This blog explores fraud and the profile of a public sector fraudster. Victoria’s anti-corruption agency, IBAC, has conducted research into fraud and the people who commit it. IBAC has also published a podcast of an interview with Dr Russell Smith, Principal Criminologist from the Australian Institute of Criminology.
Dr Smith says that because of the large amounts of money in public sector organisations, there are opportunities for fraud, i.e. “dishonesty where people try and obtain some benefit or avoid a loss by using deceitful means,” such as:
- accessing equipment improperly such as using business laptops for personal use
- getting benefits like travel or payments without proper entitlement
- misusing information
- infringing intellectual property – use of trademarks, copyright material, logos, etc without authorisation
- misusing credit cards
- theft of cash.
“Occupational fraudsters working for government departments tend to fit into a pretty usual mould,” Dr Smith explains. They are mostly university-educated males in their 30s or 40s, and are frequently long-term employees who have gained trust in their position, allowing them access to the information necessary for a fraud. Fraudsters usually act alone, for financial gain, and do not reoffend once they have been caught out, according to Dr. Smith. And, he reports a correlation between seniority and the size of the fraud – the higher the level of the manager, the higher the losses.
Asked what motivates fraud, Dr Smith pointed to the financial strain that comes with either trying to live beyond one’s means personally, or from trying to pay off debts. Sometimes these debts arise through personal factors which motivate dishonest conduct, such as problem gambling. In other, rarer cases, fraud has a “pathological” motivation, such as revenge against a boss whose conduct the fraudster takes issue with. Mental health issues also arise occasionally as motivating factors, as in the case of “pathological problem[s] that might lead [fraudsters] to act dishonestly.” Finally, the motivations may be altruistic – some cases involve “people stealing money where their spouse or a close relative has got a terminal illness and they need to pay for medical treatment and that might seem to be justifiable to the person involved.”
The ways fraud is detected, according to Dr Smith, include:
- Work colleagues (the most common means of detection)
- Tip-offs (e.g. members of the public finding something unusual about someone’s lifestyle)
- Serendipitous detection (e.g. someone going on holidays and a replacement discovering fraud).
Nipping fraud in the bud, Dr. Smith explains, is in organisations’ interests: “The longer fraud takes place the more money is involved, so it’s a great benefit for organisations to detect fraud quickly and put a stop to it.” Dr Smith says that public sector agencies should have good policies in place – they must know where money is being transferred and have controls placed on financial transactions, particularly electronic transactions.