Fraud is a form of deception where the perpetrator knowingly misrepresents or conceals information with the intent to gain a benefit or to harm another person. The most common forms of fraud are financial crimes, which may include scams or unauthorized transactions. Fraudsters use false information to take advantage of an asymmetry in which they know something that their victim does not, or cannot, verify. These crimes carry serious consequences, which reflects their impact on the victims and legal systems prioritize punishing offenders to discourage others from engaging in similar criminal activities.
Managers and employees responsible for stewardship of University resources should be aware of red flags, warning signs that may indicate the potential existence of fraud. In most cases, one or two flags does not necessarily mean that fraud is occurring, but if they are found in combination with other factors, such as accounting irregularities or weak controls, then the fraud department should be contacted immediately.
There are many types of fraud, and it can be classified as organizational or individual. Organizational fraud includes schemes that target entire organizations, such as embezzlement and bribery. Individual fraud can range from identity theft and phishing scams to more complicated schemes such as Ponzi schemes or advance-fee schemes.
The motivation to commit fraud varies by individual, but it is generally caused by a combination of pressure and opportunity. The pressure is the need to meet a pressing need, such as paying bills, and the opportunity comes in the form of a specific scheme that allows the fraudster to take advantage of their position of trust (e.g., stealing cash or falsifying expenses). When these elements are combined, it is the fraudster’s rationalization that ultimately drives their decision to engage in fraudulent activity.
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