Student Name: TUPCHIIENKO DMYTRO

Student Number: 6589

Course: Diploma in Forensic Accounting
Assignment NO: 3 (Psychology of The Fraudster )

Marking Criteria:
We expect the learners to write minimum one well expressed point in three lines against
each allocated mark. This means one needs to write 15 lines with 5 well expressed points to
get high grades for a 5 marks question.
For high grades use examples and illustrations where appropriate.

i. You are an investigative officer, how would you differentiate between high and low
level thieves?

Persistent career thieves are divided into low-level, middle-level and high-level categories on the
basis of the scale of their crimes1. There is a distinction between professional thieves and amateurs,
the latter being the largest group, or low-level thieves2. At high levels of organizational life, it is easy
to steal because controls can be bypassed or overridden. The sums high-level thieves steal tend to be
greater than the low-lever personnel steal3.

ii. Give the profile of a typical criminal who commits more expensive fraud.

Frauds involving large sums of money are particularly committed by: (i) long-term employees of the
organization, (ii) high-income earners, (iii) males, (iv) people aged over 60, (v) people with good
educational backgrounds, i.e. the higher the level of education, the bigger the fraud, (vi) people
working in collusion with other perpetrators, and (vii) people who have never been subject to
criminal charges.

 Define the term ‘calculating criminals.’

Two general types of financial fraudster have been observed:

Calculating criminals who want to competeand to assert themselves, and Situational dependent
criminals. Calculating criminals are predators. They tend to be repeat offenders, they have higher-
than-average intelligence, and they are relatively well educated. They usually begin their careers in
crime later in life than other criminals. These predators are generally inclined to risk taking and they
lack feelings of anxiety and empathy. They lacked inner direction, self-confidence,and self-esteem
and were motivated by their desire to fit in and be accepted4.

iv. What is the main difference between situation dependent criminals and power
brokers?
The vast majority of corporate criminals are not predators at all. They are situation-dependentcriminals:
seemingly ordinary people who commit crimes without the intent to harm others. Situational

1 Scott, J. (Ed.). (2006). Sociology: The key concepts. Routledge.

2 Bamfield, J. A. (2012). Shopping and crime. In Shopping and Crime (pp. 1-10). Palgrave Macmillan UK.
3 Singleton, T. W., Singleton, A. J., Bologna, G. J., & Lindquist, R. J. (2006). Fraud auditing and forensic
accounting. John Wiley & Sons.
4 Golden, T. W. (2006). Psychology of the Fraudster. A Guide to Forensic Accounting Investigation, 25-35.
dependent criminals who are desperate to save themselves, their families, or their companies from a
catastrophe5. 'Power Broker' is an individual who, through his or her connections, is able to influence
the decisions of other parties. A power broker is typically an industry insider, and is familiar with
other individuals and groups able to exert influence or make decisions. Power brokers may be
elected officials, business leaders or individuals who are "connected". Because of the influence
power brokers have on an organization's decision makers, they are able to command high fees and
the attention of individuals, organizations and companies looking to make headway with a particular
project or goal. For example, industry lobbyists and media personnel familiar with the ins and outs of
a particular issue are able to reach and influence decision makers faster than those who are
unfamiliar with key players6.

v. What are the three situations that are usually present in fraud case, according to the
fraud triangle?

The causal factors that should be removed to deter fraud (as described above) are best described in
the Fraud or Compromise Triangle. This idea was first put forward in an article by Donald R. Cressey7.
The term was later coined by Steve Albrecht8. The Fraud Triangle describes three factors that are
present in every situation of fraud:
Motive (or pressure) – the need for committing fraud (need for money, etc.);
Rationalization – the mindset of the fraudster that justifies them to commit fraud; and
Opportunity – the situation that enables fraud to occur (often when internal controls are weak or
nonexistent). Breaking the Fraud Triangle is the key to fraud deterrence. Breaking the Fraud Triangle
implies that an organization must remove one of the elements in the fraud triangle in order to
reduce the likelihood of fraudulent activities. “Of the three elements, removal of Opportunity is most
directly affected by the system of internal controls and generally provides the most actionable route
to deterrence of fraud”9.

vi. Briefly describe the Gwynn Nettler’s perception about employees lying, cheating, and
stealing.

If people have experienced failure in their lives, they are more likely to cheat.
ency
to deceive.

perception of detection, are less likely to be tempted to cheat or deceive.

-class people are less likely to cheat than lower-class people, and intelligent people
are more honest than ignorant people.

n for an individual to commit fraud, lie or cheat depends on his/her needs.

iety of personal and organizational situations lead to people lying and deceiving10.

vii. What are the typical motivations for a white - collar criminal, which persuades him to
commit fraud?
There are at least twenty-five main reasons for white-collar crimes, viz.:

5 Golden, T. W. (2006). Psychology of the Fraudster. A Guide to Forensic Accounting Investigation, 25-35.
6 http://www.investopedia.com/terms/p/power-broker.asp
7 Donald R. Cressey, Other People's Money (Montclair: Patterson Smith, 1973) p. 30.
8 Albrecht, W. S. (2014). Iconic fraud triangle endures. Fraud Magazine.
9 Cendrowski, H., Petro, L. W., Martin, J. P., & Wadecki, A. A. (2007). The handbook of fraud deterrence. John
Wiley & Sons.
10 Nettler, G. (1982). Lying, cheating, stealing (Vol. 3). Anderson Publishing Company.
1. The perception of being able to get away with fraud.
2. The desperate belief of an employee that he/she needs the stolen money or articles.
3. Frustration or dissatisfaction with the job, or with aspects of the job.
4. Frustration or dissatisfaction with personal life or with some aspect of personal life that is not
related to the job.
5. An employee’s need to take revenge for being abused by the employer.
6. Failure of an employee to think about the consequences of being caught committing the crime.
7. The employee thinks that it is acceptable to cheat because everyone else is doing it as well.
8. The employee thinks that stealing will go unnoticed because the organization is too big to be
affected by it.
9. The employee is having financial difficulties and feels compelled to steal.
10. The employee steals because he/she wants to beat the organization.
11. The employee was deprived of social or economic welfare during childhood.
12. Stealing/cheating is a mechanism to fill the absence of love, trust or affection in the employee’s
personal life.
13. The employee is a compulsive thief.
14. The employee wants to harm the organization on behalf of a friend whom he/she feels has been
treated unfairly, humiliated or abused.
15. The employee is lazy and does not want to work in order to fulfil his/her needs.
16. The internal controls put in place by the organization to prevent cheating or stealing are so weak
that everyone thinks that it is easy to steal.
17. The organization has never punished or prosecuted anyone for stealing.
18. There is an absence of the fear of being caught because most thieves are caught by accident and
not by audit.
19. Lack of counselling from the management regarding employees’ personal or financial problems.
20. Not all employees steal for the same reasons. They face different situations, and have different
preceding conditions and motives.
21. There is a wide variety of reasons behind an employee’s stealing or cheating.
22. Employees rarely face long prison sentences for committing fraud, stealing and embezzling from
their employers.
23. Human nature is weak and vulnerable to criminal temptations.
24. In today’s world, employees have weak morals and ethics.
25. Corrupt bosses set a bad example for employees, making them more likely to steal or cheat11.

2. ‘The profile of a white - collar or blue - collar criminal is different from other typical street
criminal.’ Discuss this.
White-collar offenders have lower scores on lifestyle criminality but score higher on some measures
of psychopathology and psychopathic traits compared with non-white-collar offenders. White-collar
versatile offenders are highest in criminal thinking. Logistic regression findings demonstrated that
white-collar offenders could be distinguished from non-white-collar offenders by substance use12.
Most white-collar criminals are very clever in evading detection by law enforcement and avoiding
skepticism from their their victims. They build walls of false integrity around themselves to increase
the comfort level of their victims. According to various studies conducted by the Association of Fraud
Examiners (ACFE), over 90% of white-collar criminals don't have previous criminal records). The
higher the economic value of the crime, the less likely it is that the perpetrator had a previous
criminal record13.
These crimes require a certain amount of status and power within the organization that can only be
gained by white-collar workers, like being a business manager or a chief executive office of a

11 Cleff, T., Naderer, G., & Volkert, J. (2013). Motives behind white-collar crime: results of a quantitative and
qualitative study in Germany. Society and Business Review, 8(2), 145-159.
12 Ragatz, L. L., Fremouw, W., & Baker, E. (2012). The psychological profile of white-collar offenders:
Demographics, criminal thinking, psychopathic traits, and psychopathology. Criminal justice and behavior,
39(7), 978-997.
13 https://whitecollarfraud.blogspot.co.uk/2011/04/reuters-on-fbi-efforts-to-profile-white.html
corporation.
Forms of white-collar crime include:

 Stock fraud

 Bribery

 Income tax evasion

Blue-collar crime is not a formal legal classification of crime. It's an informal term that is used to
describe certain types of crimes. Blue-collar crime is a term used to describe crimes that are
committed primarily by people who are from a lower social class. This is in contrast to white-collar
crime, which refers to crime that is usually committed by people from a higher social class. Blue-
collar workers may not have access to the same resources as white-collar workers, so they tend to
commit crimes that are immediate and personal in nature, such as robbery, rather than crimes that
involve elaborate planning. This is not to say that white-collar workers don't commit blue-collar
crimes. Rather, it's just that the people that commit the majority of these crimes are from a lower
social class.
Examples of blue-collar crimes include:
 Armed robbery
 Murder and other violent crimes
 Sexual assault
 Burglary and theft
 Breaking and entering
 Drug abuse14

3. “Fraud is most common in organisations that have no controls, no trust, no ethical values, no
profits, and no prospects.” Discuss this.

Such situations increase the risk of fraud. Evidence shows that the most common factor in all frauds
committed is the lack of separation of duties with no effective control- a situation common to small
businesses and charities . They are more likely to have one accountant, no isolation of duties, and no
compensating control, and those factors are the most common in fraud. Thus said, these factors are
not unique, eg size of the business is not the only factor, as fraud can also occur within big businesses
(eg Enron etc) and the ones with strong corporate culture (eg Arthur Andersen).

Case Study (6)

The accounts of a trader were under tax investigation by the local tax office. He had recently
begun selling and fitting kitchens using recycled materials, including pine dressers and cupboards,
and the new website he had created to support the new service displayed some very impressive
photographic results of his work.
The tax inspector (as part of her tax investigation into the accounts, which had been submitted for
the new business) had looked at the website and used the photographs to produce a costing
exercise. It showed that, even based on a reasonable assumption that only four kitchens had been
sold and fitted during the period, a far higher profit than that which had been declared would have
been generated. She had therefore begun an investigation into the business’s and the trader’s
financial affairs. A forensic expert was instructed to assist the trader in the enquiry.
Having reviewed the papers and met with the inspector the expert quickly established that the key to

14 Gordon, R. A., Bindrim, T. A., McNicholas, M. L., & Walden, T. L. (1988). Perceptions of blue-collar and
white-collar crime: The effect of defendant race on simulated juror decisions. The Journal of Social
Psychology, 128(2), 191-197
the investigation were the photographs on the trader’s website. He interviewed the trader who
explained that he had not actually sold or fitted any kitchens during the period but had used
photographs from books and magazines to give the impression on his website that he had experience
of fitting luxury kitchens. After meeting with the trader, the forensic expert was fully convinced that
the trader was right in his statement.
Keeping in view the above case, please answer the following questions:
i. If the trader has actually committed the crime, what kind of crime it is?
ii. How can forensic expert investigate the case properly when trader could have sold the goods
without generating any invoices or on cash?

i. If the trader has actually committed the crime, what kind of crime it is?

At worst, the crimes committed by the trader are:

(a) The crime of obtaining pecuniary advantage15 by deception when giving the impression on his
website that he had experience of fitting luxury kitchens. However it needs to possess the following
elements of the actus reus viz.:
 there must be a deception (any deception (whether deliberate or reckless) by words or
conduct as to fact or as to law, including a deception as to the present intentions of the
person using the deception or any other person)
 there must be causation
 there must be the obtaining of a pecuniary advantage
(b) Copyright infringement (which is strictly speaking not a crime but civil offense). In copyright law,
infringement does not refer to theft of physical objects that take away the owner's possession, but
an instance where a person exercises one of the exclusive rights of the copyright holder without
authorization. Courts have distinguished between copyright infringement and theft. For instance, the
United States Supreme Court held in Dowling v. United States (1985) that bootleg phonorecords did
not constitute stolen property. Instead,"interference with copyright does not easily equate with
theft, conversion, or fraud. The Copyright Act even employs a separate term of art to define one who
misappropriates a copyright: '[...] an infringer of the copyright.'". Copyright infringement disputes are
usually resolved through direct negotiation, a notice and take down process, or litigation in civil
court. Only large-scale commercial infringement, especially when it involves counterfeiting, is
sometimes prosecuted via the criminal justice system.

However, the trader did not commit a tax crime .

ii. How can forensic expert investigate the case properly when trader could have sold the goods
without generating any invoices or on cash?

The expert should analyse the circumstantial evidence, eg usage of electricity in the furniture
workshop, payment of wages to workers, purchases of materials and the like. It is also woth
obtaining the court order to get access to the bank statements as the cash should be stired
somewhere.

15 The deception must be the operative cause of the obtaining of property, and this is a question of fact for the jury to decide, requiring proof that the victim would not have acted in
the same way had they known the truth. In R v Laverty although the defendant put new number plates and a new chassis number on a car, the victim bought the car because he
thought Laverty was the owner. There was no proof that the false identification plates were the cause of the obtaining. This would suggest that if the victim admits not caring
whether the defendant's representation was true or false, an acquittal must follow. But, in Metropolitan Police Commissioner v Charles, a causal link was implied even though the
victim admitted not considering the question of whether the bank would or would not honour the cheque. Similarly, in R v Talbott (1995) CLR 396 the defendant gave false details
and obtained housing benefit. She was actually entitled to the benefit, but causation was established by the fact that the benefit officer would not have paid her if she had known
the defendant was lying. This "constructive" deception is necessitated because many shop assistants and officials may be personally indifferent as to whether the defendant is
honest or not. To clarify this aspect of the law, the Law Commission recommend the introduction of a specific offence to cover the use of cheque guarantee and payment cards to
remove the need for any implied representation to affect the mind of the particular person accepting the use of the card. This would identify the bank as the true victim. The
deception must precede the obtaining of property. In Director of Public Prosecutions v Ray, the defendant had already obtained the meal before he made the representation. This
is an issue of causation so that it can be shown that the deception operated on the mind of the person alleged to be deceived. In R v Coady (1996) CLR 518, the defendant went to
two self-service petrol stations. In the first, he served himself and then told the attendant to charge his employer which he was not entitled to do. In the second, he may have
made this representation to the attendant before petrol was released to the pump. The convictions were quashed because there was no evidence that the first representation
came before the obtaining of the petrol and the judge had failed to direct on the requirement that the deception operate on the mind of the attendant in respect of the second
representation. Further, the deception must not be too remote from the obtaining, and/or there must be no break in the chain of causation. In R v Button[6] the defendant falsely
represented that he was not a good runner and so obtained a better handicap than he deserved for the race which he won. He was arrested as he attempted to collect the prize
but the deception merely gave him the opportunity to run from an advantageous position, whereas the cause of the attempt to collect the prize was that he had won the race. The
deception must operate on a human mind for the causation element to be proved.
Student Statement:

By submitting this assignment, I confirm that this is my own work.

Student Signature Date 06 May 2017

For Tutor / Assessor Use Only

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 MARKING SHEET FOR STUDENT’S WORK
Student Name: Dmytro Tupchiienko
Course: Diploma in Forensic Accounting (Level 4)
Student Number: 6589
Assignment: 03

UNDERSTANDING YOUR RESULT

The course is made up of units, which contain assignments. To complete each unit your work is assessed
by your tutor along the way.

Note: If the student has achieved less than 40% marks in the assignment it means that the learning
objectives have not met and the student will be required to resubmit the assignment.

UNIT RESULTS ARE GRADED AS:

Resubmit Pass Good Very Good Excellent
0-39% 40-59% 60-69% 70-89% 90+ %

QUESTIONS AND GRADES

Question No. Grade
1 Excellent.
2 Excellent.
3 Very Good.
Case Study Excellent.

OVERALL GRADING:
Date Graded: 25.05.2017
Overall Grade: Excellent
Comments: Compelling arguments; insightful discussions and analysis.
Tutor: Dr. Irfan Raja
Internal Verifier: