Fraud BY ROBIN SINGH
Inside the Mind of a Fraudster Identifying potential suspects based on the profile of a fraudster is not a straightforward task.
F
or as long as white-collar crime fraudsters have been a common occurrence throughout multiple industries, specialists have wondered aloud whether or not it is possible to properly develop a profile that allows organisations to accurately identify fraudsters while the fraud is happening, or in some cases beforehand. Of course, predicting crime before it actually happens is a concept best left to science fiction novels and movies at the moment – but what if there were some easily identifiable warning signs of potential fraudsters?
General Attributes While any individual could potentially conduct fraudulent actions, there does seem to be some basic elements that make an individual more likely to take part in fraud. According to a study by KPMG1, the typical fraudster displays the following attributes: • Is between the ages of 36 and 45. More than 70% of fraudsters fall into this age group. • Acts with little regard for the organisations which they work for. • Is employed in a position that gives them power over important organisational processes including executives, finance, operations and marketing. • Has been with the organisation for six years, or long enough to know the internal processes of the company. 26
INTERNAL AUDITOR - MIDDLE EAST
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Acts with others in committing fraud. According to KPMG’s study, more than 61% of individuals that committed fraud did so with the help of at least one other individual.
Personality Another compelling fact which the KPMG study bought forward was that a large percentage of fraudsters were extroverted (33%), friendly (35%) and highly respected (39%). These personality traits do not seem to be indicators of someone who is prone to fraud but when combined with traits like greed and desire for personal gain1, one can then get a clearer picture of the personality of these individuals. Studies have proven that these are people who are either malignant narcissist, or suffer from Narcissistic Personality Disorder (NPD), which is defined as an “enduring pattern of inner experience and behavior that deviates markedly from the expectation of the individual’s culture, is pervasive and inflexible, has an onset in adolescence or early adulthood, is stable over time, and leads to distress or impairment.” Because these disorders are chronic and pervasive, they can lead to serious impairments in daily life and functioning. Actually, to really go inside the mind of a fraudster, one needs to understand the traits of a person suffering from NPD: • Have an inflated sense of their own
importance; Believes that he or she is “special” and can only be understood by high status people. • Have a deep need for admiration for themselves; a sense of superiority. • Believe that they’re superior to others. • Constantly bending the rules for himself although outwardly criticising others for similar behavior. • Have little regard for other people’s feelings. • Be intolerant of anything perceived as less than a perfect performance. • Exaggerate their own achievements or talents. • Expecting others to go along with your ideas and plans. • Taking advantage of others. • Trouble keeping healthy relationships. • Be envious of others and / or believes that others are envious of him or her. To add to the above, the Association of Certified Fraud Examiners (ACFE), mentions in its 2014 report that the financial losses resulting from fraud committed by Owners/Executives at companies were at least than 3 times larger than the losses resulting from fraud committed by managers or employees. Similarly, the ACFE study showed that the longer a fraudster had worked for a company, the more financial harm he or she caused. This supports the fact conclusion that big game players are the ones who are at the top of the corporate pyramid. DECEMBER 2014