A thief with a lying smile
People are your biggest asset, the saying goes, but they are also your biggest risk, and most companies do not want to know about it. Fraud is the word most employers never want to hear. But in most cases they would not know what to listen for even if they started trying to hear it. It could be someone who takes no annual leave for fear of being discovered, or the enthusiastic and personable accountant who is paid less than they think they deserve. But tell-tale signs are not always there and the environment for fraudsters is changing along with technology, economic times and society itself. For lawyers, accountants, police and the small business owner, the ability to identify a fraudster needed to be backed up by the ability to pinpoint where the truth finished and the lying began. American interrogation expert Don Rabon says the window into any type of fraud is a human one and it takes certain skill to see everything you can in it. "There's something about people telling the truth and there's something about people who are not, but we can't just say I've got a feeling. They need to be able to know specifically what it is." In New Zealand with the New Zealand Institute of Chartered Accountants for a series of seminars, Mr Rabon says the best interviewers in the world are the United States Secret Service, simply because they know how to observe behaviour. "They are always looking at people. If you look at some other interviewers, they are more looking at paper than at people." Deloitte forensic accounting partner Barry Jordan says number crunching and audit techniques are instilled in accountants, but at some point in their careers they are expected to know how to interview people. "It's really relevant now, because what the world has been going through in the past few years, issues like fraud are coming to the surface far more regularly. "Fraud is all about people. We have to make sure our skills are the best they can be. It's no good for forensic accountants or investigators to sit in the back room and pore over papers we have got to interact with people." Economic crime is changing, with the data on perceptions, stereotypes and incidents all shifting in recent years. The typical company fraudster was once mostly male, aged between 30 and 40 and with a high school education or less. A quarter were in management positions. More recent surveys show a higher proportion of women are being caught with their hands in the company till. Crime statistics show a 19 per cent increase in reported fraud from 2007 to 2008. Consulting firm KPMG's 2008 fraud survey shows, over the past two years, the incidents of major fraud discovered but not reported to police have increased from 17 per cent to 43 per cent. The two statistics combined indicate a large rise in the volume of fraud being detected. Mr Jordan says people are under more financial pressure personally and that was contributing to the increase. "We are certainly seeing more. Insurance companies are getting more fraud, or claims that they would not have seen before. We're going through a tougher environment so people are going to push the boundaries more." The KPMG survey shows the $25,000 average value of hardship-motivated fraud was minimal compared with other motivators such as greed or lifestyle. That kind of fraud was more likely to rack up losses closer to $800,000. The mindset behind the two drivers is likely to be a factor in the amount taken. Mr Rabon says most chronic fraudsters are eminently personable, unlike those driven to crime by circumstances. "There are some people for whom something drastic will happen in their life, and that will take an honest person and allow them to do that. [And] there are those that are just predatory, it is just what they are going to do. "For a lot of them the idea of getting something for nothing or getting one over an individual or a company is the idea in and of itself." New York financier Bernard Madoff, behind a US$50 billion (NZ$87b) fraudulent investment scheme, was one such "addict" who clearly was not motivated by financial woes, Mr Rabon says. "Had he channelled his intellect and skills into legitimate means he could have done very well and lived a great lifestyle. How many yachts does one need? How many planes does one have to have? For people like him, it never ends, the more that is on the table the more he wants. It happens all the time." Televised interviews with Madoff from 2007 show him talking about the human propensity to maximise profits through deception, and how it was impossible to do it in the regulatory environment in the US investment markets. His calm and charismatic denouncement of the very behaviour he was guilty of puts him among a class of liar Mr Rabon says is harder to get an admission from. "Pathological liars. Here is a person that believes they are telling the truth. Even if you catch that person in a lie it is like trying to pick up jelly, they'll just go off into another fantasy. The knowing liar and the pathological liar are both drawing from imagination, and so there are common linguistic signs, but when you catch a knowing liar it will have a certain emotive effect. The pathological liar just floats off into another fantasy." PricewaterhouseCoopers forensic services associate director Chris Budge says computers are creating greater opportunities for fraudulent transactions and arguably contribute to the belief that such offences are victimless.
By NICK CHURCHOUSE - The Dominion Post
WATCHOUT: Tough times can drive an increase in fraud.
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