Financial Crime Tradecraft: A Critical Study of the Mechanics of Financial Crime

Abstract

This thesis contributes to understanding of the tradecraft of fraudsters who commit complex financial crimes. It takes up the challenge laid down by Levi (1984) and Braithwaite (1985) to give greater attention to how fraudsters commit their crimes. It provides insight into the diversity of tradecraft regularly applied by fraudsters in pursuit of their objectives. The underlying hypothesis of this thesis is that a fraudster's status as either an insider or an outsider of a target financial system influences how they deploy their tradecraft.

This thesis proposes the presence of three interlinked activity domains common to all complex financial crimes. It found the access, learning and planning domains, when combined, produce a process model that enables the testing of the hypothesis driving this research. The data, primarily transcripts of interviews with detectives and criminal case management files, are divided into insider and outsider cases. These cases are thematically analysed to identify key similarities and differences in the methods, resources and tradecraft used by fraudsters. This process identifies key stages in the commission of financial crime including accessing the financial target; learning about the target's strengths and weaknesses; planning to overcome financial crime controls; and fraud implementation.

The thesis proposed and tested the ALPi Model and identified variations between insider and outsider's deployment of tradecraft. Outsiders demonstrate greater levels of task intensity linked to access, learning and planning earlier in their fraud event timeline. Insiders demonstrate similar intensity, but later in their fraud event timeline; this suggests insiders and outsiders have different offending trajectories. Consequently, this finding led to a revision of the Time-allocation Model of Criminal Planning to reflect the post-crime activities of insider fraudsters (Allen, 2011). The thesis found outsiders deploy a greater variety of tradecraft than insiders who benefit from knowledge and access derived from occupational positions. Tradecraft aligned to access, learning and planning is classified and includes secondary systems and organisational interface point access; learning through subversion and stigmergic processes; and the deployment of planned backstopping and operational security strategies.

The thesis defined three distinct learning periods common to all fraud event timelines. Pre-crime learning was generic, often linked to what was referred to as base line knowledge and access. Pre-crime and crime phase learning was targeted and deliberate, focussing on satisfying specific information deficiencies. Post-crime learning was reactive, disjointed, and focussed on the nature of actual or perceived threats. The thesis also identified the need to reframe routine activity theory's 'absence of capable guardianship' to a position that recognises a criminal's 'capability to overcome guardianship'. This acknowledges the role of individual agency in circumventing fraud controls by bringing the deployment of financial crime tradecraft into the fraud control narrative.

Finally, the thesis contended that until the complexity that is evident within the data is more fully understood, meaningful fraud prevention efforts remain bereft of their most important asset; that is, a detailed understanding of how fraudsters set about overcoming the controls that organisations seek to implement. Show more