Introduction
Serial fraud is the act of defrauding others on a regular basis with the intent of gaining financially. This type of crime is committed within a short duration with various forms of fraud, such as embezzlement, securities fraud, and identity theft. This is important because serial fraud affects people, businesses, and society. Serial fraud can also be expensive as victims may suffer greatly while the organizations pay hefty fines. Serial fraud also undermines the confidence in financial systems and institutions, making the economy unstable and less credible. Serial fraud is a matter of concern among law enforcement agencies, regulatory bodies, and businesses globally (Gottschalk, 2015). In studying serial fraud, it is possible to determine the general characteristics and methods of operation used by serial offenders who commit it. It is also important to understand the psychosocial processes that underlie serial fraud to identify the drivers behind the conduct and to design preventive interventions. It is, thus, necessary to study serial fraud to safeguard individuals’ or organization’s finances and trust in financial transactions. This essay aims to explore serial fraud with respect to its definition, psychological aspects, characteristics of its perpetrators, and techniques of forecasting and prevention.
Description of Serial Fraud
Serial fraud is a series of false or illegitimate acts done frequently by either one person or a group intending to earn something for themselves. Fraudulent activities in this context cover a wide range of activities whose systematic nature is persistent over time. There are many forms of serial fraud, ranging from identity theft, insurance fraud, Ponzi schemes, financial scams and credit card fraud. Most of these frauds are based on tricking investors, falsifying financial data, and inventing non-existent investment plans. Personal information can be sold by its thieves in many ways, which include establishing a fake credit card account to swipe bank funds (Gottschalk, 2015). Insurance fraud covers different types of schemes meant to cheat insurers, including faking claims and fabricated accidents.
Additionally, serial fraud is becoming a major menace, leading to huge monetary losses and affecting people’s faith in institutions. The FTC reports indicate that millions of people are defrauded each year in the U.S., leading to loss of billions of dollars. Serial fraud is costly because it not only involves money loss but also makes a victim untrustworthy about his financial system, business entity, or even his sense of safety. It also has emotional consequences on victims who get stressed and anxious with reduced trust in other people (Gottschalk, 2015). The effects of serial fraud can be prevented in society in the form of more regulations, high insurance premiums and provision of resources towards fighting fraud, hence diverting attention and financial support towards productive ventures.
Moreover, serial fraud has adverse effects on people, small businesses, and the economy as a whole. Apart from causing direct financial loss to their immediate victims, serial frauds destroy the reputation of honest businesses, thereby affecting the trust of their customers. Fraudulent activities involving small businesses may lead to serious losses or cessation of business altogether. Additionally, serial fraud may bring about negative consequences to the economic state by creating uncertainty among consumers who are unwilling to enter into transactions while necessitating stronger controls (Gottschalk, 2015). Social accumulation serial fraud requires a wide approach in countering its influence on the general society, preventing possible victims and prosecution of criminals so that others will be discouraged from further involvement.
Psychological Aspects of Serial Fraud
Psychological consideration of serial fraud shows that people committing these acts have personality problems, motives, and habitual behavioral patterns. Serial fraudsters often have personality traits like narcissism, antisocial and borderline personality traits. Narcissists exaggerate themselves in great ways, which may drive them to seek deceptive successes to gain admiration (Gonzalez & Kopp, 2017). Serial fraudsters who have antisocial personality traits may resort to manipulating people with a purpose for their gain. Serial fraud could be linked with borderline personality traits that are characterized by tumultuous interpersonal ties and bad behaviors.
Serial fraudsters have complex motives comprising economic benefits, power, as well as mental satisfaction. This is clear in the case of people who want to acquire wealth for themselves or simply live in luxury by committing fraud. Nevertheless, psychological satisfaction derived from an ability to beat others may also prove tempting (Gonzalez & Kopp, 2017). Successful serial fraudsters find pleasure in deception, and that is the reason why they do it. This feeling of supremacy and ability to manipulate other people make them hooked and force them to commit fraud on several occasions.
They also display a complex interplay of manipulativeness, charisma, and flexibility in behavioral patterns and traits. Their social skills are normally out of the ordinary, and they use their charm and charisma to be friendly with their victims in a bid to convince them. Serial fraudsters are also flexible and readily change their approaches to defraud the weakest spots of organizational and people’s systems (Gonzalez & Kopp, 2017). They can deceive people and manipulate circumstances in order to be allowed to carry out their deceptive activities. In addition, such people can be very charismatic and manipulative. However, the inner world of serial fraudsters consists of a variety of personalities, motivating forces, and behaviors. They are normally characteristically shady as far as personality is concerned, enjoy fooling other people, and can easily fit into any situation. Therefore, it is important to understand these psychological elements that can help in creating approaches aimed at reducing losses caused by individual and societal levels in the case.
Identified Offenders Who Have Committed Serial Offenses
Bernie Madoff was the embodiment of one of the most vast and disastrous Ponzi schemes that ever existed. For more than two decades, Madoff defrauded investors, including charities, individuals and financial institutions, of about $65 billion (Heydenburg, 2015). Investors were given the assurance that they would constantly get high returns on their investments. By using money from recent investors to pay earlier ones, the impression that investing was successful was created. Madoff used his credibility and charm in the financial sector, thus attracting and defrauding investors. He desired to live in wealth and become a prominent financial person. An example was a warning of the damage of blind faith and the massive impact of a sophisticated Ponzi scheme on many others.
Charles Ponzi organized another simpler scheme associated with the famous Ponzi scandal. During the 1920s, Ponzi would give investors large paybacks in a short time by taking advantage of the discrepancy in foreign postage reply coupons’ worth (Heydenburg, 2015). His strategy was based on attracting new investors’ funds to be used to pay previous ones, giving the appearance of profitability. The objectives seemed financial for Ponzi, as well as his desire to be successful, driven by ambition and a quest for a luxurious way of life. His case established the blueprint for all future Ponzi schemes and reflected the damage that results from false assurances and unsuspecting investments.
Unlike the typical serial fraudster who always looks for quick riches through small sums of money, Frank Abaganale had an ingenious mindset. He committed diverse types of crimes. Frank forged checks and impersonated people with different professions and names so that he could deceive persons and organizations (Heydenburg, 2015). The multiple fraud engagements by Abaganale were motivated by an adventurous spirit and hunger for acknowledgment, which involved deception in conjuring identities and forgerie strategies. Studying these cases gives an insight into the different reasons that propelled this series of frauds and how it could have been avoided since a case such as this requires very high levels of vigilance and preventive measures.
Example of an Offender and Psychological Factors
Frank Abagnale’s case study gives an elaborate account of the psychosocial dynamics that led to his conduct as a career swindler. One of the famous fraudsters from the movie “Catch me if you can” is Frank Abagnale, who was involved in several fraudulent activities, which included check forgery, impersonation, and confidence men schemes, defrauding people and businesses of millions of dollars (Clarkson & Darjee, 2022). A number of psychological issues, such as a bad childhood, a need for respect and acknowledgment, and a lack of empathy, led to Abagnale’s criminal behavior. The early experiences at home, the divorce of his parents, and the subsequent breakdown of Abagnale’s family environment are also likely to have caused insecurity and the need to feel validated at this tender age. The experiences could also have inspired him to take fake names and commit deceitful acts so as to be recognized and feel like a member of society.
Psychologically, Frankel showed tendencies of narcissistic personality disorder and feeling entitled. His fraud was driven mainly by greed for wealth, power, and respect in the financial market. Just like Abagnale’s experiences in childhood could have influenced his behavior, a similar could be said for Frankel (Clarkson & Darjee, 2022). It is said that their upbringing was not easy as they felt neglected without the support coming from their families. They may have instilled in him a strong desire for verification and achievement, which in turn led to his unwavering determination to build wealth and fame.
Frankel’s behavior also reflected manipulativeness coupled with an empathy deficit that characterizes antisocial personality traits. He demonstrated dishonesty and cunning, using his sweet-talking and brainpower to con people and businesses. This skill of bending situations and people is typical for antisocial personality disorder. In addition, some of Frankel’s actions demonstrated aspects of impulsivity as well as a lack of consideration for ethical conduct (Clarkson & Darjee, 2022). This was evidenced by the nature of his scheme, which entailed engaging in actions with high risks, such as market manipulation and misrepresentation, that suggested a reckless style of decision-making. His sense of entitlement, coupled with impulsiveness, which he seems to be oblivious about regarding how other people may suffer because of him, speaks about his complicated psychology. Finally, Frankel’s misdeeds can be traced to his desire for bigger than anything else or anybody else. To a greater extent, he was interested in money and desired to be known among the successful financiers. This yearning for acknowledgment and feeling of superiority led him to carry out fraudulent transactions and mislead both investors and regulators.
Personality Disorders Associated with Serial Fraud
Overview of Personality Disorders Connected to Serial Fraud
Serial fraud often involves individuals with personality disorders. Many times, serial fraud involves various specific personality disorders, with each kind giving certain features that shape and motivate the culprit. Narcissistic personality disorder (NPD) is one outstanding personality disorder that is associated with serial fraudsters. People with narcissistic personality disorder (NPD) tend to be excessively self-important, always needing to get positive attention and have low empathy for others (Crego & Widiger, 2018). These people can be used as weapons by others for their recognition, success, and worldly achievements within the serial fraud context. They may perceive themselves more than they really are. Therefore, they feel entitled to use others without a sense of guilt. These people are likely to keep on committing fraud with the objective of attaining esteem and acknowledgment from others for the fake success they have created.
ASPD is another common personality disorder that has been closely linked with serial fraudulent activities. People with antisocial personality disorder (ASPD) tend to demonstrate disrespect for the rules, absence of guilt, and cheating (Crego & Widiger, 2018). The traits include serial fraudsters’ manipulative behaviors, constant lying, and disregard for others’ rights and safety. The insensitivity and lack of guilt to the harm they cause to their victims drive a number of individuals suffering from ASPD to commit repeated fraud. They use their charisma and ethically inappropriate actions to defraud others effortlessly.
Borderline personality disorder (BPD) may also contribute to serial fraudulent behavior, but much less than in NPD and ASPD. People with BPD suffer from highly unstable relationships, unstable identities, and emotional instability (Howard, 2015). People who commit serial fraud could be doing so impulsively because of their emotional volatility and the internal emptiness within them that they are trying to fill up. Some of these erratic behaviors may include seeking validation through participation in deceptive practices for emotional respite (Robitaille et al., 2017). These personality disorders lay down a framework for understanding the psychological attributes and typical malfeasance demonstrated by serial fraud offenders (Crego & Widiger, 2018). Although not all of these disorders lead to crime, it is necessary to take into consideration these specific traits that are characteristic of these disorders because, combined, these factors provide good reasons for serial fraud.
Discussion of How These Disorders Influence Criminal Behavior
Personality disorders play a significant role in influencing criminal behavior, particularly in the context of fraud and other white-collar crimes. Studies have revealed that people with personalities such as antisocial personality disorder, narcissistic disorder and borderline personality disorder usually participate in crimes more than those without such characteristics (Clarkson & Darjee, 2022). Some of these disorders are characterized by maladaptation in their thought patterns and behaviors, like being dishonest and lacking empathy, which may result in a crime. Those with antisocial personality disorder are likely to showcase deceptiveness, impulsiveness, and callousness towards other peoples’ rights and, therefore, engage in fraud (Clarkson & Darjee, 2022). Similar to people under the influence of Narcissistic Personality Disorder (NPD), such individuals may also be involved in criminal behaviors as they seek to uphold an image of success and supremacy based on inflated perceptions of self-worth as well as persistent desire for recognition.
Moreover, the link between personality disorder and criminality includes the kind of offenses committed as well as the actions demonstrated at the scene of a crime. Research has shown that some personality-disordered offenders commit different kinds of criminal acts, while others show particular forms of crime scene behavior. For example, people with BPD could be more likely to commit impulsive and violent acts that are sometimes linked to their past trauma and drug habit (Howard, 2015). The comorbidity has also been shown to occur among ASPD and Borderline Personality Disorders in forensic psychiatric samples, especially for those described as “dangerous and severely personality disordered.” It is essential to comprehend these relations so that focused approaches can be implemented in the prevention and intervention of psychopathology associated with criminal behavior.
Ways of Predicting Serial Fraud
Serial fraudsters may present themselves as highly important people who keep lying in order to mislead others through deceptive ways, including being charming (Petherick & Sinnamon, (Eds), 2016). Other important indicators are also monitoring for consistency in discrepancies between the reported performance relative to actual results, unusual financial flows, and unexplained anomalies in documents. Narcissistic, antisocial, and other psychological indicators include traits like impulsiveness and the inability to empathize, which could be reflected in an individual’s actions or communication types. A thorough psychological evaluation will help identify these psychological characteristics, while behavioral analysis will enable the preempting upscaling of serial fraud.
It requires employing strategies for early detection and prevention. A preventive approach can include stringent recruitment criteria or vetting parties within financial circles. Through scrutiny of previous job records, review of credentials and background checks, one is able to locate inconsistencies or red flags. Furthermore, creating an environment where organizations encourage high levels of transparency, ethics, and accountability can be a preventive measure for fraud incidents to take place (Petherick & Sinnamon, (Eds), 2016). Anonymous hotlines or reporting mechanisms and encouraging employees to report suspicious activities that may help stop potential fraud. Educating and training people to recognize behavioral or psychological signs of fraud can enable them to become vigilant in detecting these acts, which then may prevent them from expanding to larger-scale abuses. Further, using sophisticated technology like data analytics and fraud detection software may detect outliers or abnormalities on a budget, thereby alerting companies about suspicious transactions long before they become noticeable (Petherick & Sinnamon, (Eds), 2016).
Conclusion
Serial fraud prevention and reduction recommendations comprise personality disorders and special ways that help to determine possible serial thieves. The underlying psychological aspects contributing to crime can help save financial systems from serial fraud, which is detrimental not only to the economy but also to society. However, although some personality disorders may be connected to dishonesty, other people with certain personalities may not commit any crimes at all, and there are criminals out there whose personalities do not make them fit into a personality disorder category. As a result, interventions should target the intricate interrelations between psychosocial variables and criminal action and, in general, be helpful in recognizing fraud and white-collar crime.
References
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Crego, C., & Widiger, T. A. (2018). Antisocial–psychopathic personality disorder. In Developmental Pathways to Disruptive, Impulse-Control and Conduct Disorders (pp. 91-118). Academic Press. https://doi.org/10.1016/B978-0-12-811323-3.00004-3
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Gottschalk, P. (2015). Fraud examiners in white-collar crime investigations. CRC Press. https://books.google.co.uk/books?hl=en&lr=&id=zOE_CQAAQBAJ&oi=fnd&pg=PP1&dq=fraud+as+a+white+collar+crime&ots=DCpdYbPp8a&sig=Tf07j6n6jR8EU8npG2YU6dVZeoE&redir_esc=y#v=onepage&q=fraud%20as%20a%20white%20collar%20crime&f=false
Heydenburg, M. R. (2015). The Ponzi scheme as a deception operation: The Bernie Madoff case study. American Intelligence Journal, 32(2), 27-34.
Howard, R. (2015). Personality disorders and violence: what is the link? Borderline Personality Disorder and Emotion Dysregulation, 2(1), 1–11. https://doi.org/10.1186/s40479-015-0033-x
Petherick, W., & Sinnamon, G. (Eds.). (2016). The psychology of criminal and antisocial behavior: Victim and offender perspectives. Academic Press.
Robitaille, M. P., Checknita, D., Vitaro, F., Tremblay, R. E., Paris, J., & Hodgins, S. (2017). A prospective, longitudinal study of men with borderline personality disorder with and without comorbid antisocial personality disorder. Borderline personality disorder and emotion dysregulation, 4(1), 1-13. https://bpded.biomedcentral.com/articles/10.1186/s40479-017-0076-2
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