Preface xiii
Acknowledgments xix
PART I: OCCUPATIONAL FRAUD AND CORRUPTION
Chapter 1: Introduction to Occupational Fraud and Corruption and Recent Trends 3
Deception through Breaching Trust 4
Global Trends in Occupational Fraud 4
The Cost of Occupational Fraud and Corruption 6
Types of Occupational Fraud 8
Early Fraud 10
The Fight against Fraud 12
Profiling as a Solution 13
Chapter 2: Types of Occupational Fraud and Corruption 15
A Myriad of Fraud Schemes 16
Cybercrime 17
Chapter 3: What Is Fraud and More Specifically Occupational Fraud? 21
The Association of Certified Fraud Examiners’ Definition 22
The American Institute of Certified Public Accountants’ Definition 23
Statement of Auditing Standard No. 99 Definition 23
The Institute of Internal Auditors Definition 24
Duration of Fraud Schemes 25
Chapter 4: Corruption 27
The Geography of Corruption 28
The Fight against Corruption 31
Corruption and the Public Purse 33
Cultural and Legal Influences on Corruption 34
Chapter 5: Normative Crime Analysis and Investigative Psychology 37
Fraud Is Not a Norm 37
Investigative Psychology 40
Chapter 6: The Fraud Triangle Becomes the Fraud Diamond: A Journey through the Theory 43
The Fraud Triangle 44
Fraud Risk 45
The Theory Shaping Early Fraud Profiling 45
PART II: PROFILING THE FRAUDSTER
Chapter 7: Using Profiling in the Fight against Crime and Occupational Fraud 53
The Mind of Adolf Hitler 53
Development of the Psychology 55
Modeling 57
Modeling in Fraud Detection 59
Chapter 8: Criminal and Fraud Offender Profiling 61
The Criminal Mind-Set 61
Investigative Psychology 64
Fraud Offender Profiling 64
Profiling Challenges 67
Chapter 9: Behavioral Warning Signs or Red Flags 71
How Red Flags Help Us Discover Fraud 73
Management Red Flags 73
Changes in Employee Behavior Representing Red Flags 74
Fraudsters Living beyond Their Means Exhibit Key Red Flags 74
Red Flags in the Accounting System 76
Behavioral Characteristics as Red Flags to Fraud 78
Chapter 10: Motivation and Opportunity as Key Indicators 85
The Motivation 85
The Opportunity 92
Chapter 11: Profiling Individual Behavior and Characteristics of a Fraudster 95
Perpetrator’s Gender 97
Perpetrator’s Age 99
Perpetrator’s Tenure 101
Perpetrator’s Education Level 104
Behavioral Red Flags Based on Perpetrator’s Position 109
Behavioral Red Flags Based on Scheme Type 109
Behavioral Red Flags Based on Department 110
Chapter 12: Profiling the Fraudster’s Position and Department 113
Perpetrator’s Position 114
Perpetrator’s Department 117
Chapter 13: Profiling the Fraud Methodology or Modus Operandi 123
Collusion 124
Position of Employment Creates the Opportunity 126
Many Ways to Defraud an Organization 128
Chapter 14: Profiling the Victim Organization and Its Geography 133
Fraud Victim Organizations by Geographic Location 134
Corruption Cases by Region 136
Types of Fraud Victim Organizations 136
Size of Fraud Victim Organizations 136
Methods of Fraud in Small Businesses 138
Industry of Fraud Victim Organizations 140
Corruption Cases by Industry 142
Chapter 15: Profiling the Consequences 147
Legal Proceedings and Loss Recovery 148
Losses Recovered 149
An Often Unconsidered Consequence 151
Chapter 16: Using Case Studies for Profiling Fraudsters 153
Why Reinvent the Wheel? 154
Some High-Profile Fraud Cases 155
Chapter 17: The Use of Offender Profiling in Forensic Investigations 165
Collation of Information 165
Fraud Crime Intelligence 166
Intelligence-Led Investigating 168
The Value of Offender Profiling 168
Improved Internal Controls 170
PART III: BUILDING A FRAUD PROFILING METHODOLOGY FOR YOUR ORGANIZATION
Chapter 18: Profiling as Part of Your Sound Antifraud Program 175
Antifraud Controls at Victim Organizations 176
Antifraud Controls in Small Businesses 178
Antifraud Controls by Region 179
Effectiveness of Controls 179
Control Weaknesses That Contributed to Fraud 181
Types of Offender Profiling 186
Chapter 19: Information Sources and the Role of Data Mining 189
Forensic Profiling and the Use of Data Mining 190
Supervised and Unsupervised Learning 192
Privacy and Ethical Concerns Surrounding Data Mining 193
Contributing to the Profiling Mechanism 193
Chapter 20: Fraud Profiling Your Organization 197
Personal Particulars of the Offender 198
Obtaining Modus Operandi Information 198
Determine the Motive of the Offender 199
Opportunity 201
Red Flags 203
Lifestyle Change 203
Chapter 21: The Process of Developing a Fraud Profile 205
Development of a Fraud Risk Assessment 206
Development of the Fraud Profile 213
Development of a Fraud Detection Net 216
Chapter 22: The Role of the HR Recruitment Process in Profiling 223
Perpetrator’s Criminal History 224
Perpetrator’s Employment History 224
Controlling Human Risk 225
Effective Human Performance 226
HR Departments Closing the Door on Fraud 226
The Curriculum Vitae: Fact or Fiction? 227
Bibliography 231
About the Author 237
About the Association of Certified Fraud Examiners and the Report to the Nations on Occupational Fraud and Abuse 239
Index 243
