The Hindu Business Line : Profile of a typical fraudster

Chennai April 18 How does a typical fraudster look like? "Male, between 36 and 55 years old... employed by the company for six or more years... typically works in the financial department, and commits the deed alone." Macabre, but this is what emerges from the latest survey by KPMG, a Big Four, with worldwide network of audit and advisory services firms.

"The typical fraudster is someone who would be your trusted man, who is efficient in work, and a very smooth operator," says Mr Deepankar Sanwalka, Executive Director and Head of KPMG Forensic in India. "Not all those who fit that description may be fraudsters, but the converse is true," he hastens to add, talking to Business Line.

The survey claims to be `the first analysis of real-life investigations carried out in recent years because, rather than selecting companies randomly, the sample under study comprises `360 actual cases that were entrusted to the forensic departments of KPMG in Europe, the West Asia, India and Africa'.

A disturbing finding of the survey is that over 60 per cent of the perpetrators are members of top management. "Senior managers have access to confidential information, and due to their position, it is easier for them to bypass internal controls and inflict greater damage to the company overall," explains Mr Sanwalka.

"During fraud investigations, we are told that the person under the microscope is intelligent, so good. `How could he have done it?' they ask. Precisely, that is the reason, we tell them. He had your trust, and so he misused the trust."

Whistle-blowing

So, how do we get over the problem? Most important, have a robust whistle-blowing policy, advises Mr Sanwalka. Nearly 30 per cent of fraud discovery happened due to whistle-blowing and complaints by suppliers, he points out.

Are there red flags that can alert the management? Yes, says Mr Sanwalka. "Take for instance retail banking. See if there are pressures on the sales team to generate business irrespective of market conditions," he says.

"When, as now, home loan rates are up, if the targets for the people have not been revised, it can be a red flag. Because while the potential for selling should be lower, the targets could be forcing people to cut corners, and take action which is not correct."

Can IT (information technology) help in trapping fraudsters? "Robust process of data analysis and data mining is essential in every company through which they can identify trends and red flags," assures Mr Sanwalka. "Sadly, though, in most companies, such analysis is absent. Even where data analytics are present, the level is too basic to be effective," he rues.

It may rob investors of their sleep to know that in India, IT, communication, entertainment and financial services are among the industries more susceptible to fraud. Clause 49 of the `Listing Agreement' may come to investors' rescue, hopes Mr Sanwalka. This clause of SEBI calls for reporting of frauds, and lays down the need for a whistle-blower policy in companies.

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