Recognize Lulling Tactics and Limit Your Business’s Fraud Losses
“Lulling” may sound comforting, but in a fraud context, it’s far from it. This term refers to techniques fraud perpetrators use to prevent suspicious businesses or individuals from asking questions, getting angry — or even contacting law enforcement. To lull someone into inaction, a fraudster might offer excuses, make promises, blame delays on someone else or create the impression that a problem is only temporary. It’s important to recognize these warning signs and be ready to act.
What makes it dangerous
Dishonest employees, vendors and third parties might use lulling tactics to prevent detection and extend a fraud scheme’s life. Sometimes, efforts to lull victims start only after a scam is well underway. In other cases, lulling is built into the scam from the beginning with small transactions and limited follow-through designed to make the victim believe the perpetrator is well-intentioned and legitimate. These tactics are usually effective because they appear to be ordinary delays, misunderstandings or attempts to fix honest errors.
What makes lulling so dangerous is that it’s often part of the fraud itself. Communications between perpetrators and victims — including in-person and phone conversations and email and text messages — aim to soothe concerns and delay complaints. This matters because the longer a scheme continues, the costlier it’s likely to be. Buying a few more months can enable perpetrators to steal additional funds. It also gives them more time to cover their tracks, destroy records, spend ill-gotten gains, and, in many cases, find their next victim.
False sense of hope
Companies can be especially vulnerable to lulling techniques because they want to appear fair, avoid overreacting and preserve business relationships. Fraud perpetrators exploit what, in other circumstances, would be considered smart business practices.
Fraudsters might give victims hope that they’re making progress by providing a partial payment for goods or as a “return” on a fake investment. A token repayment can be enough to persuade even cautious people to hang on and wait for full payment. Similarly, a substitute item or a promise wrapped in paperwork can create just enough hope to delay scrutiny for another day.
Other lulling methods involve blaming a third party. For example, perpetrators might attribute delayed payments to bank errors or problems in their accounts payable department. Or they might buy time by claiming, for example, a death in the family or another personal emergency. In general, you should be wary of stalling efforts and emotional manipulation. Dishonest employees attempting to cover up occupational fraud schemes often use these last two tactics to control colleagues and supervisors. After all, they have the advantage of knowing their victims and their vulnerabilities.
Document, document, document
To potentially limit the duration of a fraud scheme involving lulling, document transactions and interactions — particularly if they seem “off.” Documentation enables you to objectively examine signs that someone might be lulling you into a false sense of security. Documentation also produces a paper trail of possible evidence that can be useful if you later refer a case to law enforcement or try to track down stolen funds.
Be sure to document clear timelines and retain emails, texts, voicemails, contracts, promissory notes, photos, videos, financial records, social media posts, and, where permitted under applicable law, recorded calls. If you involve legal counsel or a forensic accountant to help investigate possible fraud, provide them with copies of these records.
Pay attention
You’re busy, and lulling makes it easy to ignore suspicious behavior. But it’s important to pay attention. Recognizing reassurance tactics early can be the difference between containing losses and giving a fraudster time to inflict serious financial damage. Contact us for help investigating suspicious activity and strengthening internal controls to prevent fraud.
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