Motives behind internal fraud in the British financial sector

Posted on July 22, 2014 by

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What motivates employees in the British financial sector to commit fraud?

New research on internal fraud in the British financial sector by Dr Matthew Hollow explores the motivations behind acts of financial fraud committed by company employees.

In order to make effective fraud risk assessments the motivations that lead employees to commit acts of fraud must be identified. While the study is not expected to be a comprehensive overview of fraud in the British financial sector, it does highlight important findings on the motivations to commit fraud by different levels of employees who work for financial companies, including banks.

In the 64 case studies of financial fraud examined by Hollow using historical records, the main motive for committing fraud was for personal financial reasons, but this was not the case for senior-level employees who more often were motivated by external pressures such as helping a friend or family member, or even helping the company itself. According to the study, senior-level offences tended to inflate the profits of their respective banks where junior-level employees would extract usually small amounts of money.

For junior level employees personal financial problems such as gambling debts were almost always the main reasons for committing fraud. While they are more unusual, the study shows that non-financial incentives for committing fraud do exist and tend to be from higher-level employees. The motivations for carrying out fraud in the financial industry were found to be similar to other industries.

Key Finding:

Personal pressures are most likely to lead employees to commit financial fraud, but external work-related pressures also influence them, especially senior management. Risks of fraud can be reduced by paying attention to motives and what takes place within wider organisational cultures.

Paper:

Hollow, M. (2014) Money, Morals and Motives: An Exploratory Study into Why Bank Managers and Employees Commit Fraud at Work. Journal of Financial Crime, 21 (2).

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Posted in: History