Interview with David Alexander
ForensicAuditing.co.za interview with David Alexander
David Alexander is a reformed fraudster turned risk mitigation consultant. For a full profile of David and links to his sites and causes visit our Resident Expert Profile Section via this link:
ForensicAuditing.co.za Exclusive Interview with David Alexander
From your own experience what would you think was the biggest factor that drove you to commit the offence?
I do not have a simple answer. It was a combination of business and personal pressures that I felt at the time that I could not share with anybody and I “drifted” into the fraud by justifying it to myself as being “only business”. This is a very common cause of a lot of fraud, people are able to justify their actions under the guise of it being ‘only business” when they are really aware that it is fraud. The justification allows you to live with yourself and continue the fraud. Everybody feels that they can work themselves out of the situation, recover the losses and no one will be hurt. This is, of course, impossible.
Some criminologists’ claim that rehabilitation is a long road and does not always go full circle, what steps led you to rehabilitation?
The realization of the extent of the damage I had caused to my victims and my family combined with the fact that I could not reconcile what I had done with the person who I thought I was.
My family and the fact that I am driven to make up for what I did to my family by making a positive contribution is the key for me. The very strong support system that I have plays a key role, as does the unwavering support of my family, my friends and my community.
Most people return to crime because they do not have a support system in the community, they feel rejected by the community and very often feel that the have no alternative other than crime if they wish to survive.
People who do not have a support system, who feel rejected often feel that they have nothing to lose by going back to a life of crime.
If put in similar situations as what caused your previous behavior, do you think you would long to go the same path,
or would you be able to easily do things differently this time around, why?
Yes, because I now realize the damage that fraud causes to companies, the community and to your family.
A key realization for me is that help is always available if you are serious about resolving your problems in the right way.
If I was in a similar situation, knowing what I do, I would never contemplate crime under any circumstances. I would seek help and talk to people about my problems. If you have a problem you are probably to emotionally involved to solve it yourself, get help.
Do you think greed is what exposed you eventually, meaning do you think that you would perhaps have been able
to get away with it completely, or at least have delayed the discovery for a longer time if not for the element of greed ?
No, the systems that were in place meant that I could never have got away with it.
Greed is the factor that made me continue, a large amount of money is very seductive and makes you do stupid things.
What do you think is the key factor in someone going from normal employee to fraudster?
The 3 factors present in every fraud situation are motive, opportunity and justification. When these 3 factors are present and acceptable fraud occurs.
If a person has the motive, (it could be need, greed, coercion, an addiction, some sort of psychological need or problem) and the opportunity exists, (poor systems and controls, the person is in a position of trust or authority, has insider knowledge of controls and audit systems) and they can justify their actions to themselves (we all tell ourselves compelling stories, no one tells themselves that they are a crook) fraud WILL occur.
We can do nothing about motive or justification so the key factor would be bad, outdated or nonexistent systems and controls.
Do you think fraudulent thoughts start out fast and are executed soon from conceptualizing the way….
or do you think that it is something that start from earlier life experiences moulding a person in a certain manner?
Most people have criminal thoughts at some time.
Whether or not a person will commit a crime depends on his own internal morals and ethics and has nothing to do with whether or not what he is planning is legal.
An example would be that some people would never consider an abortion even though it is legal and other people would have no problem cheating on their taxes even though it is illegal.
Your “moral compass’ is formed by your life experiences so these are very important in determining whether or not you would turn to crime.
The fact is that 80% of people would commit a crime if the motive, opportunity and justification were present and acceptable to them. If they can see an opportunity, the risk is acceptable, they have a compelling motive and they can tell themselves a really good story most people would commit crime.
On some occasions it is a spur of the moment decision and at other times it is very carefully planned over a long period. Both of these scenarios are common.
Would the usual fraudster stumble upon a way to commit fraud and use it OR
do you think they go out looking specifically for loop holes to abuse?
Both could be true. This would depend on the factors that I have mentioned above as well as whether the systems and controls in a company create an opportunity
If the systems and controls, the corporate culture and governance do not create an easy opportunity the chances of fraud are minimal but a clever fraudster determined to commit fraud would find a way.
What do you think the number 1 thing is for companies to do to prevent fraud?
Education is the number one preventative measure that companies can take, if every member of staff is educated and engaged in fraud prevention the chances of fraud decrease dramatically.
Following very closely and perhaps equal in importance to education is that the corporate culture and governance must be impeccable with the tone of honesty and ethical behavior being set right from the top of the organisation.
Systems, controls and audit procedure must also be very strong and appropriate to the risk of fraud that a company faces.
A company must also conduct a proper fraud risk assessment and have an appropriate fraud management program in place.
Profiling white collar criminals has been a problem for criminologists for a long time,
from your perspective what do you think are common traits shared by fraudsters?
Without doubt a very large ego and a very strong belief in the fact that they are far too clever to be caught.
The reason why the penalty and punishment for fraud is not an effective deterrent is because ALL fraudsters think that they are too clever to be caught so they are not concerned with punishment.
Also commonly present is the ability to convince themselves that they are not really doing anything illegal, that it is only business, unconventional business that they were clever enough to take advantage of.
How can forensic accountants or auditors improve their procedures to accommodate fraud considerations in audits?
They should always have the fact that fraudsters are master manipulators at the top of their minds.
Fraudsters are masters of building relationships of trust and they have no compunction about abusing these relationships to serve their purposes.
Auditors and accountants are procedure driven, details and facts people and can very easily fall prey to a manipulator.
Procedures must include forming NO relationships, doing checks and procedures not “in the book” and doing the new and unexpected. Build creativity, flair and out of the box thinking into checks and procedures.
Do the unexpected, don’t follow any guidelines given by anybody, they are probably trying to mislead you.
Would you say most fraudsters are well connected with a wide support base around them,
or are they usually more loner types?
Fraudsters are “people” people, they are usually very social and very easy to like, to form a relationship with. They are normally very good company.
All fraudster always rely on being able to mislead people to commit fraud so they usually have a very wide circle of people around them.
Are fraudsters usually in positions of power when committing said offence or
are they lower and middle management more predominantly?
Figures in South Africa point more towards people in authority but as discussed above a fraudster could be anywhere in your organisation.
Are you in favor of pre-employment screening of prospective employees for prevention purposes…
for instance some companies require a polygraph test as pre-requisite?
Yes but as discussed above most people could turn to fraud under the right conditions so this has limited value
If you recognise behavior that might indicate traits of a possible fraudster,
where would you say is the first place to start fishing for evidence?
No, because most people display behavior that could be equated with fraud at some time so this would have little value
Do you think normal people carrying on daily activities come in contact with more fraudsters than they think?
Yes without a doubt. People would be shocked; I think we have only seen the tip of the iceberg. If you take the wider definition of fraud a lot of people commit fraud without knowing that they are, so this widens the circle even more
Finally, what is the best piece of advice you can give forensic accountants / auditors on dealing with white collar criminals?
Trust no one. Don’t rely on anything that anybody tells you, ask difficult questions and demand answers that satisfy you, don’t be put off because the situation is difficult.
And form no relationships, ever.