In its Report to the Nations for 2018, the Association of Certified Fraud Examiners (ACFE) reports that in 85% of cases, fraudsters displayed at least one behavioral red flag. In 50% of cases, fraudsters displayed multiple red flags. What are the top 10 red flags of fraud?
Based on the percentage of cases for which a fraudster was identified as having displayed one or more behaviors, ACFE reports that these 10 red flags were most prevalent:
- Living beyond means - 41%
- Financial difficulties - 29%
- Unusually close association with vendor or customer - 20%
- Control issues, unwillingness to share duties - 15%
- Divorce or family problems - 14%
- "Wheeler-dealer" attitude - 13%
- Irritability, suspiciousness, or defensiveness - 12%
- Addiction problems - 10%
- Complained about inadequate pay - 9%
- Excessive pressure from within organization - 7%
The first two directly feed the "pressure" side of the fraud triangle and are amplified when paired with one or more other red flags (the full report lists 18 behavioral red flags in all).
The chancellor at St. Louis Community College found it "frustrating and discouraging" to believe the school could lose $5.4 million to embezzlement. It's hard to know from afar, but which red flags might have been displayed just waiting for someone to notice?