Profile of a Fraudster

Profile of a Fraudster

If you were looking at a lineup of 10 individuals and you had 10 minutes to interview each one, do you think you could identify the “fraudster”?

Having investigated fraud for almost 20 years as a forensic accountant I am fairly certain I would still find it challenging. Why is that?

There is no typical profile of a fraudster. The profile of a fraudster can vary widely and, in most cases, it is a person whom others may deem most likely NOT to commit fraud.  Having worked on many Ponzi schemes, the last thing the investors are thinking when they invest is that the person convincing them to invest is a fraudster and many times still do not believe it when the scheme is uncovered.  The profile of a fraudster can vary widely, as individuals who commit fraud come from diverse backgrounds, industries, and demographics, and can have completely different personalities.

That being said, there are some more common traits and motivational factors that come into play when identifying people associated with fraudulent activity. Below are some of those common characteristics:

1. Personality Traits

• • High Risk Tolerance: Fraudsters often display a high tolerance for risk and are willing to take chances for personal gain and they often do not fear getting caught.
  • Sense of Entitlement: Many fraudsters feel entitled to what they are taking, believing they deserve it for reasons such as being underpaid, overlooked, or mistreated. They tend to justify their behaviors, even when they are harmful or questionable, to maintain a positive self-image and avoid taking responsibility.
  • Low Empathy: Fraudsters often lack empathy for their victims, viewing their actions as a way to overcome financial struggles or personal dissatisfaction without considering the harm done to others.
  • Confidence and Charm: Some fraudsters are highly persuasive, using charm or manipulative tactics to convince others to trust them or to hide their true intentions.
  • Narcissism: Some fraudsters may display narcissistic tendencies, such as a sense of entitlement or grandiosity. They may believe they are smarter or more deserving than others and feel justified in deceiving people. They justify their behavior by shifting blame to the victim.
  • Psychopathic or Sociopathic Traits: Some fraudsters exhibit psychopathic or sociopathic tendencies, including a lack of emotional connection with others, manipulative behaviors, and a propensity for exploiting situations to their benefit without feeling bad about it. 

2. Demographic Traits

• • Age: Fraudsters can range in age from young adults to older individuals. However, middle-aged professionals, often with a significant amount of experience or authority, are particularly common in white-collar crime.
  • Gender: Fraudsters can be of any gender, though studies suggest a higher incidence of fraud in males, especially in large-scale financial crimes. However, women may commit fraud in certain industries, such as retail, where it can be more opportunistic.
  • Socioeconomic Status: Fraudsters come from all socioeconomic backgrounds. However, those in more affluent or professional positions may commit fraud due to financial stress, greed, or a sense of entitlement, while others may commit fraud as a means of escaping poverty or debt.
  • Occupation: Fraudsters often hold positions of trust, such as accountants, managers, or executives, where they have access to financial systems or sensitive information that can be manipulated.

3. Behavioral Traits

• • Dishonesty: Fraudsters tend to engage in lying, deception, and manipulation in their personal and professional lives. They may fabricate details, alter information, or misrepresent facts to gain an advantage.
  • Secretive: Fraudsters are often secretive about their actions and may go to great lengths to hide evidence, such as altering documents, creating false reports, or covering up digital traces of their activities.
  • Opportunistic: Many fraudsters take advantage of opportunities when they arise, exploiting weaknesses in systems or organizational controls. They may be highly aware of how to game the system, often engaging in small, seemingly harmless acts that gradually escalate.
  • Lack of Conscience: While some may feel a temporary sense of guilt, many fraudsters do not have strong moral objections to breaking the law, especially when they perceive the crime as victimless or justified by external pressures (e.g., financial struggles).
  • Lack of Ethical Boundaries: Fraudsters may not have a strong sense of ethical boundaries, viewing their actions as justifiable under certain circumstances or considering the consequences as irrelevant. Their moral compass may be skewed by their desire to succeed or obtain resources at any cost.
  • Escalation of Commitment: Once a fraudster starts down a path of deceit, they may become more committed to maintaining the lie or crime to avoid the consequences of being caught. This can result in increasingly risky behavior as they try to cover up their original fraudulent actions.

4. Motivational Factors

• • Financial Stress or Greed: Many fraudsters are motivated by financial pressures, such as debts, lifestyle desires, or an urgent need for money. For others, the motivation is pure greed — a desire to accumulate wealth or live a lavish lifestyle.
  • Workplace Dissatisfaction: Some fraudsters commit crimes due to frustration or dissatisfaction with their work environment, such as feeling underpaid, overlooked for promotions, or mistreated by their employer.
  • Addictions: A sizable number of fraudsters are driven by personal addictions, such as gambling, drug use, or alcohol, which lead them to seek illegal means to fund these habits.

Conclusion

Fraudsters come in all shapes and sizes, and they can blend in within any environment. Recognizing a fraudster involves understanding the personality, demographic, behavioral traits, and motivational factors. And while these traits can characterize many fraudsters, it is important to note that fraud can be committed by individuals from all walks of life, and not all fraudsters will show all of these traits.  For example, the fraudster may not have any of the personality traits noted above, but just the demographic or motivational factors may be the driving force. I have investigated fraudsters whose personality is the opposite of charming, narcissistic, and entitled. Fraudsters sometimes can be very humble and shy, but the motivational factor of an addiction or even the loss of a job by a spouse can be the reason for the individual participating in fraudulent activity with the intention that they will eventually pay the money back. So whether you are investing in what sounds like a great opportunity or are in a situation where you are relying heavily on someone to handle the finances and the accounting always be cognizant of the certain personalities, behaviors and motivations of those you are trusting.