“You can’t cheat an honest man…”

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“You can’t cheat an honest man…”

Most of the best frauds involve two willing parties. The first is the fraudster. The second is the victim, who is often a willing participant because of greed. Indeed, many fraudsters have assured us that fraud is difficult without a willing participant.

Greed takes a lot of forms. One form is to believe that a bargain any rational person would believe is too good to be true is actually true. Another is to go along with a deal that you suspect is shady, but decide not to question it. Another is to know that things are likely not on the up and up, but decide to go along with it anyway,

In general these kinds of fraud happen to greedy individuals acting on their own behest. However, it is not uncommon for individuals acting on the behalf of their organizations to equally be taken for a ride. Greed and cupidity, after all, remain greed and cupidity independent of whether they are on behalf of the individual or the organization.

As an example, some time ago, central banks in at least Latin America received correspondence purportedly from the Montserrat branch of a large U.S. bank that will remain nameless here. The correspondence said that there was a fund available for small ($20 million to $100 million) loans to developing countries. The fund was at a very low interest rate, and the only cost would be a nominal $50,000 handling charge. This was a great offer from a reliable bank. It was an offer too good to turn down. Some would say that it was, in fact, an offer that was too good to be true.

As it worked out, a number of smaller banks wired off the handling charge (the code appeared to be quite legitimate), and sat back waiting for their loan to arrive. By the time the banks realized that they had been defrauded, the funds had gone through many, many, many subsequent transfers before disappearing forever.

Could the funds have been traced? Sure, but the fraudsters were smart in the theft, in the covering of their tracks, and most important of all, in their psychology. It would have cost more to find the missing funds than would have been recovered, so it made more sense to drop the whole matter. More to the point, the whole fiasco was so embarrassing that it was thought to be better to write off the small amount of the handling charge rather than to appear to be a fool.

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