06th January 2020 | Top 6 Warning Signals | by Dr Alexander Schuchter

“I was extremely alert. I kept my ears perked and tried to be as inconspicuous as possible.”

Statement by a fraudster | personal interview

How good are you at recognising the manipulation mechanisms which already permeate your office? Fraudulent practices leave traces. These traces are warning signals. Some manifest themselves in the fraudster’s conduct, some can be found in data and documents. If you identify them correctly, they can help you nip irregularities in the bud.


Being aware of warning signals will enable you to assess fraud risks with greater accuracy. Effective controls, precautions to screen for fraud and preventative action can then be taken. In this manner, you can minimise financial losses, damage to reputation and liability risks.

TOP 6 WARNING SIGNALS for Swiss businesses:

1. Abnormal Behaviour

Men and women display different types of abnormal behaviour. Previous cases of fraud show that women were more likely to engage in fraudulent practices on account of domestic problems. Male colleagues, on the other hand, displayed unusually close relationships with customers and suppliers.

In roughly 90% of all fraud cases, fraudsters display at least one warning signal. Frequently, the most visible sign is when a colleague blatantly lives above their means. However, this warning signal does not appear until after the fraud has been committed.

Example: Studies show that it takes considerable time before colleagues connect a new luxury car or vintage wine collection with the possibility of fraud.

2. Signals in Data

Supercomputers and AI support us in big data analyses. Intelligent software is becoming an increasingly important tool, particularly when it comes to the early detection of fraud.

Machine learning is deployed to uncover fraud. In real time, psycholinguistic programmes analyse emotions in data material and deliver forecasts.

Numerous highly effective measures, however, do NOT require the use of special software. Analytic audits, compliance controls and other measures can easily be combined with simple modern data analysis methods.

Example: some procedures can be completed with Microsoft Excel®. In our special forensic investigations (fraud investigations) in Switzerland, simple digit tests and checks for gaps and duplicates have proven highly efficient.

3. Written & Spoken

Decades of research show that people choose different words and phrases when making true and false statements. Secret services adopted the most successful methods and perfected them, turning them into a fine art.

Tip: For professionals, this research can make the decisive difference in compliance and audit interviews, when screening documents or in day-to-day business.


Spoken and written sentences contain far more than mere factual content – they also send countless hidden messages. True statements are governed by certain formulae. In all probability, these will not apply to false statements.

Example: an absence of sufficient verifiable facts can be a warning signal. True statements often include specific details. But when people freely invent something, their imagination often fails to extend to details.

4. Profile for Fraudsters

In roughly two thirds of all the fraud cases I have examined in the last years, I have repeatedly heard the same claim: “I found him to be a person of integrity. Of all people, he was the one I would have believed least likely of committing such an offence.”

Our research points to a typical fraudster profile that differentiates a fraudster from an honest manager. Most white-collar criminals are excellently integrated. They thirst for social admiration and are socially manipulative (machiavellian).

Typical fraudsters know exactly what others want to hear. Cooperation is faked in a targeted manner in order to deceive the professional environment. Fraudsters are able to instrumentalise others for their own purposes – without the other person noticing.

5. Micro-Expressions

Recent scientific research has verified the reliability of certain micro-expressions. Tiny muscle movements flash up for a split second, revealing masked emotions. As with a lie detector, they subconsciously reveal our true emotions.

Professionals in auditing positions can be sensitized to decode emotions and thus identify anomalies – and respond accordingly.

Practical example: if someone slightly shrugs their shoulders, this is counted as a decisive warning signal. Nonetheless, people often make false judgements – particularly with regard to general signs of nervousness.

6. Risk Factors

Having examined fraud cases from the last few decades, we have been able to identify various factors which point to an increased risk of fraud.

Example: We frequently encountered formal or informal restrictions on auditive actions. Most of these made access or communication disproportionately difficult. Circumstances or barriers made it difficult to glean information.


The lessons we have learned from previous cases of fraud can help us assess present critical situations with greater accuracy. Great attention should be paid to the risk factors which most frequently accompany fraud.

“We are the good guys. We are on the side of angels.”

Statement by Jeff Skilling | CEO for Enron, 2001

Last But Not Least

Confronting warning signals with common sense and intuition can be deceptive and cause you to draw the wrong conclusions. Uncovering and correctly interpreting red herrings requires in-depth expertise.

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Dr. Alexander Schuchter

I have been working in forensic since 2008 – but not as a fraudster! As Managing Director of Schuchter Management GmbH, I support executives and companies.

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