Do we know what fraud is?

I am a fraud and economic crime educator and training consultant.

By the very nature of my profession I deal with fraud and white collar crime and the people who are involved in this crime (albeit vicariously!) on a daily basis.

Not only that I am an ex fraudster myself having perpetrated one of the largest white collar crimes in the history of South Africa.

In addition I spent many, many hours in jail talking with other fraudsters to try and understand the nature of their crimes, their mindset, what drove them to crime and how and why the targeted specific companies or industries.

I also spend many hours engaged in research to stay on top of trends in fraud and white collar crime on a local and international basis.

I am an expert in my field and I understand fraud and economic crime and why people commit fraud.

The question is why do we have an absolute deluge of fraud and economic crime?

We are all aware of the dangers that fraud and economic crime represent to our businesses, ourselves and the economy of the country.

Why does this scourge continue to proliferate?

This is an easy answer.

We all lie, cheat and steal.

That is how our previous Auditor General, Mr Shauket Fakie, defines fraud.

“Lying, cheating and stealing”

The official South African definition of fraud is:

“Fraud is the unlawful and intentional making of a misrepresentation which causes actual and or potential prejudice to another”.

The first problem is that we don’t understand what fraud is and what the consequences could be.

Here is a recent example to illustrate the point.

I read a story on Moneyweb's Realestateweb about the undervaluing of houses by estate agents to get quicker sales.

Is this only business?

Nope it is definitely fraud.

Look at the definition, fits the bill doesn’t it?

When that estate agent deliberately misrepresented the value of the house to the seller he caused him potential prejudice and it is therefore fraud.

If the potential prejudice is more than R500 000.00 that qualifies the estate agent for a 15 year minimum sentence jail term.

Did that agent think about that when he made that misrepresentation?

Did he even know that he was committing fraud?

Can he deal with spending the next 12 years in jail?

People don’t realise that fraud is about potential not actual loss, the victim does not have to suffer any actual loss for you to be found guilty of fraud.

The other problem is that we are all motivated by self interest; the only important thing is what is good for us.

We lie to our spouses, children, bosses, business partners, the Minister and God Himself without thinking of consequence.

We steal the all the time even if it is only a pencil from work, our employer’s time, our expense accounts or someone else’s chocolate bar from the cupboard.

We cheat at games, on our spouses, our employers.

And we find no problem with this, I mean, EVERYONE does it.

We are all (or at least 80% of us according to research) morally confused. We will do anything if the motive and opportunity are right.

If this is the case, and it is, why would fraud be a stretch?

We are all already corrupt, we have strong criminal tendencies, and we only have to convert these tendencies into action.

Yes I know YOU have never done anything like that, you are one of the morally impeccable 10%!

The other 10% are outright crooks and NONE of us fall into that category!

The point is that there is a definite line between moral and immoral behaviour and most of us crossed that line a long time ago.

Most of us just idle along as petty criminals until the right opportunity and motive come along, and then we become real crooks.

Once you have crossed the line you have crossed the line, very difficult to get back.

Do you really think that the high profile crooks that we read about started life with the ambition of becoming a crook?

Of course not, things just got out of control; the downward spiral swept them away.

This happens very easily and quickly and you rationalise and justify it all the time telling yourself that it is only business and that you are doing nothing wrong.

Deep down you may know the truth but you only admit it when you are caught, and you WILL be caught.

So the answer is that we are ignorant, we don’t know that what we are doing is fraud and we are morally confused.

The solution is very easy; don’t EVER lie, cheat or steal and be morally impeccable.

Develop, build, maintain and promote a cast iron impeccable personal moral code.

And stick to it no matter what happens.

In a word be trustworthy.