Understanding the changing of the fraudster’s mind from sweet to sour

(by Daven Morrison, with Ken Cramer*) One of the most perplexing questions in fraud prevention is how to halt the theft before it starts.   In parallel to the challenge of helping individuals and organizations not fall victim to a fraudster, another equally perplexing challenge is how to stop a nearly invisible fraudster who steals inside an organization:  silently and secretly—without detection.

For the typical fraudster who steals enough money to be financially material and is subsequently both discovered and prosecuted, a Certified Fraud Examiner is often involved. The Association of Certified Fraud Examiners (ACFE) compiles the work of the examiners and these case compilations begin to provide illumination into the trends of fraudsters.  What the ACFE study (among others) demonstrates is the average fraudster is not a “professional” criminal.  They have not committed other felonies and are not living a life of crime.  They are average people succinctly summarized as “soccer moms” and “hockey dads” by fellow blogger, Joe Koletar.  How does one stop them?  Understanding the components of one’s decision to commit fraud lies at the heart of the problem.

In our book, The ABC’s of Behavioral Forensics, we propose that these average people are reversing or switching between their motivations.  They are not ill (mentally or physically), because they commit only fraud, and do so while keeping “everything together.”  The point at which the fraudster crosses the line is as unique to them as his/her fingerprint — it’s part of the individual fraudster’s life story — but it would be instructive if one had a theory or model of how the mind switches from obeying the law to breaking it.  Fortunately there is one:  the empirically studied Theory of Reversals.

This theory begins with a foundation that a person’s mind is always in some motivational state, but that the motivation moves back and forth between four sets of opposing continuums.  Obeying rules vs. defying (or rebelling against) them is one such continuum.  Here is an example, in the form of a joke, of switching between disobeying rules and conforming:

            A visitor to Harvard is lost. He finds himself in the middle of the campus and is disoriented as to where he needs to be. He is anxious to get to his appointment on time. He sees a student and decides to ask for help . . .

Visitor: “Can you tell me where this path leads to?”

The student is silent. She stops but doesn’t look up. Visitor (louder): “Ahem, Can you tell me where this path leads to?”

 The silence persists. The visitor is becoming angry and he clears his throat again, only louder.

“CAN YOU TELL ME WH_”

“Please do not raise your voice at me. I can hear you fine.” The student replies. Then she continues: “The issue at hand is, we are educated here at Harvard to not respond to a comment that ends in a preposition. (She pauses) I am waiting for you to finish.”

“Ok, I will.” Says the visitor.

He then calmly continues: “Can you tell me where this path leads to jerkface!”.

There are times when the rules of grammar are essential and there are times when they are not. Being able to switch back and forth appropriately is an important social skill.

This summer in their biennial International Conference, the Reversal Theorists from around the world met, and I had the honor to present our ideas on Fraud and Reversal Theory. The conference was fascinating. Invited in as a colleague, I was part of discussions of presentations with topics ranging from violent felonious assault in sports to poor health compliance to college pre-party drinking as well as the factors of unprotected sex.  Many of the topics included the same perplexing problem of individuals breaking rules despite awareness of high risk to themselves.

In investigating fraud, greed is assumed to be the motivation. Reversal theory offers a refined method to consider human motivations. As we turn our attention formally to the behavioral forensics of fraud, it is clear that the motivations are more complex than “greed”. In fact, the all too common explanation of greed obstructs our understanding of the fraudster’s motivations. Perpetrators do not see themselves as greedy when they act, and thus the concept of greed as a motivation doesn’t provide any advantage towards understanding how they see themselves.

So what was the feedback on fraud? Generally the response was very positive with encouragement to develop a method to formally assess the actual motivations of fraudsters using the model of Reversal Theory. This goal lies between now and the 18^th Reversal Theory conference in London 2017.

Join us for more insights into behavioral forensics (behind fraud and similar white collar crimes) from the authors of A.B.C.s of Behavioral Forensics (Wiley, 2013): Sri Ramamoorti, Ph. D., Daven Morrison, M.D., and Joe Koletar, D.P.A., along with Vic Hartman, J.D. These distinguished experts come from the disciplines of psychology, medicine, accounting, law, and law enforcement to explain and prevent fraud. Because we are inspired to bring to light and address the fraud problems in today’s headlines, we encourage our readers to come back and revisit us regularly at BringingFreudtoFraud.com.