There are a number of common signs that we may see when someone is engaged in financial fraud within a company. Tracy talks about the behavioral red flags for fraud in this video, which are also summarized below:
Situational pressures that may lead to fraud can include:
- Personal financial problems, such as high debts, bankruptcy, child support obligations, spousal support obligations, or investment losses
- Family or relationship struggles, especially if they involve money
- Instability or emotional trauma in one’s personal life
- Significant illness, leading to time away from work or substantial medical bills
- Addictions, such as alcohol, drugs, or gambling
- Criminal background, which may suggest dishonesty, but may also create difficulties in obtaining and sustaining employment
- Chronic legal problems, which can be expensive and time consuming,
- Infidelity, which involves dishonesty and requires funds concealed from the spouse
Personal or behavioral red flags that might indicate the involvement in financial fraud include:
- A lifestyle that exceeds the known income or an obvious change in one’s lifestyle
- Financial difficulties
- An unusually close association with customers or vendors
- A wheeler-dealer type of personality
- Excessive gambling or use of alcohol or drugs
- Perceived inequities or unfairness at work
- Overly protective of one’s work, responsibilities, and documents
- Chronic dissatisfaction with work or personal life
- Resentment of superiors
- Unusual desire for personal gain
- Weak personal code of ethics
- Frequent rule-breaking or repeated attempts to beat the system
- Change in work habits (coming in early, staying late, attempting to be alone at the workplace)
- Reluctance to take vacation time or be absent for more than a day or two at a time
- Rationalizing unethical behavior
- Change in behavior patterns
