Lies are the fraudster’s tools of deceit. They come in many forms, but there are three primary ways they are communicated. Being aware of the different types of lies and how to spot them can help you uncover a fraudster’s scheme more quickly. I will use an actual embezzlement case that was reported earlier this year to illustrate these different ways one can lie.
A former employee embezzled almost $13 million from her employer over sixteen years. She and her husband spent their ill-gotten gains leading a lavish lifestyle—buying homes, a yacht, jewelry, furs and luxury cars. They also enjoyed gambling in their spare time. The fraudster’s husband was even able to retire early because of her scheme which involved moving funds into an account she controlled and covering her tracks by altering her employer’s bank statements and creating false invoices.
These types of fraud schemes involve multiple lies, which happen in one of the following three ways:
- Written lies can come in a variety of forms—emails, texts, invoices, or forgeries, just to name a few. Lies in the form of emails or texts occur less frequently because there is a historical record that can easily be tied back to the fraudster. Because of this, the successful fraudster almost always has to use written lies that are tied to other individuals or organizations for their scheme to work. These lies can be successful tools because it appears that a person unrelated to the fraudster is requesting, providing, or confirming the transaction or information. For example, as in the case mentioned above, if a company employee changes the company’s bank statement to match an accounting entry that was made up, the company owner is less likely to question the veracity of the bank statement because it appears to have come from an unrelated trusted party, the bank.
- Oral lies happen primarily in two ways—face-to-face or over the phone. These are more prevalent because they are easy to work with, easy to change, and are usually undocumented. They allow the person telling the lie to change their story depending on who they are talking to or to deny previously made statements. This fluid story line can cause uncertainty and confusion and gives the fraudster more time to continue their scheme. With the above case, the fraudster would have most likely lied about how she obtained the money to buy her expensive toys if she flaunted them at work from time to time. She could have told coworkers that she won the lottery or inherited the money from a rich relative. The lies would have continued until the truth was discovered.
- Silent lies are overlooked all the time. Fraudsters lie silently by staying quiet when a question is asked or by remaining silent when an inaccurate statement is made in conversation and thus implying that the statement is accurate. These lies are easy for a person to conceal because they take almost no energy and create little stress for the fraudster. These lies can be challenging to spot, but if identified, can quickly uncover the truth. In the case described above, if the owner asked questions in a meeting related to profitability dropping or certain expenses increasing and everyone except the fraudster is trying to figure out the answer, then the fraudster’s silence (or absence from the meeting because they are too busy) is very telling. The owner or someone else in the meeting should take note of the silence and try to get more information. Further direct inquiry can often lead a guilt-ridden fraudster to tell the truth.
A fraudster’s lies can cripple an organization by reducing profits or increasing losses. Strong organizations can bounce back after a fraud is discovered, but for some, the story can be very different. If the fraud is significant enough, bankruptcy may be the only option for the organization. In either scenario, lies can cause significant damage.
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