The Psychology of Embezzlement : The Art of Control and Intervention

Using recent research and case studies, this book offers an evidence-based insight into the embezzler's mindset as they commit crimes that are costing nations, organisations and individuals increasingly more each year. This mindset is described in detail as the embezzler develops their motivation to steal from their employer, finds a method of stealing, assesses the risks, executes the theft, and then determines whether to continue to steal. The organisational landscape of security capabilities, culture and financial circumstances provide the environment that this mindset operates within. The embezzler's approach to the crime is broken down into four stages: Pre-Existing Vulnerabilities, Induction to First Theft, Ongoing Theft and Detection to Resolution. The author recommends strategies based on the embezzler's mindset for organisations to enhance their ability to protect themselves from such inside threats that attack their reputation, productivity, morale and, in the worst cases, financial viability. David Curnow, PhD., is affiliated with the Centre for Forensic Behavioural Science at Swinburne University, Australia. He has worked as a Forensic Psychologist for over 20 years in prisons, private practice and consultancy. He was appointed to the state Parole Board in 2014 and has also served on the Standards Australia review of Fraud Control Standards. He gained his doctorate in 2011. Contents List of Figures List of Tables 1: The Cost of Inaction and Avoidance Is This a Crime Book or Business Manual? What Is the Criminal Behaviour We Are Talking About? How Much Does Occupational Fraud Cost the Community? What Happens to Individual Organisations? Who Is Stealing from the Organisation? What Is the Likelihood That a Person Associated with This Organisation Would Steal from It? Awareness of the Costs of Inaction or Avoidance Guide to the Rest of the Manual 2: The Offender Mindset Background of Offender Mindset Model PhD Research Personality Motivation to Offend Assessment of Risk Versus Reward Security and Security Culture How Do Offenders Justify Their Offending? Culture of Work Environment Conclusions from My PhD What Has Been Missing from Fraud Research? The Offender Mindset Model Top-Down View of the Offender Mindset for the Organisation’s Perspective Phase I: Pre-existing Vulnerabilities 3: Pre-existing Vulnerabilities Case Studies Don Angela Justin Pre-existing Vulnerabilities Personality Types of Personality Self-Sacrificing Element Unrelenting Standards Element Blaming Element Bringing the Personality Types Together Emotions/Beliefs Do They Feel Others Are Relying on Them? Do They Feel Trapped? Do They Feel They Have Not Achieved What They Wanted to by This Time? Do They Feel That They Are Owed? Do They Enjoy Taking Risks? Do They Fear the Potential Loss of a Relationship, Status Or Financial Asset(s)? Do They Fear Physical Consequences for Themselves or Others? Do They Fear Certain Workplace Experiences? Do They Fear Not Being Liked? Do They Fear Failure or Perceived Poverty? Do They Focus on Immediate Risk But Not Long-Term Consequences? Do They Believe That Everyone Steals and the Organisation Allows for This? Do They Believe They Need to Lie to Get a Job? Context Criminal History Poor Evidence of Ties to Any Person, Group, Professional Organisation or Commitment Poor Evidence for Stated Employment History Evidence of Cultural Problems in the Previous Workplace(s) High Expectations by Others of Income (i.e. Divorce, Children, Parents, Friends, Investors, etc.) Suggestion of High Financial Needs But Not Disclosed (i.e. Addiction, Affair, Impulsive Investment, etc.) Financial Risk High Debt Levels Evidence of Questionable Business History Conclusion Phase II: Induction to First Theft 4: Why Do I Need to Steal? Why Do I Need to Steal? Case Studies Don Angela Justin Why Do I Need to Steal? Why Would I Steal If I Have No Debt? Become Aware of an Opportunity Test Yourself Holding a Grudge I deserve .... Professional Criminal Would I Steal to Pay Debts or Expected Future Losses? Pressured Relationship (Non-sanctioned, Targeted or Fear of Relationship Ending) Altruism Addicted Gambling Perception of Success Investment Opportunity Realisation that Can Not Pay Back the Debt or the Likely Future Costs What Would It Mean If I Did Not Access the Funds? Which Emotions Are Risky for Me? What Are My Risky Thought Patterns? Impact Bias Sunk Cost Bias Temporal Discounting Over-Confidence Grim Acceptance of Fate (No Options) Belief that Others Would Do the Same Thing in the Same Situation Confirmation Bias Optimism Bias I have Stolen Before: Will It Be Different This Time? Does the Culture at My Workplace Increase the Likelihood I Will Steal? Why is Theft the Best Option to Solve This Problem? Leaping to a Conclusion that I Cannot Resolve the Problem in a Legal Way Without Disclosing It to Someone Conclusion 5: How Could I Steal from This Organisation? How Could I Steal from This Organisation? Case Studies Don Angela Justin How Could I Steal from This Organisation? Do I Have What It Takes to Exploit a Vulnerability? Position Ego and Confidence Intelligence and/or Technical Ability Ability and Willingness to Apply Deceit Stress Management Ability and Willingness to Apply Coercion Where Are the Vulnerabilities in This Organisation? Knew About the Vulnerability and Either Did or Did Not Inform the Organisation Shown by Others Found by Accident Knew Where to Look Researched the Different Options What Makes a Vulnerability Attractive? What Else Needs to Be Planned Before I Can Act? Can I Access These Funds? Are There Other People I Need to Involve to Access the Funds? Is There Specific Information I Need? What Will I Need to Do After I Have Stolen the Funds? Conversion Concealment Conclusion 6: What Are the Risks If I Do Steal from This Organisation? What Are the Risks If I Do Steal from This Organisation? Case Studies Don Angela Justin What Are the Risks If I Do Steal from This Organisation? What Risks Do I Think There Are? Experience Improve Knowledge of Risk How Would I Assess the Organisation’s Security? Awareness of Security Protocols and Technology Centralised Security Internal Controls Ability to Notify the Organisation Security Culture Perceived Level of Motivation of the Organisation to Stop Theft Should I have a Test Run First? What Do I Think Will Happen If My Theft Is Detected? Prison Sacked Unemployment Loss of Professional Standing Abusing the Trust of Long-Term Colleagues Social Financial Family What Emotions am I Likely to be Experiencing? Excitement Driven Anger Fear Freeze What Level of Risk am I Prepared to Accept? How Can I Neutralise Negative Feelings Which Lead to Doubt? I Accept What I am Doing Is Wrong I’m Excited I Give Up Responsibility Necessity Drop in the Ocean Expecting the Organisation to be ‘Fair’ in Their Response I Do Not Accept What I am Doing Is Wrong I am Only Borrowing the Funds I am Owed These Funds Treated Poorly by the Organisation How Confident am I That the Theft Will Be Successful? Conclusion 7: Am I Really Going to Do This? Am I Really Going to Do This? Case Studies Don Angela Justin Am I Really Going to Do This? How Can I Build Up My Confidence? When Is the Best Time to Steal the Funds? Setting a Date No Date Set Triggering Event Occurs What Thoughts Help Me to Execute the Theft? Fixation Optimism Bias First Theft Committed Funds Accessed and Retrieved Did I Just Commit a Crime? Conclusion 8: What Will the Organisation Do Now I Have Stolen the Funds? What Will the Organisation Do Now I Have Stolen the Funds? Case Studies Don Angela Justin Do They Even Know? When There Is No Apparent Investigation No Investigation as the Theft Has Not Been Detected Reviewing Security Protocols and Technology Investigation Has Commenced: The Organisation Is Building Evidence Against You Investigation Has Commenced as a Theft Has Been Detected but the Offender Is Unknown Reviewing Security Culture Reviewing the Organisation’s Resolve to Stop Theft Why Hasn’t My Theft Been Detected? How am I Feeling About the Organisation Not Detecting the Theft? How Confident am I That the Organisation Will Not Detect the Theft? Has My Behaviour Changed Due to Confidence Levels? Retreating Behaviours While Not Caught, the Offender Decides to Confess Due to Fear Decide to Focus on Covering Up Initial Offence and Not Continue Advancing Behaviours Conclusion Phase III: Ongoing Theft 9: Do I Have the Same Reason to Steal as Before? Do I Have the Same Reason to Steal as Before? Case Studies Don Angela Justin Do I Have the Same Reason to Steal as Before? Are My Reasons to Steal the Same as for the First Theft or Do I Need New Ones? What Can I Tell Myself to Justify Continuing to Steal? Financial Affirmations or Attempted Arguments That Offenders Tell Themselves So They Can Keep Stealing Just Borrowed the Funds and Proved it by Paying It Back So Can Continue This Does No Harm and My Needs Are Greater Other People I Care About Need My Help Security-Based Affirmations or Attempted Arguments That Offenders Tell Themselves So They Can Keep Stealing If They Had Not Wanted Anyone to Steal They Should Not Have Made It So Easy Want to Test the System Controls Whether I Stop at the First Theft or Continue Taking Funds the Consequences Will Be the Same Victim-Based Affirmations or Attempted Arguments That Offenders Tell Themselves So They Can Keep Stealing I Have Been Treated Badly by the Organisation and Colleagues Angry at the Organisation Reward- or Compensation-Based Affirmations or Attempted Arguments That Offenders Tell Themselves So They Can Keep Stealing I Deserve These Funds from the Organisation What Sort of Person Would Continue to Steal? Shrewd and Competent Victim Fun and Generous Person Protector Player Conclusion 10: How Do I Continue to Steal? How Do I Continue to Steal? Case Studies Don Angela Justin How Do I Continue to Steal? How Much Do I Need to Steal and How Often? Satisfying Your Motivation Avoiding Detection Should I Use the Same Strategy? Should I Use a New Strategy? Opportunity Recognition Opportunity Assessment How Confident am I That I Could Successfully Continue to Steal Using This Strategy? When Should I Start Stealing Regularly? Difficult to Stop Offending? A Similar Amount Is Taken Regularly Should I Try to Pay Back the Stolen Funds If This Is How I Justified the Original Theft? Pay Back the Funds Don’t Pay Back Stolen Funds Conclusion 11: Why Is This Feeling More Difficult Than Before? Why Is This Feeling More Difficult Than Before? Case Studies Don Angela Justin Why Is This Feeling More Difficult Than Before? Am I Feeling Trapped Or Not? Feeling Trapped by the Offence Feeling Trapped by the Increased Funds Not Feeling Trapped at All What If Even I Don’t Believe the Reasons I Told Myself for Continuing to Steal? What Is the Price for Me Keeping This Secret? Physical Fatigue Cannot Delegate Any Work Never Allowing Others to View the Actual Accounts or Make Contact with Suppliers or Customers Cannot Take Holidays Cannot Take Secondments or Promotions Where They Cannot Take the Accounts with Them Working Late to Keep Control of Accounts Psychological Fatigue How Else Can I Cope While Continuing to Steal? Meaning-Focussed Coping Paying It Back Diminishing Consequences Blaming Others Problem-Focussed Coping Emotion-Focussed Coping Suppression Compartmentalisation Escapism Compensation Social-Focussed Coping Conclusion 12: How Many ‘near misses’ Can I Survive? How Many Near Misses Can I Survive? Case Studies Don Angela Justin How Did I Not See This Coming? Risk of Detection Heightened: Internal Change Low Level Medium Level Highest level Risk of Detection Heightened: External Change Low Level Medium Level Highest Level How Can I Reassure Myself That the Theft Won’t Be Detected? How Do the Negative Outcomes Compare to Keep Coping with the Threat of Detection? No Negative Outcomes Foreseen Why Have I Been Successful So Far? Position Intelligence Ego Coercion Deceit Stress Management What Is My Actual Level of Risk from This ‘near miss’? Risk Aversion Is Low Risk Aversion Is High After Analysing the Risks, How Confident am I That the Offending Won’t Be Detected from This Event? Confidence Maintained That Will Not Be Detected Confidence Reduced That the Offending Will Not Be Detected Confidence Maintained That the Offending Will Not Be Detected but Cannot Maintain the Level of Vigilance and Subterfuge Required No Confidence Certain That Will Be Detected Conclusion 13: Do I Keep Going, Stop or Admit My Crime? Do I Keep Going, Stop or Admit My Crime? Case Studies Don Angela Justin Do I Keep Going, Stop or Admit My Crime? Are My Coping Strategies Still Functioning Under This Pressure? No Stress Therefore No Need for Coping Strategies Coping Strategies Are Holding So There Is No Need to Consider the Consequences Coping Strategies Are Becoming Overwhelmed or Counter-Productive Leading to Consequences Being Considered No Coping Strategies in Place and Therefore Consequences Are Considered Certain Should I Change My Theft Behaviour? Decide to Continue to Offend I Have Decided Not to Stop as I Believe Processes Will Hold I Have Decided Not to Stop as I Require the Funds I Have Decided to Not Stop as I Have Faith in My Ability to Avoid Detection I Have Decided to Not Stop as I Believe That There Will Be No Difference in the Penalty When Detected I Have Decided to Not Stop for While the Processes May Not Hold I Have No Other Option But to Hope Stop the Offending I Believe I Can Explain My Behaviour My Coping Skills Are Completely Overwhelmed Should I Start to Plan What I Will Do if Theft Is Detected? I Am Going to Get Caught So I Need to Distribute Funds in Preparation I Will Pay Back as Much as Possible to Mitigate Any Negative Consequences I Will Admit to the Offending Now I Will Start to Lay the Ground Work for My Mitigation of Consequences Strategy I Will Abscond Conclusion Phase IV: Detection to Resolution 14: How Much Do They Know? How Much Do They Know? Case Studies Don Angela Justin How Much Do They Know? How am I Being Confronted with the Evidence? Internal: Confronted with Evidence by Organisation Civil: Asset Freeze Order Criminal: Police Contact Indicating You Are a Person of Interest What Factors Can Impact on the Confrontation? Offender Interviewer Agendas How Strong Is the Evidence? Challenge Facts Illegally Obtained Offended for the Organisation Behaviour Was Not Against the Law Assessing the Evidence in Context Is the Quality of Evidence Sufficient for Criminal and/or Civil Proceedings? Is the Security Culture Supported Enough by the Organisation to Proceed or Will They Be More Concerned About Damaging Morale? Is the Motivation of Organisation to Stop Theft Sufficient to Proceed Despite Public Exposure? How Will I Respond to the Interviewer’s Allegations? Total Rejecter: Refuse to Acknowledge That an Illegal Act Took Place or Played No Role Tactical Rejecter: Admit Their Guilt to Themselves But Deny Guilt to the Interviewer Tactical Acceptor: Deny Criminality to Self But Admit Guilt to the Interviewer Total Acceptor Should I Offer to Help Any Further Investigation After the Confrontation? Why Would I Want to Help? Why Would I Not Want to Help? Conclusion 15: How Can I Reduce the Consequences for Myself and Others? How Can I Reduce the Consequences for Myself and Others? Case Studies Don Angela Justin How Can I Reduce the Consequences for Myself and Others? Why Would I Not Even Try to Mitigate the Outcome Regardless of the Quality of the Evidence? Admit to the Theft Do Not Admit to the Offence How Will I Focus My Mitigation Strategy When There Is Weak Evidence and Low Motivation to Proceed? I Tried to Pay It Back I Gained Nothing from the Theft The Organisation Should Share the Blame How Will I Focus My Mitigation Strategy When There Is Strong Evidence and High Motivation to Proceed? Should I Confess Everything? What Mitigations Strategies Should I Focus On? I Had No Control over What Was Happening Mental Health Addiction Personal Context Family Financial Problems Relationship Issues Family Violence Intending to Leave the Relationship Having an Illicit Relationship Having a New Relationship Ensuring That the Person Stays with Them Groomed by a Criminal Partner/Family Member/Colleague Another’s Medical Needs It Was the Organisation’s Fault That I Stole Ethical Culture Workload Treatment How Can I Make My Mitigation Strategy More Effective? What Does an Effective Mitigation Strategy Sound Like? What Does an Ineffective Mitigation Strategy Sound Like? What Are the Ways That the Journey Can End? Conclusion 16: How Does an Organisation Block, Deter and Detect Offenders? How Can the Organisation’s Structure Provide Accountability for Controlling and Influencing the Potential and Actual Offender? What Are the Different Levels of Accountability in Any Fraud and Corruption Control Plan? Phase I: Pre-existing Vulnerabilities Personality Emotions/Beliefs Context Criminal Record Poor Evidence of Ties to Other People or Groups Poor Evidence for Stated Employment History Evidence of Cultural Problems in Previous Workplace(s) Evidence of High Expectations by Others of Income and Suggestion of High Financial Needs But Not Disclosed Financial Assessing the Material as a Whole Marketing the Organisation’s Focus on Hiring Only Those with Personal Integrity Phase II: Induction to First Theft Why Do I Need to Steal? Why Would I Steal If I Have No Debt? Would I Steal to Pay Debt or Expected Future Losses? What Would It Mean If I Did Not Access the Funds? Which Emotions Are Risky for Me? What Are My Risky Thought Patterns? Does the Culture at My Workplace Increase the Likelihood I Will Steal? Why Is Theft the Best Option to Solve This Problem? How Could I Steal from This Organisation? Do I Have What It Takes to Exploit an Opportunity? Where Are the Vulnerabilities in This Organisation? What Makes a Vulnerability Attractive? What Else Needs to Be Planned Before I Can Act? What Will I Need to Do After I Have the Funds? What Are the Risks If I Do Steal from This Organisation? What Risks Do I Think There Are? How Would I Assess the Organisation’s Security? Should I Have a Test Run First? What Do I Think Will Happen If My Theft Is Detected? What Emotions am I Likely to Be Experiencing? What Level of Risk am I Prepared to Accept? How Can I Neutralise Negative Feelings Which Lead to Doubt? How Confident am I that the Theft Will Be Successful? Am I Really Going to Do This? How Can I Build Up My Confidence? When Is the Best Time to Steal the Funds? What Thoughts Help to Me Execute the Theft? First Theft Is Committed Did I Just Commit a Crime? What Will the Organisation Do Now I Have Stolen the Funds? Do They Even Know? Why Hasn’t My Theft Been Detected? How am I Feeling About the Organisation Not Detecting the Theft? How Confident am I that the Organisation Won’t Detect the Theft? How Has My Behaviour Changed Due to My Confidence? Phase III: Ongoing Theft Do I Have the Same Reasons to Steal as Before? Are My Reasons to Steal the Same as the First Theft or Do I Need New Reasons? What Can I Tell Myself to Justify Continuing to Steal? What Sort of Person Would Continue to Steal? How Do I Continue to Steal? How Much Do I Need to Steal and How Often? Should I Use the Same Theft Strategy? Should I Use a New Theft Strategy? How Confident am I that I Could Successfully Continue to Steal Using This Strategy? When Should I Start Stealing Regularly? Should I Try to Pay Back the Stolen Funds if This Is How I Justified the Theft? Why Is This Feeling More Difficult Than Before? “Am I Feeling Trapped ... or Not?” What If Even I Don’t Believe the Reasons I Told Myself for Continuing to Steal? What Is the Price for Me Keeping This Secret? How Else Can I Cope While Continuing to Steal? How Many ‘near misses’ Can I Survive? How Did I Not See This Coming? How Can I Reassure Myself that the Theft Won’t Be Detected? How Do the Negative Outcomes Compare to Keep Coping with the Threat of Detection? Even After Analysing the Risks, How Confident am I that the Offending Won’t Be Detected from This Event? Do I Keep Going, Stop or Admit My Crime? Are My Coping Skills Still Functioning Under This Pressure? Should I Change My Theft Behaviour? Should I Start to Plan What I Will Do if Theft Is Detected? Phase IV: Detection to Resolution How Much Do They Know? How am I Being Confronted with the Evidence? What Factors Can Impact on the Confrontation? How Strong Is the Evidence? How Will I Respond to the Interviewer’s Allegations? Should I Offer to Help Any Further Investigations into the Theft Even After the Confrontation? How Can I Minimise the Impact? Why Would I Not Even Try to Mitigate the Outcome Regardless of the Quality of the Evidence? How Will I Focus My Mitigation Strategy When There Is Weak Evidence and Low Motivation to Proceed? How Will I Focus My Mitigation Strategy When There Is Strong Evidence and High Motivation to Proceed? How Can I Make My Mitigation Strategy More Effective? What Are the Ways that My Journey Can End? Conclusion Appendices Appendix A Appendix B Appendix C Appendix D Ethical Decision-Making Program Appendix E Emotions Management Program Appendix F Difficult Conversations and Listening for Admissions Programme Listening for Admissions Programme Appendix G Fraud Awareness Program Appendix H Red Flag Behaviours for Fraud and Behavioural Observation Skills Behavioural Observation Skills Bibliography Index