There is no easy answer to the problem of fraud.

There is no silver bullet to stop fraudsters


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What does a fraudster look like?


Jennifer Wilson, Macquarie University

A common stereotype of fraudsters is that they are psychopaths. That fraudsters are considered manipulative, callous and remorseless is understandable, considering the consequences of fraud. The Conversation

But these traits are not necessarily typical. Different people commit different types of fraud in different circumstances.

I reviewed decisions handed down in fraud trials and found that some fraudsters were completely remorseful, some were partly remorseful and others showed no remorse at all. Several fraudsters I interviewed described distress at violating their morals. One fraudster spoke of his regret at causing harm to his victims.

False stereotypes of who fraudsters are, and why they do what they do, could lead us to go after the wrong people.

Stereotypes aren’t helping

That the “typical” fraudster is a middle-aged male manager is another stereotype. But this does not explain two of the largest frauds by individuals in Australian history, both committed by women – Rajina Subramaniam (A$45 million) and Sonya Causer ($20 million).

Theories about fraud offer little help in predicting fraudsters. The dominant theory, The Fraud Triangle, presents fraud as comprising motive, opportunity and a justification.

But it says nothing about who will have both a motive for fraud and decide to commit fraud.

An adaptation of The Fraud Triangle, The Fraud Diamond, adds an extra element – capability. The rationale is that some level of capability is needed to identify and exploit an opportunity for fraud.

But, as I will explain later, this also is too simplistic.

How to spot a fraudster

Opinions differ on whether fraudsters are different from the rest of us and, if so, what makes them different. Some fraudsters who offend to protect their employers are highly conscientious, irresponsible and lack regard for social norms. In contrast, fraudsters who offend for their own benefit have been found to be narcissistic and lacking conscientiousness.

Some fraudsters have gambling addictions, but not all addicts commit fraud. Some researchers question whether gambling may sometimes be an excuse rather than a reason for fraud.

One of the fraudsters I interviewed described feeling desperate to provide for his family after some investments went bad. He said his shame about his crimes would prevent him from re-offending. Another said he would not re-offend because the risk of a criminal record could prevent him from providing for a family if he had one in future.

The varied results from all this research show the folly in picking just one metric to try to identify a fraudster. Organisations that screen using only criminal records, for example, may wind up hiring more risky, rather than less risky, employees.

Anyway, most employees convicted of fraud do not have prior criminal records and may never re-offend.

Career fraudsters may not show up in a criminal records check. Some are smart or lucky enough not to be convicted, charged, or even caught. Previous employers may not realise they have been victimised. Employers may also decide not to involve the authorities to avoid bad publicity.

So what do you do?

So how do organisations predict which employees might commit fraud when there is no reliable psychological test to screen them?

Employers need to start by avoiding what psychologists call a fundamental attribution error – focusing on characteristics of individuals while ignoring the effect of environment on their behaviour. This means that to predict who is likely to commit fraud, we need to understand the effect of fraudsters’ environments.

I have created a model to explain how different factors, involving both the potential fraudster and their wider context, may influence different stages of fraud in different ways.

As you can see, there is no one thing we can point to that leads to fraud.

To illustrate the model using the capability element of The Fraud Diamond, an incompetent manager may start falsifying financial statements to disguise his or her mistakes. A lack of capability is no barrier if organisations have poor accounting controls. A smart fraudster may steal more money over a longer period than a less capable fraudster. He or she may also avoid detection altogether.

There is no silver bullet to stop fraudsters. Predicting who is likely to commit which type of fraud under which circumstances would involve comparing a lot of people in the same circumstances who offend and
with those who don’t. But we don’t yet have the data to do this.

If employers want researchers to tell them which employees are likely to commit fraud, they need to help by reporting fraudsters to the authorities instead of sweeping their offences under the carpet. Researchers need to understand that someone who steals repeatedly may have more in common with a kleptomaniac than a serial killer.

In the meantime, we all need to consider that someone who steals to pay for medical treatment for a dying relative may have little in common with a billionaire Ponzi scheme operator.

Jennifer Wilson, Combined PhD / Master of Organisational Psychology candidate, Macquarie University

This article was originally published on The Conversation. Read the original article.

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Making companies pay for failing to prevent employee fraud

Making companies pay for failing to prevent employee fraud


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Australia’s employee fraud problem needs a new approach.


Jeanette Van Akkeren, Queensland University of Technology

The high cost of organisational fraud in both private and public sectors in Australia continues to haunt organisations, particularly fraud committed by “trusted” employees. The Conversation

Cases prosecuted this month include former Sydney Ferries CEO Geoff Smith, who was sentenced to more than three years jail for a corporate credit card spending spree, and former Burke Shire Council deputy CEO Frederick Aqvilin, who is alleged to have illegally transferred more than A$1 million of council monies to his own account.

Spectacular cases in recent history include A$45.3 million stolen from ING by an employee over five years, and A$16.4 million stolen from Queensland Health, and later attributed in part to poor supervision and management.

Often even more damaging are financial crimes committed by groups of senior executives working in collusion within large organisations – frauds that are usually very difficult to detect.

Who can forget HIH, One.Tel and Clive Peeters? And then there’s the evolving Commonwealth Bank and ASIC fraud scandal in which the activities of dodgy financial planners led to thousands of people losing their life savings.

Multiple victims

The victims of fraudulent acts are not only shareholders or customers of the company; innocent employees are at risk as they can lose their jobs as a consequence of these crimes.

Then there are those who have missed out on aid from a not-for-profit organisation where a major fraud has been perpetrated. According to accounting firm BDO’s 2014 Not-For-Profit Fraud Survey, 70% of organisations that experienced fraud in the previous two years had suffered fraud in the past. This suggests many organisations had failed to implement fraud prevention policies.

KPMG reports that, although managers commit less fraud overall, the cost of a single incident can be hundreds of millions of dollars. Determining the overall cost of fraud to a nation like Australia is almost impossible as more than 50% of cases are never reported. This means the true cost is at best, an educated guess.

Accountability in the UK and beyond

Recently, and in response to the ongoing problem of corporate crime, UK Attorney-General Jeremy Wright has considered bringing in a new offence of “failure to prevent financial crime”.

The proposed reform to the UK Bribery Act could result in companies being found guilty of financial offences regardless of whether the board knew about them, making it an offence if a company is found to have failed to prevent financial crime.

The fallout for companies, should this reform pass through parliament, is the potential of multi-million pound fines and reputational damage should rogue employees commit fraudulent acts that were preventable. This is in addition to legislation already enacted that places strict and heightened liability upon companies, directors and individuals for bribery-related acts when carrying out business in the UK.

The implication for Australian and other international organisations doing business in the UK is that the Bribery Act has extensive territorial scope, making them equally liable and exposed to prosecution for failure to prevent bribery, regardless of where the misdemeanour occurred. Therefore, if the reform is passed, Australian organisations doing business in the UK would also be open to prosecution if it could be shown that inadequate systems and weak control measures contributed to the crime when it occurred.

Organisations may argue that they are compliant with the Foreign Corrupt Practices Act (FCPA) or local laws such as CLERP 9 rules sitting under the Corporations Act, but this alone does not constitute immunity under the UK Bribery Act or, for that matter, with the US Sarbanes-Oxley Act.

Are Australian legislators doing enough?

The Corporations Act, passed in 2004, developed rules relating to financial disclosure, whistleblowing and remuneration for directors and executives and is relevant to company directors of small and large organisations. They are legally enforceable auditing standards, which have shifted the emphasis on fraud controls back into the corporate governance arena.

However, 10 years on there has been little change in the corporate fraud climate in Australia with cases continuing to emerge. The UK Bribery Act and proposed reform, alongside the tightening of the Sarbanes-Oxley rules in the US place greater emphasis on fraud prevention, compliance and corporate governance than currently exists in Australia.

The crackdown on organisational bribery and corruption by international legislators shows a growing intolerance of less than honest corporate practices.

Improving and strengthening governance and other control measures to minimise corporate fraud may spawn the next wave of legislation and force companies to take their fraud prevention strategies more seriously. It remains to be seen if reform to the Bribery Act is passed, and whether Australia adopts a similar legal principle. Regardless, unless organisations become more vigilant, proactive and transparent on minimising fraud, legislators may just force compliance upon them.

Jeanette Van Akkeren, Senior Lecturer in Forensic Accouning, Queensland University of Technology

This article was originally published on The Conversation. Read the original article.

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How Facebook could be threatening your romantic relationship

How Facebook could be threatening your romantic relationship

Sam Carr, University of Bath

Deciding whether technology is “good” or “bad” can be like trying to decide the same thing about food. That is, it’s pretty obvious that it’s good in some ways and bad in others. But we need to be mindful of both as we tumble deeper into a digital age. The Conversation

Some argue that technology has an immensely positive influence on our closest relationships. Facebook CEO Mark Zuckerberg claims that “when people are connected, we can just do some great things. We have the opportunity to bring the people we care about closer to us. It really makes a big difference.”

This is true. But we shouldn’t be too quick to generalise. Technology can also have a toxic effect on intimate relationships, one of which is Facebook’s own potential to exacerbate romantic insecurity.

The key features of insecurity are mistrust in a partner’s loyalty and fidelity; a deep rooted fear that they will abandon us, and a hyper-vigilance or awareness of potential threats to the relationship. It’s our psychological response to the fact that, on some level, life’s cruellest paradox is that those we love the most could (and often do) hurt us most deeply.

Insecurity can be a pervasive and enduring trait in some people but it can also vary in response to triggers (real or imagined) that heighten it. It has been well established as a driving force behind relationship conflict and disharmony because people are compelled to cope with it by seeking unreasonable levels of certainty, exerting excessive control, and punishing significant others for perceived wrongdoings.

It would be simplistic to suggest that technologies such as Facebook cause romantic insecurity. People were insecure long before social media came along. But it is important to explore how insecurity is intensified or shaped by a social media platform that facilitates an unprecedented degree of fusion between partners’ social networks.

Facebook – which started life comparing the appearance of Harvard students – gives couples access to multiple features of their partner’s social life. This includes a visible list of “friends” (raising questions such as “Why is he friends with her?”, “Why is she still in touch with her ex?”); documented public interactions with such “friends,” and pictures, comments, likes, and posts, each of which can be all too easily surveyed and scrutinised. This can serve as excellent fodder for the insecure mind that is hyper-vigilant to potential relationship threats.

A recent anthropological study revealed that some young people are indeed finding that Facebook permits a level of access to partners’ social interactions that fans the flames of romantic insecurity to uncomfortable levels.

One participant told of her reaction to seeing that her boyfriend had written a message in Italian to a girl on Facebook. Suspicious that she was being cheated on, she used translation software to understand the words, spent two hours “Facebook stalking” the mystery girl to find out what she looked like and who her friends were, and then eventually realised that, in fact, her “rival” had a boyfriend of her own. At this point, the suspicious girlfriend decided to stop using Facebook.

The same study highlighted that young people felt confused and conflicted about whether they were actually insecure people in the first place, or whether Facebook had played a major role in generating their insecurity.

Insecurity settings

Many suggested that insecurities frequently arose over issues they simply would not (and should not) have known about, had they not had a platform for such pervasive scrutiny and surveillance of their partner’s social lives.

One contributor commented: “I couldn’t decide whether it was the fact that I checked Facebook that triggered my not trusting him, or I already didn’t trust him, and Facebook just perpetuated it.”


Too much information.


Larger studies have supported the idea that Facebook seems to bring out the green eyed monster, arguing that it exposes people to ambiguous information about their partner to which that they wouldn’t otherwise have had access.

One of the fundamental ways that technology has changed society is by facilitating our surveillance of one another. It has been argued that we are now firmly living in an age of surveillance. But there must be a line, beyond which we pay a price for such a high degree of surveillance, such as human rights infringements and excessive invasion of privacy.

Facebook delivers a language of surveillance into the realms of young people’s relationships, changing how people relate. Some are finding that there is a line to be drawn here too, and that the psychological cost of excessive access to romantic surveillance includes a thriving sense of insecurity.

Sam Carr, Lecturer in Education, University of Bath

This article was originally published on The Conversation. Read the original article.

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Media – ‘Sleuthing out the truth’

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Why Australia needs to change its view of organised crime

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Are authorities too focused on the usual suspects and missing the new and emerging markets in organised crime?
AAP/Adam Marsters


Terry Goldsworthy and Caitlin Byrne

Organised crime costs Australia approximately A$15 billion per year. The federal government’s campaign against the ice menace highlights organised crime’s danger to wider society. The Conversation

International law enforcement agencies such as Interpol have recently highlighted organised crime’s changing nature. So what is “organised crime” and how has it changed? Are authorities too focused on the usual suspects and missing the new and emerging criminal markets?

International perspectives on defining organised crime

Law enforcement agencies have often been more focused on activities or enterprises of organised criminals rather than the markets that exist within the organised crime world.

International policing organisation Interpol frames its discussion of organised crime in terms of criminal activity:

Organised networks are typically involved in many different types of criminal activity spanning several countries. These activities may include trafficking in humans, illicit goods, weapons and drugs, armed robbery, counterfeiting and money laundering.

The UN Convention against Transnational Organised Crime suggests that organised crime groups have a number of elements. These include:

  • a group of three or more persons that was not randomly formed
  • existing for a period of time
  • acting in concert with the aim of committing at least one crime punishable by at least four years’ incarceration.

The motive behind any group is to obtain, directly or indirectly, a financial or other material benefit.

The Australian take on organised crime

Surprisingly, Australia’s National Organised Crime Response Plan does not define the concept of organised crime. However, it does identify six main threats:

  • ice use
  • growing use of technology to facilitate crime
  • criminal targeting of the financial sector
  • professional money laundering
  • illicit trade and use of firearms
  • the prominence of entrepreneurial individuals in illicit markets.

A number of pieces of legalisation help frame how Australia defines organised crime. These include the Australian Crime Commission Act and the Queensland Crime and Corruption Act.

The New South Wales Crime Commission defines organised crime as including serious crime committed in a systemic, organised or sustained way, that would likely have a significant impact on the community and involve substantial proceeds.


Elements of organised crime in Australia.
Terry Goldsworthy


Is Australia looking at the right players?

Since 2013, Queensland has been targeting crime committed by outlaw motorcycle gang members, or bikies. Earlier this month, South Australia proposed similar laws to Queensland’s. State Attorney-General John Rau argued that these laws target organised crime.

However, a snapshot of bikies’ organised crime activity in Queensland may suggest that too many resources are being devoted to what could be best described as low-level players.

Data I have obtained from the Queensland government show that bikie gang members were found guilty of 4323 criminal charges between April 2008 and April 2014. In the same period, 2,537,223 total offences were reported to police. This means that bikie gang members were found guilty of 0.17% of reported Queensland offences.

The picture does not overly improve when organised crime-type offences are considered. Bikie gang members’ involvement is insignificant in totality.

Money laundering has rightly been considered as being at the centre of organised crime, yet not one charge of money laundering was made against a bikie gang member in six years in Queensland. Most of the crime that bikie gang members committed simply does not fit the nature of organised crime offences.

This focus on the easy targets has seen other highly profitable organised crime groups flourish. An ABC 7.30 report recently uncovered “boiler rooms” – sophisticated fraud operations that are running virtually untouched in Queensland. One insider claimed they were earning hundreds of millions of dollars.

Their discovery prompted the head of the fraud squad, Brian Hay, to call the Gold Coast a crime “mecca”. These criminals weren’t riding Harley Davidsons. They were working the phones.


Organised crime activity of bikie gangs in Queensland, April 2008-April 2014.
Terry Goldsworthy, information drawn from data obtained by Right to Information.


A new world of criminal opportunity

In its 2015 organised crime report, the EU’s law enforcement agency, Europol, called for a new definition of organised crime. It observed:

The group structures that dominate fictional representations of organised crime are disintegrating and will increasingly give way to an organised crime landscape dominated by loose networks made up of individual criminal entrepreneurs who interact and conduct their business in a shared, and often digital, criminal underworld.

The United Nations Office on Drugs and Crime has recognised that organised crime has diversified and become more transnational:

Organised crime is not stagnant, but adapts as new crimes emerge and as relationships between criminal networks become both more flexible and more sophisticated, with ever-greater reach around the globe.

Queensland is holding a commission into organised crime to re-align its strategy and focus in combating it. The NSW Crime Commission acknowledges:

Organised crime groups undertake a wider range of criminal activities with greater complexity.

Today’s organised crime occurs through loose and undefined networks made up of criminal entrepreneurs and freelancers with little concern for group branding or loyalty. Their business model is increasingly digital, concealed by legitimate activity and global in reach.

Australia’s geographic isolation is no longer the buttress that it once was. Globalisation has made us an attractive and available target, as Prime Minister Tony Abbott recent noted. Australia’s approach to organised crime must move in sync with global activity and must be evidence-based.

Terry Goldsworthy, Assistant Professor in Criminology and Caitlin Byrne, Assistant Professor, International Relations

This article was originally published on The Conversation. Read the original article.

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