- Fraud is on the rise and is often very costly for victims.
- Gambling and financial pressures may encourage a trusted professional to commit fraud.
- Paul Andon FCA is speaking at CA ANZ's Business Valuation and Forensic Accounting Conference 2018 in Sydney on 13-15 August.
Fraud is on the rise and high profile cases are often very costly for victims. The 2011-2012 case involving ING and a Sydney-based female accountant saw the multi-national insurance and finance company defrauded of A$43m.
Paul Andon FCA is an associate professor in the School of Accounting at the University of New South Wales whose research focuses on how individuals involved in fraud sustain their offending over long periods. His research examines case studies in the accounting profession and investigations into whistleblowing incentives.
Typical offender behaviour
Andon notes that high-profile surveys suggest that fraudsters typically tend to be middle-aged, white-collar professionals. Andon highlights the need to understand the personal situation and professional circumstances that compel individuals to commit fraud.
“Situation is as much an important factor as the individual themselves,” he says. “People can be coerced. People may not necessarily be the kind of sociopathic type that may wish to engage in criminal behaviour but may still find themselves in a position where they feel like fraud is a necessity to deal with a personal problem.”
Most people who commit fraud have experienced significant trauma.
Andon’s research suggests that gambling has been a common driver of fraud and given rise to the “crisis responder”.
“A lot of people who engage in offending are doing so out of a feeling of necessity because, for example, they have a gambling problem, or because there are problems financially at home,” he says. “Fraud is seen as the only way out of their quite immediate and pressing financial problems.
“There are profiles around a typical offender but our research tries to push the fact that, depending on the situation, any character type or any personality type can be susceptible to finding themselves in a situation where they may look to commit fraud.”
An individual’s environment and personal circumstances need to be considered when analysing the drivers of economic crime.
“A lawyer may find themselves in trouble professionally because they are not getting the revenue they need to keep their business afloat,” says Andon. “So they may look to source funds from their trust accounts to try and prop up the business.”
Individuals involved in crimes of necessity can be categorised as crisis responders, opportunity takers, opportunity seekers or deviant seekers. Andon is yet to find a trend favouring either long-term or short-term fraud.
“It can be a range of different sorts of pressures that people can experience that might lead them down what we call a ‘crisis responder’ driver to fraud,” Andon says.
Andon recalls a case that involved a married couple and battered wife syndrome. To deal with the pressure from her husband, the wife attempted to gain greater financial means to please her spouse and turned to fraud in an attempt to fund a better lifestyle.
Fraud can go undetected for long periods when perpetrators incrementally siphon funds from their victims over time. “So much fraud goes unreported,” Andon says. “Of the frauds we have looked at, which we put under the umbrella of ‘serious workplace fraud’, some can go on for a long time, decades even.”
While Andon doesn’t sympathise with white-collar criminals, his research leads him to believe that most people who commit fraud have experienced significant trauma.
“For the ordinary person it’s not necessarily this social psychopath that we are talking about when we are talking about fraud offenders,” he says.
“Many of them are everyday, otherwise upstanding people and for some reason they have found themselves in a situation where they have cooked the books or engaged in fraud offending. They are stuck in that situation and it’s not something they can unwind easily. It can be quite a stressful situation.”