Risk & Compliance

To Catch a Thief

The habits of highly effective rogues.
Laura CameronMarch 3, 2008

Even after losing Société Générale €3.9 billion, rogue trader Jérôme Kerviel couldn’t help but pour salt on the wound. “The fact alone that I didn’t take any days off in 2007 should have alerted my supervisors,” he told French financial investigators. “It’s one of the elementary rules of internal control.” But it turns out that catching crooks by observing their behaviour alone is easier said than done.

In some cases, confirms Alex Plavsic, head of fraud investigations at KPMG, employees who arrive particularly early, leave later than others or do not take time off, do so to conceal misdeeds. Unusual time management, however, isn’t the only behavioural red flag companies need to look out for, Plavsic adds. One woman pretended to have cancer to get colleagues to treat her sympathetically and distract them from her fraudulent activities. As time went on, and she failed to display any symptoms of the illness, her employer found that everything from her supposed infirmity to the references on her CV were made up. And that she embezzled more than €1m.

What’s more, some types of fraud are best perpetrated while on holiday, says Jon Hayton, director of forensic technologies at PricewaterhouseCoopers. He once investigated a woman skimming off receivables and found that key contact with her co-conspirators was made by fax while on a cruise ship. Only when she was back at work, and offering suspicious discounts for early payment in the hope of covering her tracks, did her company realise she was up to no good.

The majority of fraud, however, is uncovered by whistleblowers, says Brian Stapleton, head of financial investigations at Kroll. That’s why observing employee behaviour more closely will catch only marginally more fraud. But Stapleton adds that, on many occasions, finance managers fail to follow their gut feel about suspicious behaviour that is later proved to be fraudulent.

Truth is always stranger than fiction, so drawing up a catalogue of hypothetical behaviours that characterise fraud is probably futile. The best bet is to follow your instinct.

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