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

Chapter 13Profiling the Fraud Methodology or Modus Operandi

THE ACFE HIGHLIGHTS FOUR CHARACTERISTICS that typify employee fraud:

1. The offense is undertaken in secret.
2. The perpetrators are in breach of their duty to the organization by committing the offense.
3. The motivation for the fraud is the personal benefit of the fraudster.
4. The organization, usually the employer, is the victim.

The various methods of committing the many types of fraud are generally the same or similar, for example, payroll fraud using ghost employees, accounts payable fraud with employees authorizing payment to themselves or companies they have created, or accounts receivable fraud with the falsification of bank reconciliations. It is important to include fraud methods or modus operandi when using profiling to identify fraudulent behavior in an organization. The particular modus operandi will classify the fraud risk type and enable a targeted approach in terms of implementing the best fit internal controls.

Collusion

When two or more individuals conspire to commit fraud against an organization, it can have an especially harmful effect, particularly when the combined efforts of the fraudsters enable them to circumvent or override antifraud controls. In the ACFE's three most recent studies, the rate of collusion has been fairly consistent; multiple perpetrators were reported in 36 percent to 42 percent of all cases (see Figure 13.1). Schemes involving collusion have also consistently resulted in much larger ...