All people have the capacity to commit fraud. Deceit, trickery, and abuse of trust are a fraudster’s basic tools, and also characteristics inherent to all human beings. This is an insight offered by Alexander Stein, an American business psychoanalyst, and a specialist advisor in the psychology of fraud. Dr. Stein visited São Paulo last month with a group of fraud litigators to speak at the Inaugural Congress on International Fraud and Asset Recovery and Trans-Border Insolvency Cooperation at the Ministério Público de São Paulo. How does the mind of a fraudster operate? What leads a senior executive to commit financial fraud? How do sophisticated psychological expertise and strategies enhance conventional asset recovery operations?

How does fraud psychology work?

Fraud is theft carried out through deceit, sharp dealing, and breaches of confidence. The psychological DNA of fraudsters is incredibly complex. One of the main points to be considered is that betrayal and deception are the fraudster’s tools. He could not employ them so masterfully without knowing them intimately. The fraudster is governed by the main belief that everything presented, conceived or promised towards achieving his personal desires – such as certainty and security – was always based on a lie. The fraudster is psychologically driven by unpredictability, contingency and falsehood. He lives in a state of chronic disappointment, resentment, helplessness and humiliation. One developmental consequence of this is an exceptional and refined radar focused on others. As he grew up, making an effort to understand what was happening in his surroundings in order to survive, he developed certain skills that are now useful in his criminal career. In particular, the fraudster is an astonishing virtuoso in being able to perceive what people seem to need or want. Now, he is a creative, even brilliant – but unscrupulous – CEO.

Are people born with a tendency to commit fraud?

Yes. Everyone is sort of a fraudster! But, of course, not everyone becomes an evil criminal. What I mean is that the characteristics of fraud – falsehood, dishonesty, concealment – are all characteristic  inherent to human beings. These are important elements for survival, defence mechanisms to escape or defeat adversity. They are adaptive devices. From the mundane, such as replying to the common social greeting “how are you?” and replying “very good” even when you are not. Or hiding key aspects about your-self ‒ thoughts, feelings,wants and wishes. This is all with the purpose of avoiding scrutiny, judgment or humiliation. The essential point is to understand how our natural defence mechanisms turn into predatory weapons serving criminal action.

What leads a successful person, such as a bank director, to become a fraudster?

Psychologically speaking, the line dividing legitimate entrepreneurship from criminal behaviour is subtle. A creative businessman and a fraudster can overlap in many aspects. Success and personal accomplishment are not antidotes to criminal behaviour, chiefly because financial gain is rarely the main (or even the only) driver for committing substantial fraud. Opportunity and greed may play a role, but overall, high level professionals who take advantage of confidential information and power were already fraudsters before they came to their roles. They didn’t become fraudsters because of their jobs.

How do we identify a fraudster or a potential fraudster?

This is a challenging question. The best fraudsters are highly skilled in their ability to deceive and to avoid detection. But we should remember that in order for a fraudster to exercise his nefarious and anarchical power, he ultimately depends on his victims. What makes a person become a victim? Some people are more prone than others to become victims