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

PART II

THE FOUNDATIONS OF BEHAVIORAL FORENSICS: WHY GOOD PEOPLE DO BAD THINGS

In the many investigations and experiences with fraud that our team has explored, one of the more challenging aspects of the people dimension, the human side of fraud, is this: Where does one start?

Fraud is perplexing. When we explore the human side of the crimes of fraud cases after the fact, we are left wondering about many things, such as the motivations and the seeming absence of concern about the harm done to the trust inherent in human relationships. It is legitimate to ask the following:

• Where is the shame in the bad apple?
• Why did the victims not see the signs?
• How does a leader who ruins his organization sleep at night?

We see the human stories in the headlines. From the fanciful Internet deception that led to Notre Dame's star linebacker Manti Te'o believing that he was having a relationship with a beautiful woman to the hard-hearted deception of the ratings agencies during the run-up to the housing market collapse, fraudulent schemes are limited only by the creativity of the human mind.

Bizarre tales like Te'o's are not as troubling as those that disrupt our trust of the markets and of business in general, of course. The latter leave us cold, distrustful, and cynical. In particular, our concern is deepest about those who seemed beyond reproach (e.g., Tour de France champion Lance Armstrong).

We explore how the mind works to allow for such deception. The unconscious, our defenses, and our ...