How to Deter Fraudsters

Viewing the Matterhorn from the beautiful Swiss city of Zermatt can be unbelievably intimidating. While on a recent trip to the area, I had booked a rock climbing adventure that would take me within the throws of this legendary mountain. The night before the trip I recall gazing at the mountain from Zermatt and wondering what I had gotten myself into. The next day’s excursion was one of the most challenging, yet exciting and invigorating adventures I had ever been on. In hindsight, I was intimidated, almost to the point of deterrence, simply by the visual presence of the mountain and what I had heard and read about it.

This is exactly the mind-set we want to impart on our fraudsters, deterrence based on visual and verbal cues. So what does the academic literature tell us in regard to the effectiveness of deterrence as a fraud prevention strategy? The results are mixed, but are positive toward counter fraud efforts if placed in theoretical context. Capital punishment has created debate for years, with supporters claiming that the law of retaliation, or an eye for an eye, prevails, and punishment should be severe. Detractors claim that capital punishment is too severe, inhumane, and immoral. In-depth studies on this topic have failed to prove that implementing the death penalty actually deters crime, thus causing more heated debates. Other studies I have reviewed also show weak support for deterrence as a solid preventative approach.

However, it is important to consider the criminological perspective of rational choice and free will to understand the effectiveness of deterrence in our fraud industry. As I have established in my book and other articles and research I have performed, most fraudsters operate as rational thinkers and make conscious choices to engage in or refrain from deviant behavior. Operating on this assumption, the development of programs and policies that are severe should in fact have a deterrent effect. Therefore, it is likely that focusing on deterrence in a counter fraud setting will in fact have a positive impact on deterring fraud. Crime is seen as developing from two main factors: the pursuit of one’s own self-interest and the lack of adequate punishment as a deterrent; thus, if we outweigh self-control with severe punishment, fraud should be prevented.

Deterrence by companies can be shown in many ways, such as using strong analytical tools to detect fraud early on, showcasing fraud successes, leveraging training and awareness, using fraud warnings, codes of conduct, and any strategy that will give the visualization (similar to the Matterhorn) of intimidation.

Stay safe!

Dr. Fraud


© 2017 Dr. Fraud TM