Behavioral Red Flags of Financial Fraud – Fraud Files Blog

There are a number of common signs that we may see when someone is engaged in financial fraud within a company. Tracy talks about the behavioral red flags for fraud in this video, which are also summarized below:

Situational pressures that may lead to fraud can include:

• Personal financial problems, such as high debts, bankruptcy, child support obligations, spousal support obligations, or investment losses
• Family or relationship struggles, especially if they involve money
• Instability or emotional trauma in one’s personal life
• Significant illness, leading to time away from work or substantial medical bills
• Addictions, such as alcohol, drugs, or gambling
• Criminal background, which may suggest dishonesty, but may also create difficulties in obtaining and sustaining employment
• Chronic legal problems, which can be expensive and time consuming,
• Infidelity, which involves dishonesty and requires funds concealed from the spouse

Personal or behavioral red flags that might indicate the involvement in financial fraud include:

• A lifestyle that exceeds the known income or an obvious change in one’s lifestyle
• Financial difficulties
• An unusually close association with customers or vendors
• A wheeler-dealer type of personality
• Excessive gambling or use of alcohol or drugs
• Perceived inequities or unfairness at work
• Overly protective of one’s work, responsibilities, and documents
• Chronic dissatisfaction with work or personal life
• Resentment of superiors
• Unusual desire for personal gain
• Weak personal code of ethics
• Frequent rule-breaking or repeated attempts to beat the system
• Change in work habits (coming in early, staying late, attempting to be alone at the workplace)
• Reluctance to take vacation time or be absent for more than a day or two at a time
• Rationalizing unethical behavior
• Change in behavior patterns