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

Chapter 11Profiling Individual Behavior and Characteristics of a Fraudster

NO MATTER HOW WELL-RUN an organization may be or how close-knit the employees are, no organization is immune from fraud. Organizational fraud, misappropriation of assets, and financial statement fraud are not new problems, but they still need to be closely monitored. Managers of organizations experiencing fraud are often shocked to learn that the fraud was perpetrated by a trusted employee of the business. It is important to ensure that safeguards are in place protecting the firm's assets and reputation, irrespective of the level of confidence and trust that managers may have in their employees.

According to the ACFE, in 81 percent of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct; the most commonly observed behavioral warning signs are as follows:

• Living beyond one's means (36 percent of cases).
• Having financial difficulties (27 percent).
• Unusually close association with vendors or customers (19 percent).
• Excessive control issues (18 percent).

Typically, a fraudster is someone who is greedy and deceitful by nature. However, many fraudsters work within entities for several years without committing any fraud before a motivational factor such as financial worries, job dissatisfaction, aggressive targets, or simply the opening up of an opportunity tips the balance.

According to KPMG's 2011 analysis of 348 cases across 69 countries, red ...