CSI Business: How to Uncover Who Committed Fraud


Theft is every business’s worst nightmare. It doesn’t matter what gets stolen or from where it goes missing; even a small amount of theft is enough to turn a growing enterprise into a collapsing catastrophe.

Undoubtedly, the worst type of theft is financial fraud, which is the most expensive to occur, the hardest to catch, and most painful to overcome. Every year, American merchants collectively lose more than $200 billion to various types of fraud, but with swift, decisive action, a business owner can mitigate the damage of fraud and put the perpetrators behind bars ― if the perpetrators can be found in time.

Learning more about typical fraudsters can help business owners understand who is most likely to attack their business and how to protect themselves against such theft. With a little detective work, business owners can justly assign blame and work to overcome the effects of fraud.

Was It a Stranger?

An overwhelming majority of fraud cases are perpetrated by individuals or groups who have no connection to the victimized business. One study on payments fraud found that more than 76 percent of fraud attempts come from outside the organizations who suffered the attacks.

Strangers almost always access essential financial systems through digital means. Fortunately, computers save an abundance of data that can be used to accuse and locate the fraudsters. Ideally, once a business discovers that fraud has occurred, all computer systems should remain unused until they have been cleared of evidence useful to discover the guilty party, which is most likely a stranger far away.

Was It the Staff?

Fraud perpetrated by employees is common, especially amongst big businesses. However, recently internal fraud has been on the rise, and businesses can lose between 5 and 6 percent of their annual revenues to dishonest staff. Employees who commit fraud do so in number of ways, including:

  • Asset misappropriation, or the taking of anything not glued down, including office supplies, merchandise, and even cash money.
  • Corruption, or the taking of bribes or kickbacks.
  • Financial statement fraud, or the falsifying of financial statements for gain, as in the infamous cases of Enron and WorldCom.

Businesses should always suspect that employees are committing fraud. Education is one of the most potent antidotes for internal fraud, and teaching staff what constitutes fraud and how the company handles fraud ― i.e. reports to the authorities ― should dissuade most staff members from participating in fraudulent activity.

Was It the Auditors?

Auditors are easy targets for accusations of fraud. They work closely with financial information and often understand better than others potential loopholes that may be exploited for monetary gain. Additionally, most businesses expect auditors to catch weaknesses that could lead to fraud before the damage occurs, and auditors’ failure to prevent fraud leads to bad feelings that can be disastrously critical.

It is true that many auditors’ main goals are to thwart fraud, and the inability to spot potential flaws in the system could indicate malpractice. However, all business owners should be careful not to put too much blame on auditors who are working hard to locate and eliminate fraud, as inappropriate accusations may lead to more vulnerability in the long run.

Was It Yourself?

Ultimately, business owners will almost always share some of the blame for successful fraud. It is entirely possible to protect one’s enterprise from the vast majority of fraud attacks. From the start, a business should focus on security, both digital and physical, to protect its assets. It is wise to hire a professional forensic accounting firm to routinely survey fraud prevention tactics and enact new, improved strategies for counteracting attacks. Business owners have the responsibility to protect their enterprises from fraud in every possible way, and a failure to do so brings the blame onto them.

The Mind of a Fraudster

Fraud is a crime committed everywhere and by anyone. In fact, in comparison to other criminals, fraudsters are distinctly diverse and therefore difficult to discern from the rest of the law-abiding population. For example, those who commit fraud are likely to be highly educated, more religious than average, rarely abuse alcohol or drugs, and generally abstain from other types of criminal activity. Fraudsters are slightly more often male, but considering 30 percent of fraud perpetrators identify as female (compared to 3 percent of most other criminals), the genders are relatively balanced in fraud.

However, the reasons individuals commit fraud remains almost identical from case to case. All fraudsters experience the fraud triangle, which includes a perceived pressure to be dishonest, a perceived opportunity to succeed in theft, and a rationalization of their corrupt behaviors.

Business owners have almost no way to prevent the fraud triangle from developing, but they can protect themselves with smart business choices, trustworthy employees, and steadfast security systems. Then, their chances of suffering the destructive effects of fraud are incredibly low.

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