The 6 Most Common Behavioral Red Flags of Fraud

Fraud detection often requires sharp observational skills and a keen eye for detail. While many tools and techniques can aid in this process, one of the most effective methods is recognizing behavioral red flags. In the ACFE's Occupational Fraud 2024: A Report to the Nations, data showed that individuals engaged in occupational fraud schemes often exhibit specific warning signs before their actions are discovered. Understanding these signs is crucial for any organization aiming to mitigate fraud risks.

Survey respondents were presented with a list of 20 common behavioral red flags and asked to identify the red flags that had been displayed by the perpetrator before the fraud was discovered. 

These six behavioral red flags have been the most common in every one of our studies dating back to 2008, with a remarkably consistent distribution:

• Living beyond one's means: Perpetrators often display signs of affluence that are inconsistent with their known income.
• Financial difficulties: Personal financial problems can drive individuals to commit fraud.
• Unusually close association with a vendor or customer: This can indicate a conflict of interest or collusion.
• Excessive control issues or unwillingness to share duties: A lack of transparency and reluctance to delegate can be red flags for fraudulent activity.
• Irritability, suspiciousness or defensiveness: Behavioral changes such as increased aggression or defensiveness can be a sign of underlying fraudulent behavior.
• A general “wheeler-dealer” attitude involving shrewd or unscrupulous behavior: Individuals who exhibit a consistently cunning or unethical approach to business dealings may be more likely to engage in fraud.

While the presence of these red flags doesn't imply that fraud is being committed, understanding and recognizing the behavioral red flags displayed by fraud perpetrators can help organizations detect fraud and mitigate losses. Read more findings from the world's largest global fraud study at ACFE.com/RTTN.