Understanding fraudsters is an important part of assessing the risks of fraud in any organization or company. Understanding fraudsters helps in analyzing the reasons why people or fraudsters commit fraud. In most cases, fraud occurs because people are allowed to do so. Companies and organizations face a wide range of threats, and the threat of fraud can come from inside or outside of the organization.
Fraud specialists have long debated whether it is possible to develop a profile of a fraudster that is accurate enough to enable organizations to catch people in the act of fraud or even beforehand. A strong analysis of frauds and the fraudsters may help the companies and organizations to strengthen their lines of defence against criminal activities.
Companies should know that the fraud may not be committed if the potential fraudster believes that the achievable rewards will only be modest, and the chances of detection are high or that the punishment set for a particular type of fraud is extremely high. The main way to assess the fraudsters’ motives and attitude toward fraud is to establish a system where management may assess in detail the possible fraudulent threats and from whom the threats are coming in. This assessment leads a company to judge the likelihood of occurrence of the fraud.
Different Types Of Fraudsters
Fraudsters usually fall into one of three categories:
- Pre-planned fraudsters,
- Intermediate fraudsters, and
- Slippery-slope fraudsters
Now let us discuss each of them individually.
- Pre-planned fraudsters:
They intend to commit fraud from the beginning and may be short-term fraudsters such as those who use stolen credit cards to gain financial benefits or may use false social security numbers. They may also be long-term players who may be involved in bankruptcy cases or involved in serious crimes such as money laundering activity.
- Intermediate fraudsters:
These are the fraudsters who in the beginning work as honest employees or individuals but turn to fraud when times get hard. For example, they may get frustrated at being passed over for promotion or may need serious financial help to handle family matters.
- Slippery-slope fraudsters:
They are the fraudsters who are simply involved in trading businesses objectively. They are not able to pay their debts to run the affairs of the business.
Understanding Fraudsters As A Basis For Identifying Fraud
The type of fraudster is continually changing. One major change is due to the rapidly growing use of technology by companies and fraudsters. New techniques of fraud are emerging, and companies need to respond to these techniques by updating their line of defense. The use of the technology has enabled many fraudsters to perform frauds from various remote locations. These types of frauds are not only occurring in technologically advanced countries, such as the United States, but also in those countries that are not technically advanced.
One of the major concerns for all businesses is that the new generation of people is more able to use modern technology, and it has access to much more information as compared to past generations. This makes companies and businesses more worried as frauds may occur at a much larger scale compared to fraudulent cases reported in the past.
By analysing this fact, it becomes possible for the companies and businesses to go beyond to respond to various unforeseen fraud instances and develop strategies to pre-empt and minimize fraud losses.
It is intended to provide the reader with insights into the relationship between the attributes of fraudsters, their motivations, and the environment in which they flourish. The typical fraudster in the 2013 study is 36 to 55 years of age, is acting against his/her organization, and is mostly employed in an executive, finance, operations, or sales and marketing function.
He or she often holds a senior management position, was employed in the organization for more than six years, and, in committing the fraud, frequently acted in concert with others.
Technology not only enables the fraudster but also enables the organization to defend itself.
Importance Of Understanding Fraudsters In Investigating Fraud
Understanding the characteristics and circumstances of fraudsters is especially important both for planning the activities to meet any possible fraudulent activities and investigating fraud incidents.
In various past surveys related to fraud incidents, it is shown that fraudsters age between the ages of 36 and 55. This may not always be the case because opportunities to perform the frauds are more obvious and available to students at the universities or high schools, such as the availability of technology for cyber-attacks.
Most of the fraudsters are employed by the victim company or organization for more than 6 to 10 years and around 70 percent of the frauds are conducted by the perpetrator colluded with others.
Amongst the frauds, employee fraud such as misappropriation of assets is quite common, and it covers a sizeable percentage of total fraudulent activities performed in a company or an organization. Here understanding the behavior of employees becomes crucial to identify the main causes of fraud incidents in a company. Another most prevalent type of fraud involves revenue or assets gained by fraudulent or illegal acts.
When a person suffers a financial loss as a result of deceptive, unfair, or false business practices, this is referred to as consumer fraud. Thieves steal your personal information, assume your identity, open credit cards, bank accounts, and charge purchases with identity theft. Mortgage scams target distressed homeowners in order to steal money from them.
Credit and debit card fraud occurs when someone steals your card information and uses it to make purchases or make offers to lower your credit card interest rate. False charities and lotteries take advantage of people’s sympathy or greed. Debt collection fraud attempts to collect on unpaid bills, whether or not they are yours.