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I was at home when I heard my dog barking in that threatening way she did whenever someone other than family was at the door.

I went over to take a look. The wooden door had a window. Through it I saw a very handsome, well-dressed man. He was looking down, focusing on something intently. I was strangely unaffected and quickly concluded he was confused and didn't know where to find the doorbell. As I moved toward the door, it was then I saw him raise a massive crow bar. He was breaking into my house, and came well equipped to do so.

So what is the true profile of a thief or fraudster? According to a 2007 KPMG survey, Profile of a Fraudster, "the typical fraudster is male, between 36 and 55 years old. By the time he starts profiting from his illegal means, he has usually been employed by the company for six or more years. He typically works in the financial department and commits the deed alone. He is driven to crime by a desire for money and by opportunity."

Best estimates say that employee fraud costs U.S. organizations $400 plus billion annually.That translates to more than $9 per day per employee and more than 7 percent of total annual revenues. These are serious numbers.

So why do "good" employees commit fraud? One theory by Joseph T. Wells is referred to as the "Fraud Triangle," where three conditions must exist for fraud to be more likely--opportunity, pressure and rationalization--a prospective fraudster has to see an opportunity to commit and conceal a crime, they are under some form of financial pressure, be it greed or need and they are usually able to rationalize their transgression as something other than criminal activity.

Some say that fraud has less to do with opportunity, but more with rationalization--the more dissatisfied the employee, the more likely they will steal to "balance the scales" of their own sense of self worth. With our recent economic downturn and not surprisingly, the collateral damage to employees, it is the prime environment and opportunity for proactive fraud risk assessment.

Dampening the desire for fraud is the secret ingredient to fraud prevention. Companies should be watching deteriorating workplace conditions and employees faced with embarrassing financial situations. Dan Ariely, author of "Predictably Irrational", further suggests that corporate culture and language sets the standard for what people will do. '

Ariely recommends articulating crystal clear values. His studies show that people asked to recollect the Ten Commandments tend to be more honest than those who haven't and that honor codes actually do reduce dishonesty in the workplace. With respect to language used with employees, consider the plethora of interpretations of expressions such as "push boundaries" and "think outside the box." With creative thinking, the box some employees may be trying to avoid is one with bars around it if they are caught.

JOANNA MAKOMASKI, the former risk manager for a global energy company, is a leading specialist in innovative Enterprise Risk Management methods and implementation techniques for ERM Quickstart. She writes on risk management.

July 1, 2009

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