Fraud and Addiction

I’m sure everyone reading this post is painfully aware of the terrible toll that addiction, especially alcohol addiction, takes on individuals and families in every American community; families whose lives have been reduced to a daily struggle against a relentless foe that, time and time again, seems to successfully resist their every effort to combat it.  The effects of addiction are frighteningly insidious; perhaps the great French poet Charles Baudelaire said it best…first the drug is a stranger, then a friend and finally a master.

If you examine the numerous compiled lists of pressures on employees that lead them to commit crimes like embezzlement and a whole host of other financial manipulations, the progressively corrosive effects of addiction, either to alcohol or drugs, is always near the top of the chart.  Consider for a moment the typical items on such a list.  Underlying emotional problems can be aggravated by drugs and incentivize the tendency to reckless behavior with money like living beyond one’s means and gambling.  The loss of control over one’s life occasioned by alcohol addiction is often mentioned as a trigger for the need of money to “set things straight” and “get back on my feet” as a consequence of high debt,  medical  bills or automobile accidents.

The drug addict’s constant need of funds to fuel her addiction poses a constant personal challenge to find additional sources of money, especially if the only source of the  drug of choice is related to criminal activity.  The addict’s job performance suffers leading to, at the least,  a low level of job recognition accompanied by low job satisfaction, fear of job loss and, at worse, outright dismissal.  If all that’s not enough, addiction seems to fuel greed and  chronic high debt in many individuals. Credit cards are maxed out, there are personal financial losses due to bad purchasing decisions, spending continues to spiral out of control and credit scores deteriorate.

When an addict confronting all these issues is placed in a job situation featuring either loose internal  controls or lacking internal controls altogether,  the temptation to engage in the self destructive activity we call financial fraud can be overwhelming.   Those not thinking clearly and a prey to the unremitting family pressures and feelings of negative self worth commonly associated with addiction are especially vulnerable to rationalizations like, “I deserve it because they won’t give me a raise in spite of the great work I do around here;” “I need it;” “I’m only borrowing it;” and so on and on.

Sad to say, in today’s world, fraud examiners and forensic accountants must make familiarity with the exact symptoms and consequences of the addiction of employees at all levels of  their client organizations a top training priority.  This is so because every one of the classic pressures traditionally  associated with the commission of fraud can either be a direct result of addiction or can be aggravated by it.


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