The hidden costs of fraud

Fraud creates systemic costs that impact us all. This blog will provide tips on how to identify and fight back against fraudulent activity.

According to Competition Bureau Canada, recent data from the Canadian Anti-Fraud Centre indicates that Canadians lost a total of $98 million to fraud last year alone. Add in the expense of investigating and prosecuting fraudsters and the price tag is even higher. While you might not get a bill for this in the mail, you’re certainly paying your (un)fair share of this cost.


Service provider fraud is alive and well in Canada, and if you are fortunate enough to participate in an employer-sponsored health benefits program, you’re likely paying the cost of fraud directly through your premiums. If a co-worker/member of your plan submits fake receipts and receives a reimbursement, there is a real penalty to you. This increased usage on the plan drives up the overall price of the plan. If your employer covers the full cost of your plan, you are indirectly affected by less money being available to increase benefits over time. However, if you are paying for a portion of your benefits through a payroll deduction, this cost affects you directly. Benefits fraud isn’t a “victimless” crime. You are the victim.

The large insurance companies who administer these plans are fighting back against fraudsters. Using social network analysis, pattern analysis, predictive analytics and other “big data” tools, these companies are stepping up and will lay charges on fraudsters they catch. Their efforts do help reduce the loss due to fraud, but enforcement still comes at a cost.


If you use a credit card, you’re likely paying the price of fraud. Credit card companies want you to use your credit card, and in order to build trust, it’s common for them to refund to you any fraudulent charges you report.

Who actually pays for these charges? You do.

Through the interest rate on your card, the annual fees you pay and by way of increased pricing on your retail purchases, you cover the damage. In some cases, credit card companies will eat the cost of these fraudulent charges whereas others will push the cost to the retailer where the fraudulent purchase was made. Either way, those costs ultimately make their way back to you, the consumer.

Credit card companies are striking back too, and they are also using big data techniques to analyze purchasing patterns across their network to identify suspicious activity. They’ve built mechanisms for notifying you, the cardholder, via text message and push notification when they suspect fraudulent charges. In many cases, they are declining these fraudulent charges before they even hit your card, but every now and then one may slip through and eventually be passed along to you.


Who is responsible for fighting fraud? We all are. But in a more direct sense, Competition Bureau Canada, along with key partners nationwide, are taking charge, providing tips on how to identify and fight back against fraudulent activity.

But, we all should be doing our part. Firstly, by taking steps to protect ourselves from fraud. And secondly, by reporting fraud when we see it. Check out these links from the Canadian Anti-Fraud Centre for resources on both:

Fraud affects us all. Even if you aren’t directly the victim, is fraud costing you in ways you may not realize? 


Have you ever had to report fraud before, such as fraudulent credit card charges? Post a comment below.



The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

David Lord, CPA, CMA, CFP

David is a co-founder of Red Seal Financial Ltd. He works with individuals, families, professionals and business owners to help them plan for success. He is a big believer in education, both learning and teaching, and is passionate about financial literacy