When Fraud Experts Go Bad

What would motivate a respected authority on money laundering to try his hand at committing the crime?

Comments Views

​A professor may have learned the wrong lessons from his decades of research on organized crime. U.S. federal prosecutors say Bruce Bagley, an expert on money laundering and corruption, laundered $3 million that foreign individuals had obtained through bribes and embezzlement, National Public Radio reports.

Prosecutors allege that between November 2017 and April 2019 Bagley received monthly deposits from bank accounts that were tied to a Colombian national. Bagley then would withdraw the funds through a cashier's check and give it to a second individual from Colombia, while retaining 10% for himself, prosecutors say in court documents filed after his arrest.

Bagley, a professor at the University of Miami, has written several books about drug cartels and corruption. He frequently has consulted with law enforcement agencies and has served as an expert witness in drug-trafficking trials.

Lessons Learned

This case is striking because the alleged fraudster is an expert on money laundering. Yet for all his knowledge, Bagley may not have chosen a sophisticated approach to covering up his alleged crimes — prosecutors say he created fake contracts to account for the money he was making.

Rather than focusing on the systems, techniques, and processes involved in preventing and detecting money laundering, let's take a step back and consider: Why would a fraud expert commit fraud? Most internal auditors are familiar with the fraud triangle — opportunity, motivation, and rationalization — but here are five explanations.

  1. Narcissism. The basic thinking is "I'm important and the rules don't apply to me." These fraudsters do and take what they please, and justify it given their superiority, importance, or desire. A form of sociopathy may drive their behavior, and they may not have empathy for other people. When individuals are influential and set rules for others, such as when teaching students or advising government officials, they can begin to see themselves as morally distinct and not subject to the same rules.
  2. Impact minimization. Any workplace presents many opportunities for theft, some of which are small and easy to ignore. In this case, the alleged fraudster may have considered a 10% cut of the money laundered to be a small amount.

    Some fraudsters make a small compromise or act unethically in a way that they don't consider to be a big deal. When no one cares or notices, they get away with it. They then repeat their crimes and even try for a larger amount.

    As the crimes escalate, small thefts can become bigger and more persistent. Then, if the fraudster feels there is no way out, the individual may take larger risks if the original risk suddenly results in a big loss. Ultimately though, even an expert will be noticed and caught.
  3. Ethical rationalization. Some people commit fraud because they believe what they are doing is in some sense ethical — they convince themselves to do unethical things depending on the way something is framed. In a case like this story, a money-laundering expert may rationalize that "the amount of money I'm keeping for myself is a small fraction of what is being stolen."

    Constant exposure to extreme wealth, or environments that reflect it through feelings of injustice and jealousy, can lead people to unethical behavior. Also, individuals may feel that they have accumulated "ethical credit" by being morally and ethically appropriate in their actions to date. In doing so, these people can justify wrongful behavior.

    Further along the path of fraudulent behavior, a cognitive dissonance and rationalization can set in: If a person's actions differ from his or her morals, the individual may rationalize both to protect himself or herself from the contradiction. The bigger the dissonance, the larger the rationalization; the longer it lasts, the less immoral it seems.
  4. Self-serving bias. People often are competitive and can be self-aggrandizing in their thinking and actions. These individuals think they are better than the people around them, which can lead to feelings of injustice and acting to rectify those feelings. An example is a person who does not think he or she is receiving a fair share of the rewards from his or her performance and capacity.

    Such perceptions can be worsened by tunnel-vision thinking. Focusing on only one goal, such as financial reward, can distract people from ethical concerns. Combining this type of thinking with feelings of alienation from large organizations and institutions may lead individuals to feel detached from their goals and leadership, driving them to consider committing fraud.
  5. Health and physical factors. People who are physically ill, stressed, lack sleep, or suffer from other issues, may have less self-control. Moreover, they may have greater financial need to address these issues, which may lead them to think crime is their only alternative.
Art Stewart
Internal Auditor is pleased to provide you an opportunity to share your thoughts about the articles posted on this site. Some comments may be reprinted elsewhere, online or offline. We encourage lively, open discussion and only ask that you refrain from personal comments and remarks that are off topic. Internal Auditor reserves the right to remove comments.

About the Author



Art StewartArt Stewart<p>​Art Stewart is an independent management consultant with more than 35 years of experience in internal audit, financial management, performance measurement, governance, and strategic policy planning.​​​</p>https://iaonline.theiia.org/authors/Pages/Art-Stewart.aspx


Comment on this article

comments powered by Disqus
  • AuditBoard-February-2021-Premium-1
  • GAM-February-2021-Premium-2
  • ACGI-February-2021-Premium-3



Thanks, We Already Know Thathttps://iaonline.theiia.org/blogs/jacka/2020/Pages/Thanks-We-Already-Know-That.aspxThanks, We Already Know That
Six Data Privacy Predictions for 2020https://iaonline.theiia.org/blogs/Jim-Pelletier/2020/Pages/Six-Data-Privacy-Predictions-for-2020.aspxSix Data Privacy Predictions for 2020
Public Servants Are Vital to Defeating COVID-19https://iaonline.theiia.org/blogs/chambers/2020/Pages/Public-Servants-Are-Vital-to-Defeating-COVID-19.aspxPublic Servants Are Vital to Defeating COVID-19
Are We Ready to Move Beyond COVID-19 Risks?https://iaonline.theiia.org/blogs/chambers/2020/Pages/Are-We-Ready-to-Move-Beyond-COVID-19-Risks.aspxAre We Ready to Move Beyond COVID-19 Risks?