Profiling The Internal “Fraudster”


Internal Auditors are obligated to be familiar with the warning signs and characteristics of fraud. Let’s take a look at how we can examine some of the characteristics of individuals who commit fraud.

Here are the following general characteristics that you can find in the profile of an individual who commits fraud within an organization:

  • Male
  • Intelligent (someone who’s bored of the routine job, and is challenged by “secure” systems”)
  • Egotistical (I usually scornful of the “obvious” flaws in the system, “dumb” managers, etc)
  • Highly Inquisitive (tempted at discovering various vulnerabilities in the system)
  • Risk taker (willing to take chances)
  • Rule breaker (will look for short cuts and loop holes)
  • Hard worker (an employee that arrives early to work and leaves late and even takes fewer vacations)
  • Stressed Out (an employee suffering from financial or personal problems)
  • Greedy or is in Financial Crisis
  • Complainer or disgruntled at work
  • Big spender (over indulges in expensive hobbies and luxurious items)

Seems like a really generic description right? If asked “who is most likely to commit fraud?” the answer would simply be about 80% of the world’s population, according to the right combination of motives, opportunities and abilities to rationalize the act.

However, an easy way to figure out how a “law-abiding” citizen would be drawn towards committing fraud is to look at the most typical motorist who speeds very often over the legal speed limit, especially if they know there are a few patrols out there. So, the motive here for speeding could depend on certain situations such as being late for work, having a fast car and the simple fact of rationalization like “everyone’s doing it, so can I, it doesn’t harm anyone, and I’ll never be caught”.

Individuals that commit fraud often think in the same way. It might start by accident like an inattentive supervisor, something that makes its way through the system without being detected or by an internal control that failed to work. The potential fraudster will test the system for any defects; once it occurs a second time, the potential fraudster will pursue the activity and thus another fraud is born. The fraudster could be anyone in the organization, it could be the mail room clerk, the CEO or anyone from the middle management level; all that’s required is rationalization, opportunity and the need to pursue the fraudulent activity.

The Association of Certified Fraud Examiners (ACFE) even published “A Report to the Nations Occupational Fraud and Abuse”. The report consists of interesting facts and statistics. For instance, most frauds are committed by white collar lower level employees who average about $60,000, however, the largest damaging frauds about $1,000,000 and more are committed by business owners or senior executives. And, larger frauds of $100,000 or more are generally committed by individuals over the age of 35. The reports can be found posted on the ACFE website.

So, that’s how you’ll find a potential fraudster. Simply follow the basic characteristics and you’ll be able to profile individuals in the organization who could attempt to commit fraud. The purpose of this article was to simply educate individuals about understanding the warning signs and characteristics of fraudulent activities and how it’s our responsibility to keep an eye on things.

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