Profiling The Fraudster: Removing the Mask to Prevent and Detect Fraud

Chapter 9Behavioral Warning Signs or Red Flags

THE AVERAGE FRAUDSTER IS MALE, has worked in the organization for many years in a senior position, and is considered trustworthy. Most are over 40. What, however, are the behavioral warning signs that should not only be picked up on but acted upon immediately and not ignored?

A fraud warning sign or red flag is an event or set of circumstances that should alert an organization to the presence of risk. In seeking to identify fraudulent behavior within an organization, much attention has historically been focused on these fraud indicators that are loosely termed red flags, fraud alerts, and personal indicators.

Fraud can best be explained by the following four factors or drivers:

1. A supply of motivated, pressurized, or incentivized offenders.
2. The availability of suitable target organizations.
3. The absence of capable guardians or a control system, opening up an opportunity.
4. Rationalization in the fraudster's mind bringing about justification for his or her actions.

The motivation, pressure, or incentive to defraud may be as simple as financial need or greed, or anything from unrealistic deadlines and performance goals to the financial demands of personal vices such as gambling or drugs.

The availability of a suitable target organization is an easy one. It is more often than not the fraudster's employer with whom he has built up a relationship of trust, quite often over many years. This trust has usually been so powerful that the employee ...