At the heart of all fraud lies deceit: building a profile of a corporate fraudster

Corporate fraud can take hold quickly and be notoriously difficult to detect and prosecute. However, one of the most effective measures any company can take to shield themselves from fraud is also one of the simplest: listen to your employees.

As I interviewed experts and industry leaders to record KPMG’s Forensic Lens podcast series, this was a common theme. But it is one thing to listen, another knowing what to look out for when unearthing wrongdoing. Fortunately, the series also provided a handy ‘beginners guide’, so to speak, on fraud and the people who commit it.

At the heart of all fraud lies a pattern of behaviour that incorporates omission, half-truths and blame-shifting to create a positive impression and mask harmful actions. Corporate fraudsters, according to forensic psychologists, go out of their way to refine their techniques, to avoid past mistakes and maximise what they can get away with.

Impression management is a key tool in the arsenal of a white-collar criminal. It’s common for fraudsters to have psychopathic tendencies – they appear to be well-liked and respected members of their business, not loners.

That aside, are there any other ways to identify a potential fraud? Well, data does tell us that they are on average male, between 40 and 50, have a university degree, and hold positions of relative power, often with budgetary control.

Of course, this doesn’t paint a full picture, but building a profile of fraudsters is a helpful exercise for anyone looking to investigate corporate wrongdoing. This is because the key to any successful investigation is establishing a solid factual narrative. Uncovering fraud is, disappointingly for some, nothing like on television.

The best method of defeating deception is to simply gather enough facts that the fraudster’s version of events no longer adds up. Easier said than done, especially as the criminal mindset continues to shift toward permanent denial and blame-shifting. Long gone are the days of ‘it’s a fair cop’.

In fact, one of the notable aspects of fraud is how perpetrators rationalise their behaviour convincing themselves they are justified in their actions. In their eyes it may mean they have not really committed a crime. But they often underestimate their frauds by many, many multiples

When fraud extends beyond a single individual, becoming pervasive within a business, the task is harder still. Cartel behaviour, for example, is much more common than many realise, but according to outgoing ACCC Chair Rod Simms 70 percent of cases the agency investigates arise from immunity applications; companies dobbing in other members in exchange for immunity from prosecution.

Relying on self-reporting, despite the benefits it provides businesses, is far from an ideal situation when it comes to other forms of malfeasance. As former AFP National Team Leader of Foreign Bribery explained to me, Australia has no legally codified procedure which allows companies to safely report wrongdoing to enforcement agencies. So, confronting and exposing fraud internally can be challenging.

If you discover a problem, own it, don’t try and hide it. Be open and transparent and commit to stamping out any bad culture which has let fraud develop. Keeping an open mind and encouraging honest dialogue throughout the business, as well as with shareholders, discourages wrongdoing.

Given the right environment, fraudsters will flourish, and once embedded they are difficult to spot and hard to punish – so stopping them from settling in is vital. Challenging as it may be, striving for maximum openness, taking time to really listen and investigating suspicious behaviour are the top three ways to catch out fraudsters before they can do significant damage to your business.

Listen and download the series here.


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