Two men looking at codes on screen

Understanding the psychology of a fraudster

Tim Robinson, Partner, Forensic Services
Two men looking at codes on screen

The world of fraud is a complex one, with fraudsters coming from diverse backgrounds and holding a range of motivations. Crowe’s recent research, the Annual Fraud Indicator 2023, which has been carried out in collaboration with the University of Portsmouth’s Centre for Cybercrime and Economic Crime and Peters and Peters LLP, now suggests the UK loses £219 billion to fraud annually. To many, the sheer size of the problem will feel like we’re fighting an unwinnable battle. However, understanding the psychology of a fraudster can provide us with important insights which are invaluable if we are to fight back and reduce this monumental figure.

In this article we will explore the known motives, characteristics, and psychological mechanisms that drive individuals to engage in fraudulent behaviour. We’ll then discuss some key measures to help to prevent fraud.

The motives behind fraud

Fraudsters come in all shapes and sizes, and their motivations are as diverse as the schemes they concoct. The most common and obvious motive for fraud is the desire for financial gain. Fraudsters may be motivated by the prospect of easy money, whether it's through misappropriation of funds, embezzlement, identity theft, Ponzi schemes, or other means. The allure of life-changing financial gain can be a powerful incentive for individuals to engage in fraudulent activities. Conversely, some fraudsters turn to deception out of desperation. When facing mounting debts or financial difficulties, individuals may resort to fraud as a way to alleviate their financial woes. The fear of losing everything can push individuals to take drastic measures.

For some, the motive behind fraud is not purely financial but stems from a desire to boost their self-esteem and self-image. Fraudsters may engage in deceitful activities to appear successful, sophisticated, or influential to others. This psychological need for recognition and self-worth can be a powerful motivator.

Personal vendettas, grudges, or a desire for revenge can drive some individuals to commit fraud. These fraudsters may target specific individuals or organisations to exact revenge or settle personal scores. This motive can be particularly difficult to detect, as it may not always align with traditional financial motives.

Just as some individuals can be forced to dishonestly gain additional funds to pay off a gambling debt or substance addiction, others become addicted to fraudulent activities. The thrill of deceiving others, coupled with the rush of evading detection, can become an obsession for some fraudsters. This motive is rooted in the psychology of addiction and compulsion.

The characteristics of a fraudster

While fraudsters vary in their motives, they tend to share certain psychological and behavioural characteristics. Understanding these traits can help in identifying potential fraudsters and preventing their activities:

Many fraudsters rationalise their actions, believing that they have a valid reason or excuse for their fraudulent behaviour. This rationalisation helps them alleviate guilt and maintain their self-image as morally upright individuals. When perpetrating a fraud against a large corporation a fraudster often rationalises the fraud under the premise of ‘they can afford it’.

The most obvious trait is the ability to deceive convincingly. Fraudsters are skilled at concealing their true intentions and creating a facade of honesty and trustworthiness. However, fraudsters are also often opportunistic, seizing chances to commit fraud when they arise. They may be constantly on the lookout for weaknesses in systems, loopholes, or unsuspecting victims.

A key trait of a fraudster is their ability to manipulate others to achieve their goals. They can be charming, persuasive, and skilled at exploiting trust and emotions. Coupled with a lack of empathy, they can be known to harm others without remorse or understanding of the emotional and financial consequences their actions have on victims.

Fraudsters are often willing to take substantial risks to achieve their objectives. Their greed can often be the downfall as they may believe they can outsmart authorities or evade detection, even when the odds are against them.

The psychological mechanisms

Understanding the psychological mechanisms that underlie fraudulent behaviour is crucial for detecting and preventing fraud. These mechanisms shed light on the thought processes and decision-making of fraudsters.

The perceived anonymity of committing fraud can reduce inhibitions and lead individuals to engage in behaviour they would avoid in face-to-face situations. Online fraud, for example, provides a sense of detachment that makes it easier for individuals to commit deceptive acts.

Fraudsters frequently employ various cognitive mechanisms to justify their actions. They may convince themselves that they are victims of an unfair system or that their victims somehow deserve their fate. These justifications help maintain the fraudster's image as a moral person.

Detecting and preventing fraud

Preventing fraud is a complex and ongoing challenge, but understanding the psychology of a fraudster can help organisations and individuals take proactive measures to detect and prevent fraudulent activities.

  • Training and awareness: Educating employees and individuals about the various types of fraud, the red flags to look for, and the potential consequences can go a long way in preventing fraudulent activities. Creating a culture of transparency and ethics can help deter fraudsters.
  • Internal controls: Implementing robust internal controls within organisations, such as regular audits, segregation of duties, and reporting mechanisms, can help detect and prevent fraud. These controls can make it more difficult for fraudsters to exploit vulnerabilities.
  • Whistleblower programs: Encouraging employees to report suspicious behaviour or fraud anonymously can provide an additional layer of protection. Whistleblower programs create a safe space for individuals to voice their concerns without fear of retaliation.
  • Monitoring and analytics: Employing data analytics and monitoring systems can help identify unusual patterns or anomalies in financial transactions, employee behaviour, or customer interactions. These systems can raise red flags and trigger further investigation. 
  • Recruitment and intelligence: In organisational settings, rigorous employee screening processes can help identify individuals with a higher propensity for fraudulent behaviour. Background checks and reference checks are essential tools.
  • Professional assistance: In cases of complex or sophisticated fraud, seeking the assistance of forensic investigators and accountants and legal experts can be crucial. They have the skills and knowledge to unravel the intricate web of fraudulent activities and can be a strong deterrence.
  • Legal consequences: Enforcing strict legal consequences for fraud can act as a powerful deterrent. Prosecuting fraudsters and publicising the consequences can send a clear message to other potential wrongdoers.

Understanding the psychology of a fraudster is a crucial step in the ongoing battle to reduce fraud. Fraudsters come from various backgrounds and are driven by diverse motives, but they often share common characteristics and psychological mechanisms. By recognising these traits and mechanisms, individuals and organisations can implement preventive measures, improve detection, and work toward reducing the prevalence of fraud in society. As we continue to study and understand the psychology of fraudsters, we can develop more effective strategies to protect ourselves and our financial well-being.

For more information on any of the topics discussed, please contact Tim Robinson or your usual Crowe contact.

This article was first published in the Expert Witness Journal December 2023.


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Tim Robinson
Tim Robinson
Partner, Forensic Services