When it’s a clothes horse. Or in a burger, where it’s masquerading as a cow.

Okay, I’ve used a popular news story to entice you into this article, but the point I wish to make is exceptionally valid. Fraud is everywhere.

In my previous blogs I typically discuss fraud as if it’s an online-only activity, but the truth is it can happen anywhere, in any industry. As former Lord Chief Justice, Sir Edward Coke, said in 1602, “Fraud and deceit abound in these days, more than in former times”, and over four centuries later the sentiment is equally as relevant.

I would hazard a guess that most people reading this blog have committed fraud in the past. If you have ever purchased alcohol underage, or lied about your financial circumstances whilst chatting someone up, you have committed fraud. Or to give it its more official title “opportunistic first party identity manipulation”.

Whilst these may be seen to be harmless creases in the fabric of truth, they do illustrate that fraud is a human endeavour used for our own personal gain.

If you have ever read the works of the philosopher, Ayn Rand, you will be aware that apparently all human actions are done for the benefit of ourselves and no-one else (you can exclude the altruism of charity and personal sacrifice as, according to Rand, these don’t exist).  Whether or not you subscribe to Rand’s philosophy, people in the online and real worlds are committing fraud on a daily basis, and not all of it is inconsequential.

So to return to the news agenda, this meat-laden saga has revealed exploitation of two human weaknesses – trust and greed. To believe what has been reported so far, it would appear that someone, let’s say Mr. A, knowingly purchased horsemeat from an abattoir in Romania. Mr. A then approached Mr. B to tell him he was selling beef at a discounted rate. Now, rather than verify these claims, Mr. A’s claim was taken at face value and the meat was purchased and distributed across Europe.

This is a traditional ‘honeypot’ style fraud – where a fraudster dangles an unbelievably good offer in front of someone who naturally lowers their defences and their decision making becomes clouded by the attractiveness of what is put before them.

So in this case, due-diligence went out of the window in favour of unverifiable (but cheap) meat.

Sadly for consumers the final piece of fraud here is supermarket food labelling where we believed what we bought contained what it said on the label. One could argue again that we shouldn’t have trusted the supermarkets and it was our fault. But given DNA sampling kits aren’t a common household item, it is fair to dismiss that as a reasonably unfair accusation.

Where am I going with this? Well, I have one point to make – when we look at systems to prevent and detect fraud in the Financial Services industry, they need to be designed with human psychology in mind.

Fraudsters, either individual or organised crime syndicates are incredibly useful and resourceful and now have the tools to allow them to conduct attacks remotely, more quickly and more coordinated than before.

Fraudsters use very powerful technology to bypass institutions’ own fraud systems and slip under the radar of their KFIs (key fraud indicators), increasing the chance of executing the fraud. So if the fraud system in a bank is looking for  rogue trading or an insurer is attempting to clarify the legitimacy of a claim, institutions need to counter the technology of the fraudster with their own powerful technologies, deployed in a manner that thinks like the fraudster.

As we’ve learnt from the horsemeat scandal, organisations need to always be prepared for fraud and given the huge potential losses to financial institutions; they should be better prepared than the rest.