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3 Types of Fraud Figures & How to Recognize and Repel Them4 min read

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I am not sure if there are more people committing fraud, more getting caught, better fraud news coverage or a combination of all, but there seems to be new fraud stories hitting the headlines daily.  There seems to be no shortage of individuals willing to risk their freedom and reputation for a few dollars.  They range from small to large dollar amounts, to elaborate & sophisticated or simplistic & stupid.  Take for example

  1. The million dollar Michigan lottery winner who was recently sentenced to probation for receiving $5,475 in food assistance after winning.
  2. The convicted rapist who continued to apply for housing benefits and income support after winning nearly £5 million in the lottery.
  3. The fact researchers say that in South Florida there is a one-in-three chance you will be served tilapia or some less expensive fish when you order snapper, grouper or white tuna.
  4. The 45 year old Dominion Power Administrative Assistant who was ordered to pay $152,000 in restitution, ordered to serve 8 months in prison and 7 months home confinement for credit card fraud.

The fact remains that fraud is an integral part of our society.  The reasons people commit fraud are vast, but I believe that there are 3 types of players in the fraud puzzle.  Furthermore, I believe that most of us fall into 2 of the 3 types.  Finally, I believe that organizations can provide employees with information and tools to recognize and combat fraud.

Fraud Figure 1 – The Career Criminal

This is the individual that seeks out opportunities to take advantage of situations.  This person is usually fairly intelligent and very aware of his/her environment.  This person may or may not have a criminal record but is ready to strike should the right opportunity (such as a poorly controlled internal control environment) arise.

Fraud Figure 2 – The Goody Gone Bad

This is the otherwise good person (seemingly comprised of good character, moral and ethics) who is facing a difficult situation and chooses to commit a bad act to remedy the problem.  This is usually a trusted employee who, until the fraud, has not done anything to make you question their character.  And because this is typically someone you trust, the magnitude of the fraud is usually larger.  Many times this individual is going through something in which the outcome seems hopeless.  It is this desperation that leads them to commit fraud.

Fraud Figure 3 – The Angel

This individual will never ever…ever under any circumstance commit fraud.  Very few fall in this category.

Fraud Defense Strategy

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Generally speaking, the a good fraud defense involves

(1)   A good tone a top,

(2)   Clearly communicated mission & vision,

(3)   Adequate segregation of duties,

(4)   A tough public stance on fraud,

(5)   Employee awareness,

(6)   A simple trustworthy reporting mechanism.

Specifically regarding our Fraud Figures

  • The Angel is very rare.  This individual will never commit fraud.  Additionally, this individual will promptly report fraud without hesitation.  To best support the Angel, organizations need a trustworthy fraud reporting mechanism.  This is especially important to protect the Angel from retaliation for his/her bravery.
  • The Career Criminal is a special breed.  S/he is deterred most by a well-controlled environment.  This individual is looking for the right opportunity to strike.  They may move on if the environment does not support their objective.  This individual might experience behavioral and lifestyle changes.  For example, s/he may begin to brag about material possessions.  Ensure there is an adequate system of checks and balances in place.  In addition, perform thorough background and reference checks.  This person is oftentimes good at hiding his or her intentions.
  • The Goody Gone Bad is the most dangerous fraudster.  As with the others, a strong control environment is key.  This person is able to commit fraud because of their knowledge of the control environment.  Therefore, lock down the environment.  Oftentimes this individual exhibits behavioral changes.  For example, if a loved one is sick and medical bills are accumulating, the person may be tired, irritable and frustrated.  Be on the lookout for these types of changes.  Remember, this individual commits fraud because they believe their situation is now hopeless.  Organizations with good support systems can reduce this type of fraud.  A good example is an organization with an Employee Assistance Program (EAP).  Troubled employees can seek help from trained professionals and navigate through tough times.

Sources:

http://www.freep.com/article/20120724/NEWS02/120724014/Lincoln-Park-lottery-winner-on-welfare-gets-9-months-of-probation?odyssey=tab%7Cmostpopular%7Ctext%7CFRONTPAGE

http://www.independent.co.uk/news/uk/crime/benefit-fraud-lottery-winner-edward-putman-jailed-7972974.html

http://www.wptv.com/dpp/money/consumer/fish-fraud-flourishes-in-south-florida-researchers-say

http://www.wina.com/Former-Dominion-Employee-Sentenced-For-Credit-Card/13779404

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Robert Berry (101)

Robert (That Audit Guy) Berry is a risk, compliance and auditing advocate, educator and innovator. He helps good professionals become better by creating articles, web services and training that allow them to expand their knowledge network.

1 thought on “3 Types of Fraud Figures & How to Recognize and Repel Them4 min read

  1. It is really amnzaig to me how many people file fraudulent returns. I worked in a tax office for almost 10 years and saw pepole do it everyday. I would be too scared to even try it-I would be the one to get caught.

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