Monday, May 25, 2009

Reasons why fraud spikes in a recession

A recent Time Magazine article explains: "As sure as growth slides and employment numbers tumble, so cases of fraud rise during recessions. This time is no different."

This article is interesting but I think it would be more complete if it analyzed different forms of fraud. Some may actually go down during hard times. For example, I'm of the opinion that financial statement fraud probably spikes in boom times but comes to light in a recession. On the other hand, embezzlement and scams probably spike in hard times as people are more desperate.

Finally, I disagree with the article when it says: "The slump may also prompt fraudsters to rationalize their behavior." I think a slump causes increased pressure and not necessarily a change in rationalizing behavior. The increased pressure of hard economic times is simply a harder test of a person's ability to not rationalize committing fraud that is failed by more people.

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