A.B.C.'s of Behavioral Forensics: Applying Psychology to Financial Fraud Prevention and Detection

CHAPTER 1

Fraud Is Everywhere

Fraud is an interesting concept, because it is both so common and so serious. Fraud is generally everywhere around us; most people do something fraudulent, unwittingly or not, in their lifetimes.

Even such an innocuous thing as two employees chatting for a few minutes in the workplace about last night's baseball game can be a minor form of fraud. After all, they are on company property and are being paid to do other things. Assuming that they are being paid for their time, and that biological needs as well as needs for breaks are provided—many professional service firms bill by the hour—they are defrauding their employer if they are aware that they should be working rather than talking.1

This example may be considered a small infraction, and few people would think of it as fraud, but it could become so, depending on the degree. Association of Certified Fraud Examiners (ACFE) founder and chairman Joseph Wells wrote in the prologue to his autobiography, “Everyone [has lied]. Everyone. We do so for two basic reasons: either to receive rewards or to avoid punishment (or a combination of both). Although lying is not endemic to the human species, we learn it very early in life. Fraud, though, is a lie with a special twist—it is committed to deprive an innocent victim of money or property.”2

Of course, in cases of revenge fraud, the victim may not be so innocent after all.

The Pervasiveness of Fraud

If you ask a room full of midcareer professionals whether ...