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A student from the University of Sherbrooke dissects the profile of the fraudster type

by

Alain Thériault

March 27, 2018 07:00

Miruna Minea-Burga

In lieu of a thesis, mastery university, Miruna Minea-Burga has dissected the psychology of the fraudsters in the financial services of Quebec. She came out of it with a profile type and a modus operandi of the fraudster.

Ms. Minea-Burga has completed her master’s degree on the fight against financial crime at the School of management of theUniversity of Sherbrooke. The one in the recent past has been an actuary in insurance and shared the contents with the Log of the insurance.

Entitled Profile of advisers in financial services fraudsters and constituent elements of their act, the study is unique because it is dedicated to financial advisers, subject to the Chambre de la sécurité financière. Several studies have been devoted to investment advisors full-service brokers in securities, but never on those in life insurance or mutual fund.

Its first goal : allow insurers and distributors specialising in liability insurance and error and omission (E & O) better targeting of upstream potential fraudsters, before accepting a risk. It also proposes a list of key elements that are present in the con artist and in his act, in order to facilitate proof of intent, is the most difficult to build depending on the researcher.

His study is based on a sample of 20 financial advisors who violated the law to the point of committing a fraudulent act. This interpretation is based on a variety of research and analysis of disciplinary penalties imposed by the Chamber of financial security in 2014 and 2015.

Limit the possibilities of fraud

It also insists on the fact that all the professionals did a very good job. «This is just to give clues to limit the possibilities of fraud. It’s also important not to confuse the scammers with those who have simply committed an act of professional misconduct, » she said.

The study points out situations that should raise the red flags, both for the clients in the principals of compliance. Miruna Minea-Burga has noted that the adviser fraudster typical deals systematically with the client’s personal issues that don’t have relationship with the financial services it offers, and then better handle it.

This trait is marked in the advisors fraudsters will gain to be known to the advisers of good faith, who might be tempted by an approach that is too personal, no bad intentions. They would then give a bad impression rather than deepen their relationship with the client.

The study describes the fraud as a relationship of predator to prey. As in the animal world, the predator is placed on the effect of surprise to surprise its prey.

«Some authors compare the scammers to financial predators. Others consider them as talented actors experts in the staging and manipulators of the emotions of their victims, » says the study from the University of Sherbrooke.

The predator will seek to numb its prey, hosting parties, giving gifts, or saying that a regulatory agency has «approved» the product it offers. It feindra to entrust him with a secret. It will make him believe that he accepts it in a privileged group, as was done by Bernard Madoff. It will hide information and will press his client to buy, promising things that he knows to be impracticable. It will adopt a false identity or to behave like » the great of this world «.

Camouflage

Among others, a fraudster likes to hide. Ms. Minea-Burga refers to passages from the book of Louis Villeneuve, Survive the scam : the story of the ex-husband of Carole Morinville. Mr. Villeneuve has revealed that Carole Morinville boasted among his relatives to have had amorous encounters with George Clooney. His entourage also believed that it had once been a ballerina in the Grands Ballets canadiens. It was not the case. His imaginary life had so impressed her husband that he had made arrangements to create a tv series about this fantastic life.

The fraudsters take care in their appearance. For example, Vincent Lacroix was making very generous donations to the Œuvres du Cardinal Léger, one can read in the document. The research of Ms. Minea-Burga reveal that Vincent Lacroix liked to be photographed with politicians.

«Fraudsters like to join people who share the same beliefs or the same interests in order to build a reputation. They will not hesitate to spread it, first subtly, then with more shine, their success and their wealth, » she said, citing provincial regulators, including Quebec and New Brunswick, with respect to the behaviour of Carole Morinville and Vincent Lacroix.

Experienced counsellors

Despite the small sample size, the study provides a statistical analysis. The number of years of experience means within the sample of 20 consultants retained by Ms. Minea-Burga revolves around 20 years. The amount of the fraud varies from 10 000 $ to several millions of dollars (M$). With an average of$ 1.3 Million. The sample includes mostly men. The median age is 43 years.

The fraud seems to be emotionally costly for some. The sample reveals that three of the individuals who are included in the sample following the treatment of a physician for panic disorders, anxiety disorders, or depression and bipolarity.

The researcher adds that the counselors observed rely largely on a mixture of schemes. For example, the manipulation, when the reality is altered, the persuasive, insisting, and charm, focusing on qualities other than professional competence, or building a » reputation «.

Worse, nine of them have acted in collusion, or with the employees of their suppliers or of their firm. The acts range from the misappropriation or the diversion of funds to the sale of products that are inappropriate or illegal. Twelve councillors have sold their customers products that do not suit their needs and their risk tolerance, or that their certification did not give them the right to sell.

After the fraud, there are personality traits that are totally opposite. The ability to manipulate, the acting talent, the ability to lie while keeping the head high at all times, the arrogance, the total lack of consideration towards the authorities, the cult of the self in its worst manifestation (vanity, narcissism, self-centeredness), the quest for pleasure through the immediate gratification and thrills are few.

Recommendation : do a survey of credit

In his study, Miruna Minea-Burga recommends that the insurers ‘ liability to make a credit investigation on the consultant, as well as research on administrative penalties in the past. Delays repetitive to pay the bills, gestures scolded them should sound the alarm, she wrote. «If the adviser does so with the competent authorities, how would it be in the face of the insurance company ? «

A search in the plumitifs of the palace of justice, municipal courts and enforcement can consult with a criminal record, litigation, proceedings or claims about an individual or a company. Ms. Minea-Burga regrets the absence of a central file insurance professional. She reports, however, the existence of the system report complaints supervised by the regulators in Quebec and Ontario, which assembles the complaints against councillors, and that they are required to complete.

It was also observed that the absence of centralised data impedes the insurer’s ability to verify whether an advisor has had other claims in another company. «The insurer must rely on the word of the insured. «

It is difficult to predict the opportunities that will be available to the adviser in the future, acknowledges the researcher. However, easy access to money and quality controls, deficient or non-existent in his cabinet or the supplier could create. A better check of the habits of the adviser and its ways of doing business with its customers would detect deficiencies in a timely manner. The management systems of customer with control measures may allow him to do so.

Commissions : incentive potential

The study notes in passing that according to the sample, the probability of fraud increases if the consultant is self-employed and paid on commission. In addition, the independent representatives must seek the profits to keep their business afloat, the study said.

Ms. Minea-Burga also notes that independent representatives have agreements with certain providers that pay them commissions based on their sales volume. Thus, the conciliation between the performance of the adviser and the best interests of the client does not seem to be settled, enters into this passage.

Conflicts of interest accepted

«The sample pointed to problems of conflicts of interest, which indicates that this debate is not over, she explained in an interview. In the industry, there is a potential conflict of interest known and accepted. Some advisors push it much further, against the client. This represented the majority of the problems observed in the sale of unsuitable products. The adviser fraudster had received a large commission for the sale of inappropriate products. «

Ms. Minea-Burga was also asked why he had been so easy for these fraudsters to sell a product inappropriate. It finds that the commissions in insurance of persons are not disclosed, and on another side, the client is vulnerable and relies on the knowledge of the adviser.

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