What type of fraudster do you have working for you?

No organization knowingly hires a fraudster, with the odd obvious exception such as Frank Abagnale of Catch Me If You Can Fame being employed by the FBI, yet fraud accounts for approximately 5% of total revenue loss each year, according to the ACFE's Report to the Nations. To effectively identify potential fraudsters within an organization, it’s crucial to understand that fraudsters come in various forms, each with distinct traits and motivations. Recognizing these different types can help businesses better safeguard against financial losses and the trust violations accompanying fraudulent activities.

Fraudsters can be grouped into personality types based on common traits, motivations, and behaviours. Each type has unique characteristics, but some may overlap, as fraudsters often display multiple traits. For example, the nicest person in the room may also be a narcissist.

Here are some common types of people who commit fraud:

1. The Narcissist

• Traits: Narcissists have an inflated sense of self-importance, an intense need for admiration, and a lack of empathy for others. They see themselves as special, deserving, and often above the rules that apply to everyone else.
• Motivation: Narcissists often commit fraud to maintain or enhance their status, wealth, and power. They view fraud as a tool to reinforce their image, and they may justify their actions as necessary to "get what they deserve."
• Example: A CEO who manipulates financial statements to project an image of success, driven by the need to be seen as powerful and successful, regardless of the harm to the company or its stakeholders.

2. The “Nicest Person in the Room”

• Traits: Charismatic and friendly, this type of fraudster uses charm to build trust and create a positive reputation. They make an effort to remember personal details like birthdays or family information and often go out of their way to be helpful.
• Motivation: They manipulate others’ trust to gain access to information, resources, or opportunities for fraud. Being seen as “too nice to commit fraud” becomes their shield, allowing them to avoid suspicion.
• Example: An employee whom everyone trusts and likes but who uses their access and goodwill to embezzle funds, secure kickbacks, or cover up unethical practices.

3. The Bitter Employee

• Traits: This type feels wronged by the organization, whether it’s due to lack of recognition, being overlooked for a promotion, or perceived unfair treatment. They may feel resentment and harbour a desire for revenge.
• Motivation: Often driven by anger or a desire for retribution, they justify their actions as "getting back" at the company. They may believe they’re entitled to compensation for the unfairness they perceive, seeing fraud as a way to “even the score.”
• Example: An employee who skims funds or leaks confidential information after being denied a promotion, feeling that the company “deserves it.”

4. The Risk Taker

• Traits: Thrill-seeking and often impulsive, the risk-taker enjoys the adrenaline rush that comes with testing boundaries. They may display a high tolerance for risk and are often drawn to challenges.
• Motivation: They may engage in fraud for the excitement, thrill, or challenge it provides. Financial gain might be a factor, but often, the primary drive is the satisfaction of outsmarting systems or rules.
• Example: A trader who engages in high-stakes insider trading or market manipulation, driven by the thrill of taking risks rather than the need for personal wealth alone.

5. The Greedy Opportunist

• Traits: Often materialistic and focused on financial gain, this person takes advantage of opportunities for fraud whenever they arise. They lack self-restraint when it comes to personal enrichment and often feel entitled to take what they can.
• Motivation: Money and material wealth. This type of fraudster sees fraud as a quick way to get ahead financially and may justify their actions as "just taking an opportunity."
• Example: An employee who discovers a flaw in the company’s expense system and exploits it for personal gain, often feels little guilt if they can “get away with it.”

6. The Moral Rationalizer

• Traits: This type may believe that they’re a good person but rationalize their fraudulent actions due to perceived injustices, societal wrongs, or systemic flaws. They see their actions as justified under the circumstances.
• Motivation: They often believe they “deserve” compensation or that the system is corrupt, and their actions are merely fair compensation or a correction of that system.
• Example: An underpaid employee who justifies embezzling funds by arguing that they “deserve it” given the company's profits and low pay.

7. The Professional Fraudster

• Traits: Professional fraudsters are often calculating, organized, and experienced in deceptive practices. For them, fraud is a deliberate and ongoing practice rather than a one-time decision.
• Motivation: Financial gain is the primary driver. They view fraud as a career or business, carefully planning their actions to maximize profit and minimize risk of detection.
• Example: A scam artist who runs elaborate Ponzi schemes, viewing victims as a source of income and frequently moving from one scheme to another.

8. The Compulsive Fraudster

• Traits: This individual often has compulsive tendencies, leading them to commit fraud impulsively, even if the monetary gain is insignificant. They may not even need the funds but find the act itself compulsive or addictive.
• Motivation: The motivation here is often psychological rather than financial. They may be seeking attention, validation, or an escape from boredom, feeling a compulsion to deceive or steal.
• Example: An employee who habitually commits small thefts or manipulates financial records unnecessarily, possibly due to psychological factors rather than genuine need.

9. The Power Player

• Traits: Dominant, ambitious, and often authoritative, the power player seeks control over people or resources. They view fraud as a tool for maintaining or expanding their influence and control.
• Motivation: Their primary motivation is power rather than wealth. They may engage in fraud as a means to reinforce their authority or manipulate others.
• Example: A manager who manipulates accounting data or metrics to strengthen their position within the company or gain control over decision-making processes.

Summary of Fraudster Types and Motivations

Each type brings unique risks to organizations and requires different approaches to detection and prevention. For instance, while traditional financial controls may deter opportunistic fraudsters, personality-based red flags (e.g., signs of narcissism or impulsivity) might help detect other types early. Understanding these diverse profiles helps organizations develop tailored strategies to identify, manage, and prevent fraud across a range of motivations and behaviours.