Inside The White Collar Criminal Mind (Predictive forecasting or palm reading?)

In News by Aml Trainer Admin

While doing my research for this article I ended up going to a psychic. I wanted to see how accurately a psychic could predict my personality. It seemed the accuracy of the predictions had an unusual correlation to the amount of cash I paid. I should have known better, while doing the card reading the psychic kept asking me, “hit or stand pat?” The bottom line here is there are no mystical or magical methods of predictive forecasting. However, history is a great teacher and analyzing real past white collar criminal behavior can provide potential leads, clues, and indications of events to come.

Many institutions are wary of strangers and monitor the front door with magnetometers, x-rays, and pat-downs while monitoring the backdoor for incursions by hackers, viruses, scammers and phishers. However, the invited guests, better known as the employees, rarely get a second look after the initial hiring phase. Especially the higher up the rank structure a person is the less likely they will be scrutinized. This can contribute to what is sometimes called, “the deviance of the elite”. While organizations do not turn good people into bad, they can unwittingly underwrite the culture that allows white-collar criminals to justify, in their minds, the deviant behavior they perpetrate, and then so skillfully evade any guilty feelings about their deviant behavior.

The idea of attempting to understand the mind of the white-collar criminal is not about the ability to create a red flag template checklist of personal habits of employees. The concept is to encourage you to think about the possible types of risk associated with any criminal element within your institution and about the opportunity that you may have unwittingly created that overlooks, obscures, or allows criminal activity to take place.

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Part of what makes it difficult to develop risk assessment or predictive forecasting for white-collar crime is mired right in the general foundation of its existence. Even researching the subject becomes cloudy because there are no defined parameters to classify specific types of crimes as white collar. By nature, white collar crime encompasses many different types of crimes and various types of perpetrators. We would probably all agree that the Bernie Madoff type certainly fits the bill. But what about the local guy who kites a few checks? Would he be classified as a white collar criminal? What about the guy running a lottery scam out of his basement?

It would be helpful to have some sort of working definition of what is meant by the term, white-collar crime (at least as an aid to meet the objectives of financial institutions). The following is a definition provided by the National White Collar Crime Center:

Planned illegal or unethical acts of deception committed by an individual or organization, usually during the course of legitimate occupational activity by persons of high or respectable social status for personal or organizational gain that violates fiduciary responsibility or public trust.

Using that definition, and for the purposes of this article, we will consider white collar crimes to be some type of occupational and/or organizational crime.

With that, we should ask ourselves what’s the difference between occupational crime and organizational crime? A generally recognized definition is that occupational crime is committed for the benefit of an individual while organizational crime is one that is committed for the benefit of the employing organization. 

Further making it more difficult to truly get a quantitative handle on this issue for any accurate type of data compilation, is the fact that many times a white collar crime may be detected but are not reported. Institutions may choose not to report an event because of the concern for their reputation and the potential damage that might occur. No one wants to see the name of their institution on the front page of The New York Times for embarrassing indiscretions. To compound the matter, an employee that might be exposed by the institution is sometimes released by that institution without police intervention and may resurface at the institution across the street ready to resume the same criminal behavior. Now that we have established a semi-solid framework for what a white-collar crime is, let us discuss the concept of predictive forecasting.

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“He’s lying when he looks down and to the left”, or “He’s got sweaty palms in a cool office”, or “Watch him fidget, he must be nervous about his guilt.” I am sure you have all heard statements like that, especially if you watch some of those ridiculous police shows on TV. Shows that detail scenarios using micro cues to read body language as their fundamental building blocks of a solved case. In reality no one or two cues are proof of anything. Furthermore, if you are at the point that you are actually interviewing a subject and trying to read that person’s body language, then you probably have already encountered a loss and are merely in reactive mode. The concept here is to try to recognize a certain profile as a possible problematic situation prior to having to circle the wagons and clean up the mess.

Due diligence, particularly at the onset of any employment relationship is essential and can save your company a lot of grief if you have a solid “know your employee” policy. That being said, and knowing now the information we’ve uncovered in this article, it may not do much for you in the area of white-collar crimes, as historically, the wrongdoers will not have a criminal record. This could be for several reasons such as, the subject was never prosecuted, the subject was never caught or as we discussed a previous institution swept the activity under the rug. Pick one, but the bottom line is, that the potential white collar criminal is your problem now.

Let’s discuss the atmosphere for a white collar crime to occur. Usually there are three factors.

  1. A generous supply of inspired and potential wrongdoers
  2. A target rich environment
  3. Institutions with a lack of oversight, ineffective control systems, and/or ineffective policies

Focusing on the last category since it’s the one that you have the most control over, it might be time for an honest review and analysis of your own systems. As far as the potential for an employee to turn to the dark side, it should be an institution’s responsibility to understand situations and outside influences that might contribute or push an employee in the direction of committing a crime. I will refer to this as “Continue to Know Your Employee.” Certainly there are differences between wrongdoers. Those with low self-control who respond to an opportunistic event, those who commit a crime to satisfy their own ego, and those who do it depending upon their personal state of affairs. Examples of outside influences are: a spouse who’s been laid off, kids with college tuition, gambling, drug and/or alcohol issues, divorce, or health concerns.

The economy being in a down cycle, 401K’s becoming 201K’s, bonuses flying out the window, cutbacks in overtime, and generally asking employees to do more for less, can all certainly contribute to or trigger an unscrupulous event. Lastly, corporate culture plays an important role. If the management chain of command shows a propensity to be weak, lazy, or even borderline unethical, then certainly the door is being opened and is seducing an employee who might be contemplating criminal activity.

In a culture that is bottom line results driven, it becomes easy to overlook the long term. How does management get to observe any potential personality changes or even become aware of employees personal situations if there is little communication between them? There is no possible way to try to forecast a white-collar event if you have no clue who is your employee. This does not mean that management needs to take everybody out for a beer after the shift but it should spark management to take a more proactive part in the ongoing concept of “know your employee.” Very few incidents can ruin the reputation of a financial institution faster than a bad employee. Operational risks lead to reputational risks.

Moving past the atmosphere, let us get to the crux of this and discuss some of the motivational factors and ideologies of a white collar criminal mind. Keep in mind that many of the following qualities are interrelated and a person may exhibit several and/or bits of them all.

  • Greed: This is quite subjective. One person’s greed is not the same as another’s. Do I really need five Ferrari’s? However, the subject is motivated to obtain more and more objects of affection, regardless of the need or even the ultimate usage of the object. The desire for wealth is a ravenous appetite.
  • Need: Unlike greed, a subject may be at such a low point that he/she feels that the only way out is to steal. Gambling, alcohol, or drugs may be underlying causes; however, once that door is opened, the slippery slope begins. The longer the subject does not get caught, the easier it becomes to continue committing crimes, even long after the subject first began their decent down that slippery slope. In another variation of need, the subject may be unable to admit their failures at the workplace and turns to crime to disguise those inadequacies.
  • Imitation: The subject becomes aware of other people doing bad deeds so he/she wants to show that they can do it too. The semi-glorification of wrongdoers by various media outlets does not help. The hiring of a black hat type prior criminal to review your systems may seem to have some merit, however, it may have an inspirational effect on the subject.
  • Resentment: A subject may have determined that he/she is worth more than they’re paid, or feels that they’ve been treated poorly or disrespected in some way, shape, or form. This subject feels justified because in their mind they’re only taking what they deserve.
  • Opportunistic: Sometimes if the stars align just right, the self-discipline is low and an opportunity reveals itself, the subject may take the risk. This subject may fall in love with his/her own particular financial strategy and become obsessed with it and determined to prove that it works. When it does not, opportunity turns to need.
  • Gratification: Money is not the motivating factor. The act, in and of itself is what motivates this subject. The game is the most important thing.
  • Validation: The subject excuses his/her own actions and believes that they’ve done no wrong. This individual has no apologies for their actions and anyone that was hurt due to those actions was wrong for getting in their way. This subject feels little to no guilt. He/she may also dehumanize the wrongdoing event and believes that no real person was hurt.
  • Superiority: This individual feels they’re the smartest person in the room (and he/ she is very intelligent) and that they’re entitled to anything they can obtain. The subject feels that they’re above the law, and certainly above any rules and regulations. He/she believes that they have a higher purpose and ethics need not apply. This individual may also have knowledge of how the system works and so they manage to fly under the radar for longer periods of time.
  • Ego: An offshoot of superiority, this subject seeks ego gratification by outsmarting the bosses, the system and even the authorities. However, at the core of this subjects being is a sense of inferiority that must be nurtured by external successes.
  • Power Dominance: The subject loves the control and the admiration that goes with power. The subject circulates in powerful circles and easily mingles with other power brokers.
  • Addiction: The subject seeks out risk and the adrenalin rush that goes with it. Each day the system is overcome, new crises to conquer are needed.
  • Responsibility: When things go wrong, it is not the subject’s fault. This subject may blame clients for their ignorance, or shift blame to other employees, organizations or on to the government for too much or too little regulation.
  • Critical Mass: The subject, when confronted and/or cornered, will attempt to redirect interest away from the real issue and focus instead on a different topic or even on the confronter. This allows the subject to maintain a guilt-free perspective.
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In summary, there are no sure fire methods to determine if a person is currently or is about to become a white-collar criminal. However, those criminals who have been captured do tend to exhibit similar behavioral patterns. Much like using good interviewing techniques and reading body language, there is no single character descriptor that is the panacea for discovery. Reading various profile characterizations can provide building blocks that when added together create nothing more than potential warning buoys.

The lesson here is for management, upper level management, boards of directors, the financial gods or some white-collar crime fighting superhero to adopt a proactive approach to identifying and responding white-collar crime. Written policies and procedures should be created, developed and implemented to manage this risk as you would any other type of risk. Institutions should advance concepts such as team building, and critical thinking. How do you adapt to change? Reflect upon your own trust behaviors. Develop strategies for creating leaders and not just managers. The more you can do to know your employee, create an air of cohesiveness, mutual respect and lawfulness, the more you should reduce your chances of unwittingly forming opportunistic incidents.

Kevin Sullivan Anti Money Laundering Training Academy President

Kevin Sullivan, MS, MMBA, CAMS, was an Investigator with the New York State Police, and he coordinated NY state investigations at the NY HIFCA El Dorado Intelligence Center as a dually designated Federal Agent. Sullivan is a co-founder and former chair of the NY chapter of ACAMS and president of The AML Training Academy. Follow Kevin here.

View Kevin’s upcoming live AML webinars or reserve a seat. For more info or training and advisory help contact The AML Training Academy at: ☎ (855) 265-7700 | ✉ info@amltrainer.com.

Anti-Money Laundering In A Nut Shell by Kevin Sullivan

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