Managing Fraud Risk: A Practical Guide for Directors and Managers

Introduction

People commit financial crime. This is an obvious truism and yet, apart from a vague awareness of the threats posed by organised crime gangs, it is entirely unclear whether most of us understand the implications of this as we go about our everyday lives. Certainly, there are many, many examples all over the world of individuals being defrauded of their money and sometimes even of their life savings because they failed to exercise an appropriate degree of caution when presented with seemingly fabulous opportunities. Warnings about the dangers of things being “too good to be true” are well known but are frequently ignored. It seems that, very often, basic greed prevails.

This failure to apply common sense happens regularly in the business world also. It seems incredible to think that people can be hired by organisations without their qualifications and experience being checked thoroughly (sometimes new hires are not checked out at all), or that financial institutions are prepared to lend money to individuals on the strength of self-certified statements of income or assets given by those same individuals. Yet this does indeed happen from time to time as was seen in the US in particular during the years leading up to the recent financial crisis. Just to be clear at this point: I am not about to advocate that people in business should never trust anybody but what I am going to emphasise, both throughout this Chapter and indeed throughout the book, is that people in business ...