Fraud Detection: 41% of Fraudsters Exhibit Behavioral Red Flag ‘Living Beyond Means’
The fraudsters always have the motive behind their actions, which previously exhibited by certain behavioral red flags. Based on survey results presented in the 2018 Nation on Occupational Fraud and Abuse report, from 85% of occupational fraud cases, the perpetrators exhibited at least one behavioral red flag and 50% of it exhibited multiple behavioral ones.
Understanding such behavioral red flags helps us in preventing and mitigating occupational fraud. Based on the results of the survey, there were seventeen behavioral symptoms found in occupational fraud case studies. Here are six of the most common ones:
- Living beyond means (41%)
- Financial difficulties (29%)
- Unusual relationship with a vendor or a third party (20%)
- Control issue – do not want to share a job (15%)
- Divorce / family issues (14%)
- A wheeler-dealer attitude (13%)
Employee (44%) is the most common fraudsters of occupational fraud based on the survey, followed by manager (34%), owner / executive (19%), and others (3%). However, an owner as the fraudster could cause the costliest damage with a median of up to 850000 USD.
Interestingly, most of the offenders have no prior criminal record. Based on the same report, only 4% of the fraudsters were convicted for their crimes. This suggests that most fraudsters commit the action for the first time.
However, other data showed that between 58% and 69% of occupational fraud cases have never been reported to the authorities. Generally, companies do not want any bad publications because of the case. Like the iceberg phenomenon, the number of perpetrators recurring is likely to be more than those who were identified through the conviction.