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

CHAPTER 6

The Accidental Fraudster (Bad Apple)1

WHEN THE APPLE TURNS AND HONESTY REVERSES COURSE

We believe that the model for distinguishing between accidental and predatory fraudsters is a useful one. The predatory bad apple (described in Chapter 5) decides to coerce and harm others with intimidation and hostility. In contrast, this chapter will focus on the accidental fraudster (bad apple), who finds a hole in the system and decides to perpetrate a fraud. Then, realizing the low likelihood of being caught and becoming enamored of the risk-free payoffs, he or she continues the fraud over a long period.

The situation thus works differently for the accidental fraudster than for the predatory fraudster. Opportunities to steal present themselves, and if the workplace environment allows it, such as weak or nonexistent controls, these opportunities can be exploited. This type of fraud can be expensive in terms of cost and damage to the reputation of the organization. Such frauds remain unmanaged risks and can be sustained often as the perpetrators are poorly supervised and unlikely to be detected because they are usually highly trusted individuals.

Committing the Crime

In the previous section, we gave an example in which we outlined the role of emotions in a general fraud and then explored a case in which one powerful emotion, shame, was manipulated by a corrupt CEO in order to coerce a CFO to commit fraud. This was a predatory act, premeditated to steal from those who did not know ...