What Does a Corporate Fraud Suspect Look Like?

Those aware of fraud risks might think they should be on the lookout for likely fraud suspects. That is not a bad idea, and there are many potential personal red flags of fraud, but it is difficult to put those who commit fraud into one little box. Many different types of people commit fraud; it is difficult to pinpoint a few types who are more likely to steal from their employers.

It’s important to recognize that there are inherently bad people who look for situations in which to take advantage of others. Companies try to avoid hiring these people but do not always weed them out because they may be good actors who are able to cover their evil intent. More likely, a company is a victim of a situational fraudster—someone who has a particular reason to commit a fraud at a certain time. This person would not normally be considered a bad or unethical person, but circumstances at home or work may motivate the employee to commit fraud.

A wide range of factors could cause a person to turn to fraud, including a legitimate financial need, a plan to get revenge on someone, a house going into foreclosure, a child support or alimony burden, an expensive addiction to drugs, a desire to engage in risky behavior for a thrill, or a feeling of power desired by the employee.

The motivators don’t necessarily have to be evil-sounding. They can be everyday stresses and burdens that people find themselves susceptible to. Whatever the reasons or personal characteristics of a person who commits fraud, management will often be surprised by the identity of the dishonest employee. It is most often someone who was trusted and widely regarded as a good employee. It is only logical that the trusted employees would have access and opportunity to commit fraud. Managers typically do not provide access to information and assets for employees they don’t trust. Only the trusted employees can access the bank accounts and look at confidential information—exactly the type of access that is needed to commit fraud.

When a doctor finds that her longtime bookkeeper has been stealing from her medical practice, she is often shocked. This was the woman she trusted for years to make the bank deposits, send out the bills, and generally handle the finances. How and why did fraud happen?

Most often, that trust created between a business owner and an employee is exploited for financial gain. The bookkeeper knows the doctor is not looking at the bank statements, and therefore will not identify improper payments. The doctor does not have a good feel for the volume that is billed each month, and will not notice if the bookkeeper steals some cash payments from patients. The doctor trusted the bookkeeper to handle the money, and the employee was probably loyal and worthy of trust for years. But the combination of little oversight by the doctor and a personal financial need could cause an honest bookkeeper to turn to fraud.

A situation like this illustrates just how easy it is for an owner or executive to be defrauded by the least likely suspect. It is important to be aware of red flags that fraud may be occurring, and it is even more important to implement controls and oversights to prevent even the most seemingly honest employees from committing fraud.

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