Find Deviant Behaviors, Find Fraud?

Human Resources Issues Could Uncover Worse Crimes

By By Ryan C. Hubbs, CFE, CIA, PHR, CCSA



MarchApril-deviant-employee-1 Sophisticated fraudsters may be able to conceal their frauds, but they may not be as adept in hiding their workplace deviant behaviors. Identifying or recognizing a correlation between the two, even if the correlation is weak, could significantly improve the anti-fraud profession's ability to uncover fraud. 

On his first day on the job, Joe started viewing "adult" movies on his company computer and paying for them on his company-issued credit card. He continued this behavior during his six years with the nonprofit and racked up more than $4,000 in inappropriate charges. But that wasn't all. After Joe resigned, an audit of cash collections showed Joe took more than an additional $50,000 in donations. Another audit of the cash disbursement account also revealed Joe was writing checks payable to "cash," and personal checks written from this account totaled more than $28,000. In the end, Joe's frauds totaled more than $82,000. The company prosecuted Joe, and he received probation.

Throughout my career, when investigating fraud complaints, I would find that suspects often also would have problems with pornography, bullying, harassment and other human resources issues. Conversely, when I would be called in to investigate human resource complaints and issues, I occasionally would find one or more fraud schemes involving these individuals. 

Over the years, I found so many instances of pornography on suspects' computers when investigating fraud complaints that I would jokingly comment that all investigations seem to lead to porn. After fellow fraud examiners shared similar stories at last year's ACFE Annual Fraud Conference and Exhibition, I decided to do some research. 

A daily search of news articles in any country will yield dozens of examples and situations that are very similar to the one mentioned above: employees engaging in workplace deviant behaviors while also defrauding their employer. Is there any link, association or correlation between non-fraudulent deviant behavior in the workplace and fraud? Can we find fraud then by looking for deviant behaviors and working our way backwards to potential fraudsters? I wanted to know if anybody had researched this possible correlation. 

I began to form the "Using the Deviant Behaviors of Others to Find Fraud" hypothesis or UDBOFF. (I've already received feedback that I should have come up with a catchy acronym first, then do the research, but we are too late for that, so UDBOFF it is.)

I conducted a three-month review of articles to look for other documented incidents in which workplace deviant behaviors and fraud were linked in the same cases and to explore whether I could expand and refine this approach so it could become a useful tool in the fight against fraud. Sophisticated fraudsters may be able to conceal their crimes, but they may not be as adept in hiding their workplace deviant behaviors. Identifying or recognizing a correlation between the two, even if the correlation is weak, could significantly improve the anti-fraud profession's ability to uncover fraud. 

First, a definition that I work with: workplace deviant behaviors are those behaviors exhibited by people at work that violate company policies, laws and socially accepted workplace behavior. Examples may include: sexual harassment, sending or viewing inappropriate images, bullying or intimidating other employees, using directed profanity at others, conducting intra-office affairs or retaliating against another employee. Part of the UDBOFF hypothesis is based on the premise that if someone is willing to violate the sexual harassment policy, they may also have little regard for the financial policies of the organization. Therefore, finding the next fraudster could be as simple as looking for individuals who exhibit these deviant behaviors in the workplace.


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By Robert_160
I was fortunate enough to attend Ryan's presentation of this topic at the annual conference. It is both logical and shocking. Great insight!
By Jay_8
Good research. The link between wasting time on pornography and the propensity to commit fraud seems to have been made. I would suggest, however, it is not the searching for porn - but rather, the amount of time spent on the occupation that may be the true signal the Examiner should look for.
By Ryan Hubbs_3
Thank you for all of the great feedback. Hopefully it will help you and others find additional fraud. I also hope that someone will pick up the idea and run with it further. I think that there are several additional avenues that this premise could take us. Ryan
By Orlando_Perez
By Acube
I started considering this linkage in my personal relationships last year and have had to treat my best friend with a lot more circumspection in financial dealings as he is an unrepentant adulterer. I have had to pull out of a few deals and made him and his wife understand why. The wife was of course aware of his philandering beforehand. I guess living in a notoriously corrupt country made me notice the apparent connection as virtually every corrupt politician we hear of in Nigeria is also an adulterer / paedophile / gambler / drug addict / murderer / vote stealer etc. Would be great to have thorough research done on this complex.
By David_Russo
Good insight into the causation vs. correlation debate. In some cases, the cover-up of deviant behavior (pressure) were the direct cause (rationalization) of fraudulent activity. In light of the recent Secret Service - Colombian Prostitution Scandal (4/15/12), your hypothesis hints at potential national security implications at the highest levels. May I suggest the acronym, P.O.R.N. Hypothesis - Personnel Offenses Reporting Network.
By Douglas
An excellent article! An extremely interesting approach to detecting possible fraud activity. The correlation of deviant behavior to fraud is an unusual premise, but it does make sense. Thank you for the insight.
By Kuchi_Bhagirath
Actually I too came up on the situations in the article. Unfortunately, they are my colleagues and some of them are my seniors at an audit firm I worked and there's nothing i was able to do. I came across these situation in one of my close friends workplace too and it was an audit firm too... !!! It was a good research...
By RLamar
I think the UDBOFF ("you'd be off", great acronym!) hypothesis is a valid tool in the fraud examiner's toolbox. Looking back, most of my cases involved suspects who were a little "off" in one way or another.
By Sherri_McGahee
By Cynthia_31
By tabmccormick
Many of my clients ask me how to tell if someone is stealing. This article highlights another red flag that I can point out to them.
By John_109
Excellent article! When I tell people that my first question, at a company where fraud is suspected, is, “Which married men are having affairs?”, I get met with wide eyes and nervous giggles. I then explain that a married man having an affair does not fund the activities with the family checkbook. Although paying for a hotel room with the company card may not be the crime of the century, it is often the thread, that when pulled, will unravel the entire sweater.
By James_Waters
By AlisaKnick
By Pamela_14
By Larissa
I have always thought there to be a correlation of certain behaviors and financial pressure that could lead employees to fraudulent behavior. I have noticed the correlation specifically when an employee has a drug abuse issue which leads to bad judgement.