{"id":850,"date":"2017-10-20T15:26:00","date_gmt":"2017-10-20T19:26:00","guid":{"rendered":"http:\/\/bringingfreudtofraud.com\/?p=850"},"modified":"2017-10-20T15:26:00","modified_gmt":"2017-10-20T19:26:00","slug":"back-to-the-basics-or-here-have-a-primer-on-fraud","status":"publish","type":"post","link":"https:\/\/bringingfreudtofraud.com\/?p=850","title":{"rendered":"BACK TO THE BASICS. OR, Here, Have a Primer on Fraud!"},"content":{"rendered":"

(Blog Curator\u2019s Note: With this posting, we end a lengthy hiatus in postings on this blog, for reasons cited in the previous posting<\/a>. It is appropriate to return to some basic thinking about fraud as we resume. Dr. Sridhar Ramamoorti is founder of this blog, and the posting below is based on his definition of fraud in the SAGE Encyclopedia of Criminal Psychology<\/em>.)<\/p>\n

(By Sridhar Ramamoorti) Fraud is a violation of trust, a human<\/strong> act to deceive another so that the victim suffers a loss and the perpetrator makes an unlawful gain. Black\u2019s Law<\/em> Dictionary<\/em> is somewhat more profuse in its definition: “All multifarious means which human<\/strong> ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprise, trick, cunning, or dissembling, and any unfair way in which another is cheated.\u201d (In both definitions above, the word, \u201chuman\u201d is stressed for reasons described below.)
\nFraud is a form of theft, but not by force. The victim, in most instances, willingly gives away money or something else of value because of lies and misrepresentation and betrayal of trust.
\nFraud is also a form of deception. Deception is inherent in nature. Many living creatures survive through deception (an example: the viceroy butterfly looks like the bitter and mildly poisonous monarch butterfly). Within the human world, deception may be benevolent (think of potentially life-saving camouflage used by infantry troops). And it can also be malevolent, where deception is used for gaining money, power, prestige, or some other \u201cadvantage\u201d (to use Black\u2019s language) without compensating in some way those whose loss becomes the fraudster\u2019s gain.
\nBoth definitions of fraud include some common elements:
\n\u2022 It is committed by human beings.
\n\u2022 It is a betrayal of the trust that humans grant each other.
\n\u2022 It involves either false representations or suppression of true representations between humans.
\n\u2022 The person committing fraud gains an advantage over the victim in pursuit of self-interest.
\nThose committing fraud has been conjectured in the literature being of two types:
\n\u2022 Accidental or situational fraudsters<\/em>, who find themselves with opportunity to commit fraud and then act on that opportunity.
\n\u2022 Predators<\/em> that seek opportunity to commit fraud and then act on that intent.
\nIn all fraud case, as we point out in our book, A.B.C.\u2019s of Behavioral Forensics<\/a><\/em> (Wiley, 2013), three conditions are at play:
\nThe opportunity for trust violation, the motivation to commit the fraudulent act, and rationalization within the fraudster\u2019s mind justifying the fraudulent behavior as appropriate to the situation. (This blog centers on the latter two factors as keys to the prevention and investigation of fraud incidents.)
\nThus far, we\u2019ve looked at fraud as white collar crime that is committed by an individual. But cases abound where fraud extends well beyond the actions of one person. Our book proposes a taxonomy (way of organizing a body of knowledge) of fraud in multiple levels:
\n\u2022 The Bad Apple (one individual);
\n\u2022 The Bad Bushel (when a group of people collude in the fraud);
\n\u2022 The Bad Crop (when a whole organization perpetrates and perpetuates fraud).
\n\u2022 And one of our bringingfreudtofraud bloggers, Victor E. Hartman, has proposed an even larger compilation of people committing fraud, which we may describe as a Rigged Market! This is where multiple organizations and regulators fail to protect the public and functionally contribute to the betrayal of public trust, such as was the case with the Wall Street financial crisis of 2007-2009.
\nMost fraud prevention and investigation efforts to date have centered on how fraud occurs. This blog and its sponsoring group, The Behavioral Forensics GroupTMLLC<\/em>, <\/a>is targeting the why people commit fraud. These motivations are deeper than the usual surface assumption of greed. A highly salient ingredient of the definitions of fraud with which we started (and stressed with italics and bold print) is the mention of people. Fraud is not fraud unless a person is committing it. The more we understand why people commit fraud, the more effective we can be in preventing fraud and in investigating fraud cases. We cannot be content in asking the \u201chow\u201d question regarding the instruments of fraud; we need to be asking the \u201cwhy\u201d question—what were the motivations causing otherwise good people to do bad things?
\nFraud is also a crime where often the victim unwittingly colludes with the fraudster. Fraudsters have their psychology; so do victims, giving themselves permission to enter into a fraudulent transaction with their own sets of justifications.
\nThe psychology of fraud is a new and emerging field of study and investigation, ripe with long-term potential for helping to mitigate the incidence of fraud through a better understanding of why it is committed. Actions based on this new knowledge targeted to motivations and rationalizations can be coupled with actions to reduce the opportunity to commit fraud in a broad spectrum approach to the control of fraud.<\/span><\/p>\n

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BEHAVIORAL FORENSICS GROUPTM<\/sup> LLC<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

The\u00a0Behavioral Forensics GroupTM<\/sup> LLC<\/em>\u00a0is a team of professionals with vast experience in detecting fraud, understanding why it occurs, and in recommending steps to mitigate fraud incidence within the corporate workplace, particularly within higher-level (and therefore more costly to the enterprise) executives.\u00a0\u00a0The fields of investigation, organizational psychiatry, accounting and behavioral forensics, and law enforcement are represented within the\u00a0Behavioral Forensics GroupTM<\/sup> LLC<\/em>.\u00a0\u00a0Acting in synergy to help organizations prevent, find, and\/or reduce fraud, B4GTM<\/sup> is a premier, pioneering practice in this field.<\/p>\n

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(Blog Curator\u2019s Note: With this posting, we end a lengthy hiatus in postings on this blog, for reasons cited in the previous posting. It is appropriate to return to some basic thinking about fraud as we resume. Dr. Sridhar Ramamoorti is founder of this blog, and the posting below is based on his definition of … Continue reading BACK TO THE BASICS. OR, Here, Have a Primer on Fraud!<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-850","post","type-post","status-publish","format-standard","hentry","category-audit"],"_links":{"self":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=850"}],"version-history":[{"count":2,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/850\/revisions"}],"predecessor-version":[{"id":853,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/850\/revisions\/853"}],"wp:attachment":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}