Profiling The Fraudster. Padgett Simon

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      Acknowledgments

      Completion of this book would not have been possible without the support of many people. First, many thanks to colleagues at my current place of work who have given me the support and assistance required to enable me to carry out this research and writing and to the many colleagues and professional services firms with whom I have had the pleasure to interact throughout my career and who have provided insight, inspiration, and material. Thanks to my parents who inspired me with their endurance to my never-ending skepticism of anything put to me and to Oxford Brookes University and my MBA supervisors for their assistance and the availability of excellent resources in terms of the written and spoken word. I also wish to thank my fellow board members of the Association of Certified Fraud Examiners (ACFE), UAE chapter, for their encouragement and support and the many ACFE members as well as the ACFE in general who have allowed me to use some of their valuable information to add structure and substance to the profiling theory. I would also like to thank John Wiley & Sons and in particular Stacey Rivera, senior development editor, for their guidance and advice throughout the drafting, submission, and publishing of this book. Perhaps the biggest thanks, however, should go to the many fraudsters whom I have had the pleasure of investigating and interacting with, for supplying me with the reasons for writing this work. Last but not least, I would like to thank my family, who provided unwavering support, encouragement, patience, and silence throughout the gestation period and writing and production life cycle of the development of this book.

      Part I

      Occupational Fraud and Corruption

      Chapter 1

      Introduction to Occupational Fraud and Corruption and Recent Trends

      WHEN I STARTED WRITING THIS BOOK, I considered jumping in at the deep end and commenced rapidly making notes of the various approaches to profiling by compiling a list, based on my 20 or so years of experience in the fraud investigation field, of exactly what, when profiled, would be of use to the fraud investigator. Yes, there is the behavior of the convicted fraudster to understand as well as his modus operandi, but what about which industry type or department he is likely to work in, his likely position within the organization, the likely geographical location, economic environment, and personal circumstances? We also need to understand the profile of higher risk victim organizations and their characteristics. Anyway, I quickly realized that to fully understand the subject of profiling we first need to have a fairly good grounding in or understanding of the subject of fraud and corruption – what it is and how it affects organizations and all of us who are associated with those organizations. It is also, possibly even more so, very important to understand the types of controls that are designed, put in place, and often bypassed to enable us to manage fraud risk in organizations. After all, fraud is perpetrated by human beings as a reaction to opportunities created by weak safeguarding processes. Profiling is a further antifraud methodology to add to the stable, and it does require an understanding of how and where in the corporate environment it would best sit. After all, you would not bring in a new team member without first ensuring a good fit or put a new thoroughbred into a stable to share with other horses without first having an understanding of those neighbors and what makes them kick. So, let's have a look at the world of fraud and corruption and how, since time immemorial, we appear to be failing in our attempts to manage fraud risk in the organizational environment.

      Deception through Breaching Trust

      The term fraud has come to encompass many forms of misconduct. Although the legal definition of fraud is very specific, for most people like you and me, antifraud professionals, regulators, the media, and the general public alike, the common use of the word is much broader and generally covers any attempt to deceive another party to gain a benefit. Expense fraud, forgery, counterfeiting, identity theft, theft of inventory by employees, manipulated financial statements, insider trading, Ponzi schemes, mortgage fraud – the range of possible fraud schemes is actually endless but at their core all involve a violation of trust. It is this violation that, perhaps even more than the resulting financial loss, makes such crimes so harmful. For businesses to operate and for commerce to flow freely, organizations must entrust their employees with resources and responsibilities. So when an employee defrauds his or her employer, the fallout is often especially harsh. The focus of this book is occupational fraud schemes in which an employee abuses the trust placed upon him or her by an employer for personal gain. The formal definition of occupational fraud, taken from the Association of Certified Fraud Examiners (ACFE) website, http://www.acfe.com/fraud-101.aspx is

      While this occupational fraud category is but one facet of the vast overall fraud universe, fraud in the workplace is huge and covers a wide range of employee misconduct. It is, without doubt, a material threat faced by all organizations and their employees worldwide.

      Global Trends in Occupational Fraud

      The Association of Certified Fraud Examiners (ACFE), a leading professional body of fraud examiners, has undertaken extensive research into the costs and trends relating to occupational fraud schemes. The findings of the ACFE's initial research efforts were released in 1996 in the first Report to the Nations on Occupational Fraud and Abuse, with subsequent reports released in 2002, 2004, 2006, 2008, and 2010. The ACFE's 2012 Report to the Nations on Occupational Fraud and Abuse, now carried out every two years, provides an analysis of 1,388 fraud cases investigated worldwide by qualified fraud examiners and continues a tradition of shedding light on trends in the characteristics of fraudsters, the schemes they perpetrate, and the organizations being victimized. The ACFE findings truly reflect global trends in occupational fraud and abuse and are invaluable in keeping us abreast of the fraud disease.

      The goals of these reports have been to

      • Summarize the opinions of experts on the percentage of organizational revenue lost to all forms of occupational fraud and abuse.

      • Categorize the ways in which occupational fraud and abuse occur.

      • Examine the characteristics of the employees who commit occupational fraud and abuse.

      • Determine what kinds of organizations are victims of occupational fraud and abuse.

      Each version of the report has been based on detailed information about fraud cases investigated by certified fraud examiners (CFEs). Each new edition expands and modifies the analysis contained in the previous reports to reflect current issues and enhance the quality of the data that is reported. This evolution has allowed the release of increasingly meaningful information from the experiences of CFEs and the frauds that they encounter.

      Fraud, like many other crimes, can be explained by the existence of the following four key drivers:

      1. A supply of motivated, pressurized, or incentivized offenders.

      2. The absence of capable guardians and policing, or weaknesses in control systems, opening up an opportunity.

      3. Rationalization in the fraudster's mind bringing about justification for his actions in exploiting the opportunity to satisfy the motivation.

      4. The availability of suitable victim organizations.

      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 personal vices such as gambling or drugs.

      The opportunity to commit СКАЧАТЬ