Fraud is considered one of the most significant threats to the UK, alongside firearms and drug trafficking (Doig, 2006, p. xv). The Fraud Review (2006, p. 274) estimates the total cost of fraud to the UK economy to be approximately £16 billion per year. However, this is undoubtedly a conservative estimate, as fraud will be hidden by its deceptive nature and often lays completely undiscovered. Indeed Croall (2001, p. 42) argues that white collar crime as defined above could well exceed the cost of conventional crime, indicating that the true impact of fraud may be much greater than estimates suggest. The victim, whether it be an individual or organisation, may be unaware that fraud has taken place. Fraud may also be deliberately concealed, for example where its publication could cause embarrassment or affect confidence in a business. In such circumstances, from a criminological point of view, can it be considered that a crime has actually taken place at all?
An additional difficulty criminology faces in the research of fraud is its basis in law. Indeed whilst the term fraud covers a range of offences that involve some element of deception and trickery, until the Fraud Act 2006 there was no specific offence in English law, having previously been prosecuted under sections of the 1968 and 1978 Theft Acts and the common law offence of ‘conspiracy to defraud‘ (Norman & Smith, 2005, p. 3). Furthermore, public sector organisations such as the Department for Work and Pensions has its own specific legislation to cover fraudulent behaviour, in the form of the Social Security Administration Act 1992 and the Social Security Fraud Act 2001 (Smith, 2007b, p. 75), which include the facility to offer a caution or administrative penalty as an alternative to criminal prosecution. In addition, the National Health Service uses the civil law definition of fraud where only a balance of probabilities is needed (Countering Fraud, 2001, p. 2). It also operates a policy of parallel sanctions combining criminal, civil and disciplinary action to punish all forms of abuse (NHS CFS Performance, 2007, p. 9).
As Nelkin (1997, p. 852-853) argues, many scholars have chosen to include fraudulent behaviour resulting in civil or administrative sanctions within their definitions and research into white collar crime, but this complicated legal situation cannot help but blur the line where a fraudulent crime begins, again bringing traditional criminology to the very borders of its natural scope.
Croall (2001, p. 100) argues that, because of its wide ranging nature, white collar crime would be generally excluded from criminological theory. However, when attempts are made to explain it, these are usually based around its control rather than its cause, recognising the difficulties that have been faced when trying to regulate or outlaw it effectively. Furthermore, Croall (2001, p. 152-153) argues that traditional criminology’s focus has been on the crimes of lower class young men, with police and victim surveys revolving around law and order offences such as burglary or assault. Therefore, fraud is rarely researched despite its potential cost to society. However, as criminology is focussed on law, criminalisation, prevention and control, fraud should be considered for further study beyond the usual range of poverty or social exclusion-based criminological theories.
When considering traditional criminological research into the causes of any specific criminal activity or behaviour such as fraud, the starting point may be largely based on the principles of two criminological schools of thought. Firstly, ‘classicism’ (McLaughlin & Muncie, 2001, p. 32-33) assumes that individuals are rational calculators acting upon their own free will and being aware of the consequences when they choose whether to commit a crime, with the idea that the punishment for a criminal act should be proportionate and based upon society’s interests. Secondly, ‘positivism’ (McLaughlin & Muncie, 2001, p. 212) attempts to explain and predict criminal behaviour by identifying the key underlying genetic, psychological, social or economic causes of crime which are thought to lie largely outside of each individual's control. Both schools of thought and their respective theories should be considered when attempting to explain the causes of fraud as a crime.
When looking at fraud committed by individuals, a relevant area may be that of strain theories (McLaughlin & Muncie, 2001, p. 293), which argue that individuals are more likely to engage in crime when they cannot get what they want through legitimate channels. The strain occurs when they become frustrated or angry at this situation and they may respond by trying to get what they want through illegitimate or criminal channels, for example stealing from an employer or submitting a fraudulent insurance claim. These strain theories would include Merton’s concept of ‘anomie’, which Nelkin (1997, p. 855) argues could be adapted beyond individuals and into the area of organisational fraud in an attempt to explain their possibly unlawful actions taken to deal with the strain of conforming to the need to maintain profits regardless of market problems in a capitalist goal-defined society. Alternatively, such action may be seen as simply sharp business practice rather than any attempt to defraud, again providing a further example of blurring the line as to whether or not a crime has occurred.
Control theories may also be relevant, as they ask the opposing question: (Nelkin, 1997, p. 855) why don’t we all commit fraud when the opportunity or temptation is there? Such theories suggest we don’t because of our individual investment in law-abiding relationships and societal bonds that would enforce the message that fraud is a crime. However, practitioner surveys (Doig, 2006, p. 82-83) would question this theory, as many offenders are middle management employees who, whilst they have plenty of opportunity to defraud, have much to lose by succumbing to temptation. Furthermore, Nelkin (1997, p. 855-856) argues that it is possible that strain and control theories meet up when these so-called trustworthy employees come under pressure to maintain their perceived place in society, resulting in criminal behaviour.
In an attempt to analyse the motivations and circumstances that result in fraudulent behaviour, Dittenhoffer (1995, p. 11) outlines Sutherland and Cressey’s belief that all criminal behaviour results from what he described as differential association theory, in that such behaviour is learned, not inherited, through interaction with other people within personal groups who react against instead of in favour of the prevailing laws. Furthermore, he describes the rationalisation that takes place in favour of a criminal action where the individual believes the “perceived rewards for criminal behaviour exceed the rewards for lawful behaviour” (Albrecht et al., 1982, cited by Dittenhoffer, 1995, p. 11).
As Doig (2006, p. 78) argues, it is also worth considering that fraud can occur in relation to any activity and can be either deliberate or fortuitous when the opportunity presents itself. Further, a study of top management fraud cases, Zahra et al. (2005, p. 824) has concluded that fraudulent behaviour is facilitated or accentuated by a complex mixture of societal, professional and individual related factors.
Dittenhoffer (1995, p. 11-12) argues a behavioural theory which suggests that fraud is committed as a result of three elements; a psychological, social or economic motivating force; an environment conducive to committing fraud; a rationalization process. Dittenhoffer (1995, p. 12-13) points to a series of motivating syndromes for fraudulent behaviour. He describes these as injustice, rejection of control, challenge, ‘due me’, ‘Robin Hood’, borrowing, ‘it will never be missed’, need/temptation, ego and dissatisfaction. Such a range of motivating syndromes implies that the decision by an individual to commit fraud can be far more complicated than simple financial gain. Nelkin (1997, p. 854) argues this point further in relation to the unique motivations of white collar crime offenders, such as the pressure to achieve modern business targets, or the desire to simply advance an individual’s career within an organisation. However, Dittenhoffer (1995) concludes his arguments by acknowledging that “there seems to be nothing definite on which one can generalize as to the behaviour relationships related to fraud” (p. 14).
In conclusion, fraud presents a unique challenge to criminologists in that, more so than with other conventional crimes, it is committed by individuals of differing socio-economic status, or indeed by organisations themselves, with a vast array of internal and external motivations. The offender could just as easily fall into the classical school of thought as the positivist and even then many different theories and arguments can apply to different categories of fraud and types of criminal behaviour. This appears to exemplify Nelkin’s (1997, p. 855) argument that universal theories on crime may no longer be appropriate.
Furthermore, whilst fraud is committed within a complicated legal framework, the behaviour exhibited and the suspected cost to society alone should justify criminological research. However, it may be more appropriate to look beyond traditional areas such as white collar crime and respond to the specific types and causes of fraud in contemporary society. Considering the deceptive and hidden nature of fraud this research may continue to be problematic, particularly when considering the many unknown offences that are believed to occur but are kept from the watchful eye of the criminal justice system.
Reference List
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Dittenhoffer, M. A. (1995). The Behavioural Aspects of Fraud and Embezzlement. Public Money and Management, January-March 1995, 9-14.
Doig, A. (2006). Fraud. Cullompton, Devon: Willan Publishing.
Fraud Review Final Report. (2006). Retrieved October 23, 2007, from Attorney General website: .
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Nelkin, D. (1997) ‘White Collar Crime’ in Maguire, M., Morgan, R. & Reiner, R. (Eds). (2002). The Oxford Handbook of Criminology (3rd ed). Oxford: Oxford University Press.
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Norman, P. & Smith, G. (2005). Public Sector Fraud (3rd ed.). Portsmouth: University of Portsmouth.
Smith, G. (2007a). The Fraud Problem (2nd ed. version 2). Portsmouth: University of Portsmouth.
Smith, G. (2007). Countering Fraud against the Department of Work and Pensions: A case study in Risk Management [Electronic version]. Crime Prevention and Community Safety, 9, 74-91.
Zahra, S. A., Priem, R. L., & Rasheed, A. A. (2005). The Antecedents and Consequences of Top Management Fraud [Electronic version]. Journal of Management, 31(6), 803-828.
