Fight Fraud by Thinking Like A Criminal – But Beware of Actual Criminals

Effective Techniques for Fighting Fraud

While fraud risk management dictates that it’s important to think like a criminal, businesses should beware of people in pinstriped jumpsuits.

One of the fraud prevention points we often make about fraud risk management is that it’s imperative to proactively identify vulnerabilities and weaknesses which criminals will exploit, and then plug those holes before the damage is done. One of the best ways to do that is for companies to “think like a criminal.”

I received an interesting email the other day:

“Have you ever considered hiring fraud professionals to assist in detecting and deterring fraud? That is individuals who are on the other side of the fraud fence…the actual individual who commits the acts themselves. Hiring an individual like that would provide your company with an edge in just how the underlying processes works when committing such acts. There are many pieces to this puzzle that are very intricate to the success of a successful fraudster. Such pieces could only be discovered and utilized if on the other side of the fence.”

Criminal to Consultant: A Winning Path to Fight Fraud?

The criminal to convict to business consultant path is certainly nothing new. In fact, when I got the note, I had to chuckle, as it reminded me of a graphic making its way around the web these days:

This “art imitates technical life” graphic is attributed to Stanford educated “geek to comic genius,” Don McMillan (you can peruse more of his cool humor here).

Problems in the Convict Consultant Path

What isn’t so funny, however, is that not all former fraudsters are quite so former at all. This is what we call recidivism.

Recidivism: “the chronic tendency toward repetition of criminal or antisocial behavior patterns.” (Random House)

While many “fraudsters turned consultants” peddle their wares to fight fraud, many are not reformed at all, often returning to their nefarious ways.

Case in point, Barry Minkow is the poster child for the “what you see isn’t always what you get” sentiment. Post ZZZZ Best conviction, incarceration and release, not only did Minkow “fleece the religious flock” by embezzling funds from the San Diego Community Bible Church where he was a minister (he found God while in prison – who doesn’t) but he created the Fraud Discovery Institute in an attempt to spotlight high profile white collar crimes. However, while doing so he also played both sides of the financial fence, causing homebuilder Lennar Corporation to lose approximately $580 million in stock value while he profited off their misery.

Fight Fraud by Thinking Like a Criminal

Lest anyone think that the Minkow case is an isolated example, the crime landscape is littered with recidivism examples and those statistics include convicted fraudsters who failed to learn the lesson the first time and defrauded again.

Now to be perfectly clear, despite the marketing message sent to me, we’re not advising anyone to go out and hire former fraudsters to advise them on their anti-fraud measures. If you do, it’s buyer beware…be extremely cautious where you tread and let due diligence be your guide.

We are, however, advising clients to adapt effective anti-fraud measures to prevent fraud before it occurs. To the overarching point of this message, the “have your risk management employees think like a criminal” methodology is one preventative technique that has been implemented effectively by many fraud and risk management professionals around the globe. But perhaps it’s best to stop short of actually hiring criminals to fight fraud.