Behavioural Red Flags of Fraud: An Ex Post Assessment of Types and Frequencies

Abstract

A number of researchers and professional fraud examiners have emphasized the need for early detection of frauds. Though there are many ways in which frauds can be detected, a particularly effective and inexpensive way is to identify fraudsters by scrutinizing personnel behaviour for peculiarities typical of fraudsters. Towards this end, the present study compiles a checklist of behavioural red flags of fraud based on data collected with the help of 41 semi-structured interviews. The interviewees constitute people who have personally investigated or closely observed a fraud in the last 3 years. A mixed methods triangulation approach is used to quantify the qualitative data collected from the interviews. Data analysis reveals 16 different behavioural red flags exhibited by fraudsters. An examination of frequencies indicates that strong ambition, extended working hours, social aloofness, dissatisfaction with current job and living standard disproportionate to current means are the most frequently displayed behavioural red flags of fraud. The study also shows that fraudsters exhibit three or four behavioural red flags in a majority of cases. Implications for anti-fraud practitioners are discussed.

Keywords

Fraud behaviour red flags fraudster mixed methods research triangulation

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