Risk Data Fraud Stream at CCR-interactive

1. Preventing fraud: learning from the
fraudsters

2.  Started Oct 2014: 2 year project funded by
our Faculty as Strategic Project
 ‘Abuse of a position of trust for gain’
 Fraud, bribery, integrity related behaviours
 Develop of database of those sanctioned for
corruption: 476 entries
 Interview variety of those sanctioned: 17
 Psychological profile of 17

3.  Within limited study of criminals handful on
fraud and corruption (tends to be upon
internal fraud type corruption)
 Interviews with fraudsters: Cressey (1973),
Gill (2005+), Goldstraw-White (2011), other
American: All in prison, nearly all fraud
related
 Profile of Fraudsters: KPMG, ACFE etc
 Organisational cultures: Mars (1982), Ditton
(1977) etc
 Attitude Surveys

4.  Number of WCC studies which treat them as
group
 Occupational fraudsters (against employers)
 Occupational fraudsters (against clients,
contractors, state)
 Bribepayers passive (confronted with demand)
 Bribepayers active (offer bribe with no request)
 Bribetakers passive (offered a bribe without
asking)
 Bribetakers active (demand bribe)
 Conspirators (persons drawn into corruption to
support primary scheme) leaders versus pawns

5.  Analysis of interviews not complete
 Going to give you some early snippets from early analysis
of interviews
 17 include convictions/sanctions for:
 Various Fraud Act offences
 False Accounting
 Misconduct in a Public Office
 Corruption offences
 FSA sanction
 Acts engaged in include
 Employee defrauding organisation they work for
 Owner/manager defrauding investors/banks
 Bribe payer and bribe taker
 Those responsible for others engaged in corrupt acts
 Those covering up for others engaged in corrupt acts
 All interviewed outside prison

6.  Gender: 15 men, 2 women
 Age: 3 (18-40), 9 (41-60) and 5 (61+)
 Only 4 of 17 with any higher education
 Types of Corrupt:
 2 bribe payers (Active)
 2 bribe takers (Passive)
 9 abuse of position
 4 conspirators (some merge into bribe
takers/payers)
 FSA sanctioned 1 of abuse of position, but
some others involved investment related
frauds

7.  Building on tradition of Mars’s: Donkeys, Hawks, Wolves
and Vultures; and Bamfields’s: Angels, Baboons, Jackdaws
and Crocodiles
 Wolves: Active decisions to engage in corrupt activities
and work in groups in more than one scheme
 Lone Wolves: Active decision to engage in corrupt activity
across more than one scheme acting alone.
 Hedgehogs: Driven to one off unexpected scheme of
corruption (usually occupational fraud).
 Sheep: Recruited into corrupt scheme by Wolves through
incentives and or coercion to support scheme

9.  Rational Choice/Routine Activity Theory
 Cressey’s Fraud Triangle
 Relevance to Occupational Fraud, but what
about Corruption?
Opportunity
Pressure
Fraud
Rationalisation

10.  Edwin Sutherland’s Differential Association
 How individuals learn to become criminals
through the interaction with others.
 Focus upon development of values,
attitudes, rationale and modus-operandi.
 Gangs but also think about: workplaces,
ethnic groups, societies, extended families
etc.

11.  Sykes and Matza (1957)
 Denial of responsibility;
 Denial of injury;
 Denial of the victim;
 Condemnation of the condemners; and
 Appeal to higher loyalties.

13.  Poor Internal Controls
 Authorisations
 Access to sensitive information controls
 HR controls
 Over-riding controls (Powerful managers and
corrupt)
 Screening
 Lack of Surveillance
 CCTV (call centre)
 Knowledge of reporting (whistleblowing)
 External Audit

14.  Most of the payments are done through
BACS, bank automated system, so if we were
paying suppliers, or the salaries, or the
wages, I went onto the computer, logged in.
All we’d got was a card, I was authorised to
use it, I could make payments up to
£100,000, even more. Paul (Corrupt
Accountant)

15.  No, not at all it was proper slack; it was just
me, a telephone and a computer system. No
cameras, nobody walking around. It was
just like a little back office, so it wasn't like
a big, massive call centre you see, it's just a
little back office above the place I worked.
Tony (Corrupt Call Centre Operative)

16.  I mean, I got 10 A to C’s when I was at
secondary school and I put on my CV that
five of them are A’s when none of them
were. So vetting like that and that’s never
checked. If you put down on a form that you
haven’t got a criminal record are they going
to check? Carl (Corrupt Prison Officer)

17.  …in order to stay at #### I had to be taken
on permanently. And I said well, you can't
take me on permanently, I've got…I told her,
I've got a really bad credit rating, it goes
against the ethos of the bank, et cetera. She
said well, I want you to work with me. So
she kicked off and they got it passed and I
ended up working there permanently.
Jayne (Corrupt Banker).

18.  Our audit, we would get two people come in one
day, and then, oh I won’t be in tomorrow I’ve
got to finish of another audit, and then down to
one. And, a lot of the auditors you had in, in
our case, were junior, just people doing
paperwork trails along a start of an
accountancy audit professional exam. So, a lot
of them were pretty clueless, okay, you have an
overhead head of eh audit, who is responsible to
a senior accountant within the audit company,
but most of them were almost junior, straight
out of school studying for their audit exams,
accountancy exams. Paul (Corrupt Accountant)

19.  But, you know, what got me was the fact
that auditors used to come and he'd just ring
the powers that be up in #### and say, oh,
they're causing us too much disturbance, you
know, get them out. Or allegedly this is
what he did. And they'd just disappear and
they'd be pulled out again. Fred (Corrupt
businessman)

20.  Whistleblowing
 No, we didn't find out until after that there
was even an officer that had been given
some sort of highfalutin label, but he was
supposed to be the corruption officer,
which we didn't know until the court case.
There was no whistleblowing as such
because… Carole (Corrupt Prison Nurse)

21.  No, I think, when you look at the SFO, and what
they’ve actually successfully prosecuted, it’s
nothing. I mean it’s not even…I wouldn’t even say
it’s the tip of the iceberg. Phil (Corrupt
Businessman).
 (Getting caught) No chance whatsoever. I was low
profile, I dealt with low profile people, I would never
do business with anyone who was high profile and
corrupt, because the chances of getting caught were
high. I dealt with people who were as professional as
I was at what they did, and I was fortunate that I
could make a very good living without trawling the
pond and getting out the dangerous fish. And there’s
plenty of them around. A lot of people do get caught
and it’s largely out of stupidity. Phil (Corrupt
Businessman)

22.  Paul (Corrupt Finance Director)
 ‘Again, it’s like waiting for the VAT inspection, I wanted it
to come to an end.’
 Carl (Corrupt Prison Officer)
 ‘I think you can tell yourself there’s an inevitability about
it that right, it is going to be found out at some point and
it’s just like…it’s like I thought the relief is unbelievable
especially once, like, okay, you know you’ve…it
wasn’t…you know you’ve got your family support and I
understand that, it’s unbelievable. It’s like a guillotine
hanging over your head and you’re just waiting to see
how much of your head it’s going to take off when it drops,
sort of thing.‘
 Tony (Corrupt Call Centre Operative)
 ‘I was always looking over my shoulders thinking when
will there be a knock on the door and what would happen
if I was arrested on site.’

23.  And they stopped my pay one month, I didn't
know anything about it until the bank phoned
me. I used to draw, say £2,000 per month,
they then reduced it to £1,000 a month,
which, without warning, hits you hard, shall
we say. And obviously, things became tense
between all the fellow directors - it was a
family business. Other departments such as
mine were being shut down and sold off, as
quickly as possible. But not so easy when
you've got an economy in reverse, shall we
say. Morris (Corrupt Treasurer)

24.  You want twelve per cent of what you bid. So
there’s a shit load of work goes in for very little.
So yes, when you’ve got a huge cost of bidding,
you want to win. When you’re only going to get
twelve per cent across the board after a year’s
work, winning becomes hugely important. And if
you’ve got to right in a percentage for local
commissions, then do it. Otherwise don’t bid
the country, go somewhere else, stay in England.
But nine times out of ten, the companies I work
for, there wasn’t enough business in England to
keep them going. They were export
dependant. Well, once you’re export
dependant, you play by the rules of the
country you export to. Phil (Corrupt
Businessman)

25.  And so I just wanted to not be the normal, live in three bed
semi land, no disrespect to anyone who lives in three bed semi
land, but I had a picture in my head when I was 15, 16 or what I
wanted and I was going to do everything I possibly could to get
it. Growing up I established myself in the early 80s, it was a time
where greed was good, debt was good, getting into debt was the
best thing to do because it made you get up in the morning and
work hard. I took all the Americanisms and did it, Thatcher's child
and everything else. And I decided that I was going to make £1m
by the time I was 30, and so I got into finance. But being that I
was…I think I'd say I didn't come from the wrong side of the
tracks, I wasn't accepted in the circles that my brain should've
allowed me to be accepted in, if that makes sense.
 I wasn't just sitting at home collecting money, I mean I was very,
very, busy. I had two kids at private school, I had a big house in
the country, we had two or three holidays a year, expensive
ones, flash cars, I was flying helicopters, I was doing
everything that everyone…dream land really. Frank (Corrupt
businessman)

26.  Historic ‘teaching’ of corruption as normal
means of business
 Perception/experience corruption extensive
in immediate habitus
 Perception/experience corruption required
to win business
 Perception in some chances of getting caught
low/penalties low

27.  Oh I remember. We use to have training courses in
the company … In …this was in the 80’s I think,
early 90’s. A chap use to come in. A consultant use to
come in and he would talk about our business. And
we use to have role play…he would talk about you
and our customer over there, and his big thing was
you have to know the difference between subjective
and objective needs of your customer. His objective
need, yes he wants your product and he has to… you
know…His subjective need, he has to look after
himself and he also has to make himself look good to
his boss. And we were taught all these things about
how to make his subjective needs and obviously
this included making himself a bit wealthier. You
know, this was being taught to us. Brian (Corrupt
Businessman)

28.  I know a man who used to deliver an
envelope to him monthly in cash to his
house, so don’t start kidding me… Harvey
(Corrupt Property Developer)

29.  Perception fraud and corruption widespread
and everybody at it (MPs)
 Double standards and corruption (BAE, Banks
etc)

30.  Now, if you then track back to the countries
that carry out the construction in those
countries, because they don’t have the
technology to do it themselves, or supply the
goods, France, Italy, Germany, I dealt with
the European suppliers and contractors, I
would say that probably 30 per cent of the
procurement is bent, is corrupt, is
commissionable, to win that work. 30 per
cent, at least. Phil (Corrupt Businessman)

31.  My own view was always, we’re guests in their
country, if you don’t like it, don’t go there. But if
you do like it, and you want to go there, and you
need the business, then keep your mouth shut and
play by the rules. If you don’t like the rules, don’t
do business there. Because they won’t apologise or
make any exceptions for you, in much the same way
if they came over here, we wouldn’t make any
exceptions for them with our laws. And we might
find their laws archaic and whatever, but they are
the laws. And if it’s perceived as the way to do
business, well then you must be prepared to do it.
I mean I’ve been all over the world, and it comes in
many faces, but at the end of the day, people in a
position of power are always, in my view, going to
use it. Phil (Corrupt Businessman)

32.  Yes. Did I take money from people on the
basis of lies? Then the answer is yes. That by
definition is fraud. However, I did no
different to what the City of London does
all day long and what the directors of RBS
did just before they folded. When they
stood up in front of the shareholders and
said everything's fantastic, give us another
£60m or whatever it was, and then six
months later folded the company or had to
be bailed out. So I was in a culture where…a
City culture, Frank (Corrupt Businessman)

33.  Well forgotten than forgiven, because as I
said it's hard to say forgiven because I wasn't
really like, it wasn't like I had beaten
somebody up or anything like that, it was
just stealing money from a company, just
obviously the people got paid by their
credit card people, so it's just like the
insurance that would have lost out. Tony
(Corrupt call centre operative)

34.  Ensure resilience/prevention strategies in place and are working
 Don’t rely on traditional audit
 Understand real perception of culture in organisation/sector: if
perception of corruption/fraud need to challenge and change
 Promote anti-fraud/corruption culture and make clear the rules
 Corrupt individuals suspicion: intelligence and surveillance on
networks
 Lifestyle of at risk individuals
 Offer confidential reporting counselling
 Educate staff at risk of corruption to recognise risks of ‘grooming’
and to report
 Catch more and publicise
 Wider society government: unambiguous in stance on corruption
and catch more.