Simon 0:04

Today's podcast is called Freud on Fraud. That sounds like a really interesting concept for this episode!

0:11

Thank you, Simon. We are going to start today by exploring the initial mindset of the fraudster, delving into what we might call the fraud triangle of pressure, opportunity, and rationalization. How they convince themselves that what they're doing isn't really wrong or that they'll pay it back. Then we'll discuss. The personality traits often found like a, a lack of empathy or a high need for control or admiration, contrasting that with how they present themselves outwardly. Finally, we will wrap up with how this psychological house of cards eventually collapses.

Simon 0:56

Do we find any material in the works of the great psychoanalysts of our time, like Siegmund Freud and Karl Jung?

1:03

Well, while Freud and Young didn't specifically write about modern financial fraudsters, their theories on things like deception, the unconscious and personality traits can definitely be applied. For example, Young's concept of the shadow, the part of ourselves we deny or repress could help explain how. A fraudster partitions off their darker motives and Freud's ideas about rationalization and ego defenses could show how they manage the guilt. With Freud. We will discuss how defense mechanisms like rationalization allow fraudsters to consciously separate their criminal actions from their perception of themselves as good people. IE robbing Peter to pay Paul. Freud wrote about self-deception in many contexts. For Young, the shadow archetype would offer an insight about how the fraudster fully embodies their manipulative, greedy side, the one they'd normally hide, and how that persona becomes their reality.

Simon 2:17

So we're on the couch, ready to take a deep dive into the psyche of the white collar criminal.

2:22

Yes. Today, we aren't just looking at the how. We're looking at the why. We like to think of fraudsters as hooded figures in dark basements, but the reality is much more suburban. They are your CEOs, your accountants, your neighbors. Today we're putting the fraudster on the couch. Does every scammer have a childhood trauma or is it just cold calculated chemistry? In the 1950s, criminologist Donal Cressey gave us the Freud Triangle. Let's look at how these three points interact with the subconscious. First of all, we have pressure, the id. This is the primal I want. It's not always about greed. It's often about the fear of losing status. Then we have the opportunity, the ego. The rational brain seeing a gap in the fence. No one is looking. I can bridge the gap between my reality and my desires. And then we have rationalization. The super ego's failure. This is where the psychology gets juicy to sleep at night. The fraudster must convince themselves that they aren't a bad person. A common refrain might be. I'm just borrowing it, or the company owes me for all those late nights. And if we really want to get Freudian, we have to talk about the personality traits that act as a fertilizer for fraud. Psychologists call this the dark triad, which is the three types of personality that can create a fraudster. Each of which can underpin the psychology of the criminal mind. Number one, we have narcissism, an inflated sense of entitlement. The rules don't apply to me because I'm special. Then we have Machiavellian. This is the cold calculated manipulation. Everyone is a pawn in a larger game, and the third trait is the psychopath. A total lack of empathy. They don't feel the burn of the victim's loss. We also then have this slippery slope effect. Most fraudsters don't start by stealing 10 million. It starts with a hundred put onto the company's credit card, and then what happens is the fraudster has cognitive dissonance, which is where their actions don't match their values. It creates discomfort. And on this slippery slope, we have the fix so that instead of stopping the bad behavior, the brain changes its values to match the behavior. I'm not a thief. I'm an aggressive businessman.

Simon 5:29

So did Freud write about deception and dishonesty?

5:32

Yes, Freud did touch on themes related to deception and dishonesty. Though not always in the direct context of financial crime, his theories often revolved around the unconscious mind repression and the conflict between our inner desires and societal norms. For example, Freud explored how people might engage in deception as a form of repression where they hide their true motives or desires from themselves and others. He also examined how guilt and the super ego could lead to self-deception or rationalization of dishonest behavior. In his work on psychopathology. Freud also described how some individuals might engage in deceit as a way to fulfill unconscious desires or to cope with inner conflicts. While Freud didn't directly create a framework for understanding financial fraud in the modern sense, his psychoanalytical theories, definitely laid groundwork for understanding the psychological underpinnings of why people might engage in dishonest behaviors. So let's talk a little bit about the psychology of fraud. And Freud's lens on deception In exploring the intricate world of fraud and deception, it's fascinating to consider the insights of Freud. Who is considered the father of psychoanalysis? At the heart of Freud's theory is the concept of the unconscious mind, where repressed desires and unresolved conflicts reside. Freud suggested that people often engage in deceptive behavior as a means of coping with internal conflicts and unconscious urges. For instance, someone might deceive others to hide deep-seated guilt or shame, or to reconcile conflicting aspects of their personality. Moreover, Freud explored the role of the Super ego. The internalized moral compass, which often enforces guilt and self-deception in the realm of fraud. This means that individuals might rationalize their actions, convincing themselves that their deceit is justified or even necessary. And Freud delved into the concept of projection where individuals attribute their own unacceptable thoughts or impulses onto others. This dynamic, can certainly be seen in fraudulent behavior where the deceiver might accuse others of dishonesty while concealing their own duplicity. In essence, Freud's theories highlight the complex interplay between unconscious motives, internal guilt, and social norms. By understanding these psychological dimensions, we gain a deeper appreciation of why people might engage in fraud and deception, revealing the layers beneath the surface of human behavior.

Simon 8:37

And have you noticed particular character traits of the perpetrators in the frauds you've seen? Well, Simon, as you know, I've covered in previous episodes about my encounters with various frauds and fraudsters during my career, and, uh, I I will be revealing a number of further frauds that I have witnessed, uh, and I'll be revealing those in future episodes of the uh Fraud Files podcast. But anyway, from my experience, perpetrators con artists, cheats and liars, call them what you will have all exhibited to various degrees, a number of personality traits. These range from arrogant, having a sense of superiority. Having a narcissist personality. In other words, a, a self-centered ego characterized as having an excessive preoccupation with oneself and one's needs very often at the expense of others. And then you have those types that seek admiration, seek material possessions who crave validation. And generally the fraudsters are extremely sociable. Charming, charismatic, highly articulate, reassuring, manipulative. They have the necessary skills to misdirect, to deceive, to distract, to create false narratives, and in the packaging of the fraud, because it's all about the packaging. They are the ultimate confidence tricksters. Edward, what are your closing thoughts to leave with our listeners today for them to reflect on in their own time?

10:15

Freud once said, illusions commend themselves to us because they save us pain. The fraudster's greatest illusion isn't the one they tell the bank. It's the one they tell themselves in the mirror every morning. The scariest part under the right pressure. That mirror could be reflecting any of us. We should all ask ourselves, why do highly successful people who already have millions risk it all for a few thousands more? Can a fraudster ever truly be rehabilitated if their brain is wired for risk? And finally, and perhaps most profoundly. We should ask ourselves, is there such a thing as an honest person or just someone who hasn't been tempted enough yet?