Internal Fraud Law & Legal Definition


Internal fraud refers to a type of fraud that is committed by an individual against an organization. In this type of fraud, a perpetrator of fraud engages in activities that are designed to defraud, misappropriate property, or circumvent the regulations, law, or policies of a company. For instance, internal fraud involves activities such as non reporting of transactions intentionally, performing unauthorized transactions, and intentional mismarking of positions.

Internal fraud can be classified into two broad categories, embezzling and identity theft. In the case of embezzling, the cash is taken directly from the organizations and in the case of identity theft a customer’s personal information is misappropriated by the employee in order to make a profit.