Managing Fraud Risk: A Practical Guide for Directors and Managers

Classification of Fraudsters

The great majority of fraudsters fall into one of the four categories set out below.

First-Time Offenders

It is very important that directors and managers understand that the great majority of internal fraudsters are first-time offenders. This was one of Dr Cressey's first observations back in the 1950s and most modern researchers confirm that it remains true today. For example, the ACFE in its first study of fraud cases worldwide, the 2010 RTTNs concludes that: “More than 85% of fraudsters in our study had never been previously charged or convicted for a fraud-related offence. This finding is consistent with our prior studies.” This is a key observation.

People who have never been convicted of a crime in the past will be very concerned by the prospect of going to prison and so they are likely to assess the risks of being caught and prosecuted for their actions very carefully. Organisations with strong internal controls and a track record of prosecuting fraud can benefit from this because potential fraudsters are likely to be deterred from actually committing the crime as they will think that if they do so they will be caught, and, once caught, they will probably end up in jail. Without strong controls, this possibility is much reduced of course because the fear of being caught is simply not there. As Dr Cressey observed, once pressure or rationalisation factors exceed the fear of detection, individuals will actively look for opportunities to commit ...