MT EXPERT: How to spot a fraudster

We all like to think we can trust our employees, says Zolfo Cooper's Paul Huck - but sometimes a bad egg slips through the net.

by Paul Huck
Last Updated: 18 Dec 2013

No business can survive without the people who manage it day-to-day. From the very top of the organisation, through the senior, middle and lower management ranks, to those people at the coal face, they are all important. But while most spend their days working quietly, sometimes there are one or two who abuse the trust, authority and opportunity of their roles for personal gain.

In a high-pressure environment and/or during a recession, even members of staff with high moral standards, especially ones faced with a change in personal circumstances, may commit fraud.

Using examples of individuals from high profile investigations, we've looked at the character types most likely to commit fraud.

The business owner - 'It’s my way or the highway'

This fraudster is likely to have a lavish or expensive lifestyle that needs financing. The business owner will often ignore the fact that the company has other shareholders and that they have a duty of care to other stakeholders. This person sets the culture of the organisation and is able to override internal controls without being questioned.

Examples: Allen Stanford, Bernie Madoff

The senior manager - 'I’m doing it for the business'

Senior managers may start on the wrong path by bending the rules to get the business or department ahead, which can later lead to a more defined personal benefit. Employees at this level are entrusted with business secrets and are able to override internal controls without being questioned.

Examples: Bernie Ebbers, Chris Moore, Asil Nadir

The star employee - 'I’m due this; I deserve it'

Overconfident in their abilities, ‘star employees’ are more likely to bend the rules to achieve aims and cover up mistakes in the expectation that all will come good later. All actions are aimed at short term goals and rewards, whether financial or career-motivated. They are more willing to take risks and are likely to be unaware of the consequences of their actions.

Examples: Nick Leeson, Kweku Adoboli, Jerome Kerviel, Bruno Iksil

The desperado - 'I will pay it back'

Often a former ‘star employee’, desperados need to continue fulfilling high expectations and are desperate to avoid being caught, rather than being driven by materialistic greed. This profile is likely to commit low-level fraud persistently, which may lead to a larger one-off fraud, depending on future incentives.

Examples: Nick Leeson, Kweku Adoboli

The ‘I want it all now’

This person is the same as the desperado, but the incentive is materialistic greed. They believe they deserve everything, and now.

Examples: Joyti de Laurey, Jacqui Bradley

The colluder

This is someone who gets involved with an accomplice (internal or external) either willingly or through manipulation. They take advantage of their position to benefit their accomplice with the promise of reward - financial or other if coerced.

Example: Adam Hauxwell-Smith

The plant

Part of, or recruited by, an organised criminal gang to gain access to particular functions, such as sales, finance, procurement or business secrets. Because of the nature of these cases, details are rarely available in the public domain.

Examples: Glasgow’s Financial Call Centres

- Paul Huck is director of the forensic and litigation Support Services team at advisory and restructuring firm Zolfo Cooper

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