So when you have thousands of cases to draw upon, the next natural question is to ask whether we can learn more about fraud by looking at the profile of the individual committing the fraud. Bear in mind that two thirds of our fraud triangle, those being the motivation, and the rationalization are framed by the traits specific to the individual. So let's start building our profile of our fraudster population. And interestingly, our population of fraudsters is significantly composed of managers and executives. So this is not entirely an employee issue. In fact, when you drill into it further, while employees padding their expense accounts leaves a nasty bruise.

When a manager or an executive commits fraud, the organization's more likely to suffer a hemorrhage. We returned to this idea of duration. The more senior your fraudster is, the more likely they are able to To get away with the fraud for longer periods of time, which as we learned earlier directly correlate to the amount of loss the organization will suffer. collusion happens when a fraudster teamed up with other individuals. collusion is very hard to address with a system of internal controls. This chart shows that the more people you get involved in the fraud, the more money that is at risk and the greater the loss.

Certain fraud schemes lend themselves to more or less collusion. Corruption schemes are much more likely to involve groups of people, whereas your theft of cash type schemes are less likely to involve collusion. The study performed by the CACFP is a global study. So there's lots of information that breaks down the cases by region. Now I found this an interesting representation of the different profile fraud has around the world. In North America, fraud is almost equally as likely to be committed by a man as it is a woman.

In other regions of the world. fraud is predominantly a male dominated business, presumably for a variety of cultural and socio economic reasons. Men tend to steal more than women. But this is primarily because men are involved in more corruption and financial statement reporting fraud schemes than the women. Here's another chart that might dispel some misunderstandings. The common perception is that fraud is more likely to be committed by someone you don't know, say a new hire than someone you do know, say a long standing employee, you could not be more wrong.

More than half the frauds committed are done by people who have been with the organization more than five years. And in this day and age of job hopping, five years tends to be a long time. So 50% of your frauds are coming from your employees. That you would probably trust the most. To add insult to injury, the more tenured employee, the greater their ability to extract resources from the organization for their own personal gain. Another common misperception is that the fraudsters are members of an underground society that go from job to job pilfering anything of value before moving on to their next victim.

The reality is quite different by far the vast majority of fraudsters had no previous criminal activity. However, notice that about 12% did so don't walk away from this graphic thinking that you should not be doing background checks on your new hires. Secondly, I wonder if we look through the employees file, whether there be any smoking guns that would suggest the individual is more prone to committing fraud. Once again four to five fraudsters provided no indication however one at a five did food for thought Let's dig deeper 38% of fraudsters, which is not an insignificant number, we're also the types of people who displayed other forms of misconduct in the workplace, including bullying or intimidation, absenteeism, tardiness, or excessive internet surfing. 25% of processors also showed certain job performance and job security traits, which directly feeds into the rationalization component of the fraud triangle, including poor performance evaluations, fear of job loss or cuts to their compensation.

We talked about the importance of identifying behavioral red flags in previous lessons, as they speak directly to the motivation and rationalization of the individual of the cases investigated. living beyond one's means or experiencing financial difficulties were common traits displaying amongst our fraudster population, let's drill into this further. First, let's see if a fraudsters position within the organization tipped off certain behavior red flags. From this chart you'll notice that employees are much more likely than managers or executives to be experiencing financial difficulties. And this kind of makes sense, while managers and executives are more likely to have a closer relationship with vendors and customers and exhibit control issues or display that Wheeler Dealer attitude, which also makes sense, given that these traits may be perceived as a strength of the individual. If we rearrange the data one more time and look at the red flag by scheme.

Acid misappropriation schemes are most likely to be tipped off by employees living beyond their means, or those having financial difficulties or those displaying control issues. Corruption schemes are most likely to be tipped off by someone who displays living beyond their means. Those with unusually close relationships with customers and vendors, and that Wheeler Dealer attitude we talked about, and financial statement fraud is most likely to be tipped off with once again, someone who is living beyond their means someone who is exhibiting strong control issues, and someone who is showing the pressures they are feeling from within the organization. Perhaps it's an expectation to meet analysts forecasts, or meet Bay covenants or board expectations. One last shuffle the deck may help to distinguish the red flags between genders. Women, for instance, are more likely than men to display financial difficulties, whereas men are often the ones you will see with unusually close relationships with vendors and customers and exhibit that Wheeler Dealer attitude.

So the key takeaways from this lesson are that all occupational fraud can be committed by anyone in your organization. Watch out for those behavioral red flags of your people and follow up as necessary when something doesn't look right, that's all for this lesson. So until next time, don't stop to get to the top. Don't stop.