep. Whoever buys them after that, he has a choice between two things, after he milks them: If he prefers, he may keep them, or return it to the owner along with one Sa’ of dates.⁷
5. And in the narration by Abdullah ibn Umar (may Allah be pleased with him), we are taught that a man told the Messenger (peace and blessings be upon him) that he was often deceived in transactions, and the Messenger (peace and blessings be upon him) said: “When you enter into a transaction, say: “Laa Khilaabah” (an Arabic phrase which means: There should be no deceit)”.⁸

These are just a handful of verses and Hadith that demonstrate Islam's position against deceitful and fraudulent financial practices. Islam commands honesty, transparency, and justice in all financial transactions and forbids and condemns any sort of deception or dishonesty, especially that which is damaging and harmful to others.

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Accordingly, the Fuqahaa (Muslim Jurists) are unanimous on the forbidden nature of fraudulent transactional and business activities in Islam, and as per the collective evidence in Islam, have established the following guidelines to preserve money and combat financial fraud:

1. Transparency: Muslims are expected to handle their money with honesty and sincerity. This involves being truthful in all financial transactions and following through on contractual responsibilities. Deceptive practices such as misrepresenting products or concealing flaws are prohibited. Sellers are expected to offer accurate product information. Fraudulent behaviour is considered a breach of Islamic principles and renders a person sinful. Consequently, an Islamic judge will have complete remit to reverse any transaction found to be fraudulent and has at his disposal several jurisprudence tools to level a suitable punishment upon the perpetrator of the fraud.
2. Charity and Almsgiving: Muslims are encouraged to give to charity and assist those in need. Financial deception or unfair enrichment at the expense of others goes against the spirit of compassion and social responsibility.
3. Legal Agreements: Contracts are highly valued in Islamic transactions, and parties are required to uphold their contractual obligations. It is forbidden to breach a lawful contract without a legitimate reason, and doing so entails sin and liability.
4. ‍Responsibility: Muslims believe that on the Day of Judgement, they will be held accountable for their financial dealings and any injustices done. Settlement in the process of ‘righting wrongs’ on that day will be via invaluable deeds with the consequences being severe. This notion serves as a reminder of the importance of ethical financial behaviour.
5. ‍Reconciliation and Repentance: If someone has committed financial fraud, Islamic teachings exhort them to sincerely repent, seek forgiveness, and make amends through approaching those affected by the fraud and officially making the return of their rightful wealth, or a settlement amount agreed to, a debt upon the person responsible that will be honoured.

How to protect oneself from fraudulent dealings

Taking the means is an essential component in Islam, and because both adults and students are vulnerable to financial frauds, here is a concise sequence of procedures to avoid financial scams:

1. Don’t be greedy:

Most financial scams begin with a desire to want a lot of money quickly or guaranteed returns. Genuine investment company will always make sure you understand the risks e.g “Capital at Risk” when it comes to investing and those who do downplay the risk or promise returns (Guaranteed returns could be impermissible Islamically) could be looking to scam you.

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2. Educate Yourself and use all tools available to check who you are investing with: 

Become knowledgeable about common financial scams such as phishing, pyramid schemes, and identity theft. Stay up to date on new scams and fraud strategies by following reputable financial news sites.⁹

Here are some of the most common scams at the moment, apart from seasonal scams that occur:

1. Safe Account¹⁰
2. University Student Scams¹¹
3. HMRC Scam¹²
4. Investment Scams¹³
5. Goods not received scams¹⁴
6. Vehicle purchase scams¹⁵
7. Email intercept scams¹⁶
8. Crypto investment scams¹⁷
9. Card Skimming¹⁸

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Financial regulations protect consumers' investments. Regulations prevent financial fraud and limit the risks financial institutions can take with their investors' money. Financial regulators oversee three main financial sectors: banking, financial markets, and consumers.

If you use an unauthorised firm, you won’t have access to the Financial Ombudsman¹⁹ Service or Financial Services Compensation Scheme (FSCS)²⁰ if things go wrong – and you’re unlikely to get your money back.

If you use an authorised firm, access to the Financial Ombudsman Service and FSCS protection will depend on the investment you are making and the service the firm is providing.

In addition, here are some tools worth using:

1. The FCA Warning List

‍This a list of firms²¹ that are not authorised or registered by us.

You can check and search the Warning List of firms the FCA know are operating without permission or running scams. If they appear on this list, it is because the FCA have identified that they are operating without their authorisation.

1. The ScamSmart Tool

This is a tool to help you check if an investment opportunity could be a scam. You can check the type of investment and search the Warning List of unauthorised firms. Even if a firm isn't on the Warning List, it might still be a scam. You should check it's an authorised firm on the Financial Services Register²². In the UK, nearly all financial service activities must be authorised or registered by the FCA. The FS Register lists all firms and individuals involved with regulated activities that they have currently or previously approved. There have been cases of 'clone firms' pretending to be a genuine firm from the FS register.

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3. Do some due diligence on the company:

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Ask some sensible questions:

1. Do they even have a company?
2. Who are the directors? 
3. Do they have any background in the business being invested in?
4. Do the names match with what you’ve been told?
5. What is the address?
6. Do a basic google search and use Companies house²³
7. Did the company do any due diligence on you?
8. Has the company filed any returns? (Did they match their turnover?)
9. Is the company which takes the money the same as what was described to you?

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4. Verify Sources:

A bank or HMRC will NEVER call you and ask you to move your money. If someone receives a call like this- it is important to immediately hang up and go the legitimate webpage or the back of your card and call the legitimate number/s listed.

Phone numbers scammers use are often spoofed and will appear genuine. Phone spoofing occurs when fraudsters manipulate caller ID information to make it appear that they're calling from somewhere else — usually a local number or area code (known as “neighbour spoofing”) — or from government agencies. Scammers will often say “compare the number they are calling from to that on the website”. Again, hang up and call the legitimate advertised number.

Documents which scammers send are fake – take time to read them as they will often consist of poor English, have lots of errors. HMRC also state that they will never email you documents after a phone conversation.

Always confirm the authenticity of emails, phone calls, or communications requesting personal or financial information.

If someone is saying they are from a company – ask if payment can be made by card. Card payments have an added layer of security and higher chance of getting money back. If a company is demanding a payment, ensure the account details are in the name of the company and not an individual or personal account.

Unsolicited contact with yourself should be avoided, especially if someone puts pressure on you to act immediately.

Also, If you see a warning during a payment journey don’t ignore it and follow its advice

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5. Protect Personal Information:

Keep your National insurance number, bank account information, and other sensitive information safe. For online accounts, use strong, unique passwords and enable two-factor authentication where available.

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6. Utilise safe Websites:

For online shopping or financial transactions, only utilise safe, recognised websites. Look for the words "https://" in the URL and a padlock icon in the address bar.

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7. Be Sceptical of Offers:

If an offer appears to be too good to be true, it most often is. Avoid "get-rich-quick" schemes and unrealistic promises. Never transfer money or personal information to someone you do not entirely trust.

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8. Check Financial Statements:

Review your bank and credit card statements on a regular basis for unauthorised purchases, and immediately report any anomalies to your banking institution as soon as possible.

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9. Avoid Sharing Personal Information:

Be sure to never reveal personal or financial information on social media sites or with strangers. When giving information in online forums or surveys, exercise caution.

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10. Install and Update Security Software:

Ensure that your devices are protected by reliable antivirus and anti-malware software. Keep your software, operating systems, and apps up to date in order to repair security flaws.

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11. Avoid Phishing Emails:

'Phishing' is when criminals use scam emails, text messages or phone calls to trick their victims. The aim is often to make you visit a website, which may download a virus onto your computer, or steal bank details or other personal information. Be cautious when opening emails and clicking on links or downloading attachments, especially if they are unexpected or from unfamiliar sources.

Before taking any action, confirm the sender's email address and the email's content.

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12. Seek Advice from Reliable Sources:

If you're unsure about a financial opportunity or request, talk to trusted friends, family members, or financial advisors. Never be hesitant to seek a second opinion, especially since Shura (mutual consultation) is a part of Islam.

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13. Report Suspected Scams:

If you come across a possible scam, it is your Islamic responsibility to notify your local law enforcement agency and relevant authorities.

Allah says:

وَتَعَاوَنُواْ عَلَى ٱلۡبِرِّ وَٱلتَّقۡوَىٰۖ وَلَا تَعَاوَنُواْ عَلَى ٱلۡإِثۡمِ وَٱلۡعُدۡوَٰنِۚ وَٱتَّقُواْ ٱللَّهَۖ إِنَّ ٱللَّهَ شَدِيدُ ٱلۡعِقَابِ٢

And cooperate in righteousness and piety, but do not cooperate in sin and aggression. And fear Allah; indeed, Allah is severe in penalty²⁴

To report frauds in the United Kingdom or United States, use platforms such as the Financial Conduct Authority’s (FCA) website in the United Kingdom or the Federal Trade Commission’s (FTC) website.

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14. Remain Informed and Educated:

It is important to constantly secure your perimeter by educating yourself on evolving fraud methods and cybersecurity best practises. This can be done by attending financial security and fraud prevention classes, seminars, or webinars, and by keeping a close eye on the news.

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15. Trust Your Instincts:

If a price is TOO GOOD TO BE TRUE – It usually is! Do research in prices and remember people are unlikely to sell products under RRP or market value. Particularly by large amounts. If something doesn't feel right, trust your instincts, and proceed with caution.

What do I do if I’ve been scammed?

Not all the checks and due diligence someone can do is totally fool proof as scammers are getting more and more sophisticated. Demonstrating some due diligence will always support a consumer’s case. Those who ask no questions are in a precarious position:

1. Keep any evidence – any documents, adverts, websites, social media accounts and conversations histories – even just a screen shot is sufficient.
2. Make a claim via the sending bank.
3. If a bank doesn’t get your money back, make an OFFICIAL COMPLAINT and ask for a final response letter (FCA requirement) – this is the banks final stance on the matter.
4. A final response letter will give the consumer the referral rights to the Ombudsman, then make a complaint through the Ombudsman.

Card Payments

1. Debit cards – payments made by debit cars could be recouped via a chargeback. The bank will refund the money immediately and then the onus will be on the business to claim it back. Scammers would tend not to do anything.
2. Credit Cards - money may be recouped by something called a Section 75 notice²⁵.
3. Card transactions aren’t really used by scammers and if there is a civil dispute between two parties it may need legal intervention.

Remember that financial scams may happen to anyone, so staying attentive and proactive in protecting your finances and personal information is critical.

May Allah Almighty protect us from the evil of ourselves and others and bless our wealth and our affairs.

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Footnotes:

¹ Surah Al-Baqarah (2:188)

² Surah al-Nisaa: (4:29)

³ Surah Al-Mutaffifin (83:1-3) of the Quran

⁴ Sahih al-Bukhari 2110

⁵ Sahih Muslim 102

⁶ Sahih al-Bukhari 2148

⁷ Sahih Muslim 1515

⁸ Sahih Muslim 1533

⁹ A good resource that is updated often is: https://www.hsbc.co.uk/help/security-centre/latest-scam-warnings/

¹⁰ https://www.nationwide.co.uk/news-and-stories/safe-account-scams/

¹¹https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

¹²https://www.fca.org.uk/scamsmartgclid=Cj0KCQiAmNeqBhD4ARIsADsYfTe8bcZP3EkLHjIgkQ9c0tsOLUKEqx1bqeECbf8zI5GaoR5Uor_vAdIaAlCGEALw_wcB

¹³ https://parcelbroker.co.uk/articles/common-postage-scams/#:~:text=How%20it%20works,having%20to%20pay%20a%20penny.

¹⁴ https://www.carguide.co.uk/blog/buying-guides/used-car-scams/

¹⁵ https://www.investec.com/en_gb/focus/fraud/latest-fraud-scam.html

¹⁶ https://www.fca.org.uk/consumers/crypto-investment-scams

¹⁷ https://www.forbes.com/advisor/credit-cards/how-to-spot-a-credit-card-skimmer/

¹⁸ https://www.ucl.ac.uk/estates/our-services/security-ucl/staying-safe-ucl/common-student-scams-and-how-avoid-them

¹⁹ The Financial Ombudsman Service is a free and easy-to-use service that settles complaints between consumers and businesses that provide financial services. https://www.financial-ombudsman.org.uk/

²⁰ If the financial firm you've used has gone out of business and can't pay your claim, the FSCS can step in to pay compensation. https://www.fscs.org.uk/

²¹ https://www.fca.org.uk/firms/financial-services-register

²² https://www.gov.uk/government/organisations/companies-house

²³ Surah al-Maaidah: 2

²⁴https://www.ukfinance.org.uk/faqs-chargeback-rights-and-section 75#:~:text=%22Section%2075%22%20is%20an%20important,breached%20their%20contract%20with%20you.