Cases of big financial fraud continue to fascinate and shock - but what can advisors to high net worth clients do to shield themselves from con artists? The author of this article, an experienced barrister dealing with such cases, sets out his views.

Fraudsters are a regrettable but inevitable feature of life. The conman (and conwoman) threaten on a number of levels: old-fashioned scam artists who try to impersonate other people for financial or other gain, or those who use the cyber world to steal computer passwords to empty bank accounts. Sometimes discussions about fraud prevention can become very technical and one can lose perspective on the basic principles that need to be understood. And, at root, what needs to be grasped is that defeating and avoiding fraudsters requires people to be "streetwise", to understand how much or how little trust to give people in certain situations.

Recently, the fake Saudi Prince - Colombian-born Antony Gignac - was jailed for an $8 million fraud which was discovered as of a result of his willingness to consume pork products. His carefully crafted lavish Instragram lifestyle was exposed as a lie. That is just one example to consider. Perhaps the case that continues to fascinate most people at the moment is that of Malaysia's 1MDB, the state-run fund from which hundreds of millions of money has been taken, laundered and spent. That case has seen banks fined, banned and individuals brought before the courts.

The following article comes from Philip Sinel, founding partner of Sinels Advocates, who is an international barrister and restitution specialist. The editors of this news service are pleased to share these views and invite readers to respond, but we do not necessarily share all views of guest writers. Email the editor at tom.burroughes@wealthbriefing.com

It’s well known that the leopard cannot change its spots and neither, does it seem, can a fraudster. Again and again, fraudsters are found to have repeatedly preyed upon the HNW individual. And if they can’t change their spots, they can wear a disguise, as many victims of swindlers are intelligent, well-informed and, you would think, sharp enough to spot a criminal a mile off. So how can you tell the fraudster from the crowd and spot the leopard in his disguise?

Depending on your proximity to a fraudster, there are a number of tell-tale giveaways. Not all of them apply to all fraudsters, and not all fraudsters have the tell-tale signs, but over the years I have noticed some distinct trends that would be worth considering when meeting new clients, lest you or your clients get caught out by these opportunistic scavengers.

Perhaps we should start with a psychological set up of the fraudster.

Fraudsters are often psychopaths in the true term of the word. They are not necessarily violent, but do not have the normal functioning checks and balances in the psyche – primarily shame, guilt and, to some extent, fear. You can see this from a standard definition of psychopath, and it explains why an individual affected in this way so naturally succeeds at fraud: they lack fear to scare them off, shame to dissuade them or guilt to convince them to stop. If you consider case studies of fraudsters in this way, it makes some of their behaviour much easier to understand. This absence of compunction goes with the territory, as does the absence of any form of empathy for the victims and the disadvantaged.

Also interesting is the elevated risk appetite of the average fraudster. In one of the first pieces of modern research on psychopathy, Dr Robert Hare wired up individuals to electrodes and told them that they were going to receive a jolt in eight seconds’ time. The average person became immediately distressed and displayed anxiety; psychopaths became anxious only immediately beforehand. Less unease at the thought of an unpleasant event means that psychopaths are more likely to enjoy risks, explaining why they are able to defraud and swindle without anxiety over the prospect of being caught. Should you or your clients be faced with an individual who seems unafraid of problems until they occur, consider looking at them more closely.

So how do you spot a fraudster up close?

Over the years I have noticed many fraudsters display overly loud and ostentatious behaviour in public, often combined with obviously expensive clothing and ostentatious gewgaws. Keep an eye out for incredibly expensive and/or overstated watches, or the personalised handmade shirts – always it seems with the initials on the cuffs and pocket. How many wives of arrested embezzlers, for example, have huge handbag collections? These details are, in fact, key pieces of evidence for eventual court proceedings, becuase any witness who cannot provide a legal source of their finances under cross examination will struggle to win their case. The more ostentatious their lifestyle, the more they will have to account for.  

Hand-in-hand with this goes the over ordering of food in restaurants, and conspicuous over consumption in general. Consider any number of famous fraudsters, and were their victims to observe their behaviour in a restaurant, it is hard to imagine they would not be concerned. As simple as it sounds, good advice before undertaking any financial decision is to get to know the other party personally, which often reveals the tell-tale signs of a fraudster. Obesity can also be a clue: while of course not all overweight people are fraudsters, in my experience many fraudsters are overweight. It goes with the large dinners.  

In the financial sphere, a common trait is to build up a false trading record. For example, buying a multitude of high-end cars on finance and then disposing of the vehicles and buying others, again on finance, gives a false picture of a very well-conducted account. Inevitably, the individual with the “ideal” financial circumstances will decide to buy the most expensive vehicle yet – and suddenly the money, or the vehicle itself, will disappear. Any form of over trading without apparent rationale for it can be a good indicator of bad faith.  

Not everyone has access to the financial dealings of prospective business partners, nor are they able to meet them personally to judge their character. However, it is impossible to do business with someone without receiving an email or letter from them, and correspondence itself often reveals much. All fraudsters make a point of taking kernels of truth and embellishing them, dissembling to create seemingly realistic stories out of falsehoods. If you receive a five-paragraph letter, or longer, which either has no real point or makes a false allegation with some cladding around it, you are probably dealing with a fraudster who has done it before. Their letters fit into a methodology and pattern in relation to obligations, promising much without a set delivery date, and asking for much in return – preferably now.

Fraudsters’ correspondence and behaviour also falls into a pattern of “false strokes”. Namely, nothing is too much trouble; they could not be more polite when they are trying to get payment on an account or when triyng to nourish a relationship. Another tell-tale sign is the use of an acquired accent, often with more rounded vowels and a higher class bracket than the fraudster’s origins would suggest. If you are becomng suspicous, don’t hesitate to check where they went to school. If birth and school do not fit their current speaking voice, it is a sign to proceed with caution. This too is a key facet of court proceedings, as demonstrating someone’s accent is affected is easy to do and highlights their duplicity.

An example of all these criteria is the famous case of Russell King, “the Trillion Dollar Con Man” who swindled First London Plc bank into giving him 49 per cent of shares on the basis of non-existent Bahraini backing, convincing the fans’ trust of Notts County football club to sell their club for £1 and signing Sven Goran-Eriksson to lead the club after a visit to North Korea, who King claimed backed his company with their mineral assets.

King’s defalcations included taking £2 million from a Jersey finance house at the end of a beautifully conducted relationship with regard to repetitively financed high-end motor vehicles, as we have laid-out above. Tell-tale signs also included multiple unpaid restaurant accounts. In fact he often asked for an extra plate – evidence of overconsumption and reduced embarrassment or shame. His extravagance can easily be guessed at. However, the biggest tell-tale sign was the fact that he and his equally overweight partner had bought a helicopter to travel from London to Jersey. Unfortunately, we at Sinels were informed that the helicopter was of little use: it could not operate with them both in it, as their weight put it over the safety ratings. Both men were resplendent in beautifully tailored suits (which they had not paid for). However, while their appearance was designed to make them seem trustworthy and successful, their mannerisms, extravagance and greed were, for those who know what to look for, the simple signs of a fraudster,.

And the reward for his fraud? Russell King is presently serving a six-year sentence in HM Prison La Moye.

Reference:

1, BBC Panorama, The Trillion Dollar Con Man (May 4th 2011) https://www.bbc.co.uk/programmes/b010p00r