Understanding the Psychology Behind Workplace Fraud: A Growing Concern in the Remote Era

In recent years, workplace fraud has seen a troubling rise (24% increase of reported fraud from 2022 to 2024), encompassing various schemes such as embezzlement, expense fraud, and supplier kickbacks. Understanding the psychology behind these actions is crucial in addressing and mitigating these issues effectively.

🔍 Types of Fraud:

Embezzlement: Misappropriating funds or property entrusted to one’s care.

Expense Fraud: Manipulating or inflating expense claims to gain financial benefits.

Supplier Kickbacks: Receiving illicit payments or favours from suppliers for preferential treatment.

📈 Why Is Fraud Increasing?

Remote Work Dynamics: The shift to remote work has significantly altered workplace relationships. The physical separation from colleagues and managers can reduce the emotional connection and accountability that often deter fraudulent behaviour.

Disassociation and Guilt: The lack of face-to-face interactions in a remote setup can lead to a psychological disassociation. Employees may feel less guilty about dishonest actions because they don’t witness the immediate impact on their colleagues or organization.

Weakening Ethical Standards: With reduced supervision and a more isolated work environment, employees might perceive opportunities for fraud as low-risk. This can erode their ethical standards and increase the temptation to commit fraud.

🧠 Psychological Factors:

Rationalization: Individuals may justify their fraudulent actions by believing they are underpaid or undervalued, or that the company can afford the loss.

Opportunity: The remote work environment can create new opportunities for fraud due to weakened oversight and controls.

Pressure: Financial stress, especially in uncertain times, can push employees towards fraudulent behaviour as a coping mechanism.

🔒 Preventive Measures:

Strengthening Controls: Implement robust auditing and monitoring systems to detect irregularities early.

Fostering Ethical Culture: Promote a strong ethical culture through regular training and clear communication of values and expectations.

Enhancing Connectivity: Encourage regular virtual interactions to build a sense of community and accountability among remote teams.

As we navigate the evolving work landscape, it’s essential for organisations to understand the psychological underpinnings of workplace fraud and take proactive measures to safeguard their integrity and assets.