Q&A with Dr Russell G Smith: Retiring Principal Criminologist at the AIC
In November 2020, Russell Smith retires from his position as a Principal Criminologist at the AIC after almost 25 years.
When did you start at AIC and what is your role?
I started working at the AIC in January 1996 after moving to Canberra from the University of Melbourne where I'd been lecturing in criminology. Before that I practised as a lawyer and then spent four years in London researching a doctorate in medical misconduct, which gave me insight into some fascinating ways in which doctors in the UK have acted unprofessionally throughout the last 160 years including cases involving fraud. At the AIC I began working with Peter Grabosky on cybercrime and then explored other types of white collar crime including public sector fraud.
You have an extensive career in Criminology and public sector fraud. What are three key lessons you've learned?
One, it's worth remembering the words of George Santayana who wrote in his book The Life of Reason in 1905, 'Those who cannot remember the past are condemned to repeat it'. This acknowledges the need for those involved in fraud prevention to explore what has allowed fraud to occur in the past so that solutions can be developed to make sure that it's not repeated.
Two, never underestimate the complexity of human behaviour and make sure that you explore fully the reasons why people behave the way they do. Some fraudsters are simply greedy and self-interested but the majority have complex reasons why they have behaved dishonestly. Understanding those reasons will help you to respond in ways that are most likely to make sure that they, and others, don't offend again.
Three, reach out to people in the workforce at all levels of responsibility as it's often those working on the ground who understand where opportunities for crime lie and know how best to avoid them.
What has been your biggest achievement in your career?
Contributing to the body of knowledge about complex economic crime by developing research projects and publishing the findings for others to use. The early work I did with colleagues at the AIC on cybercrime and cyber-enabled fraud provided many opportunities for applying criminological principles to entirely new problems. Many of which, unfortunately, still remain to be solved.
What is the most interesting case of fraud in Australia you're aware of?
The most interesting case involving a Commonwealth employee in recent times is probably that of Christopher Hill and Lucas Kamay in 2015. Hill and Kamay had known each other since 2007 when they met at Monash University while both were undertaking studies in commerce and economics. The men met at a pub in 2013 where Hill agreed to use his position at the Australian Bureau of Statistics in Canberra to send Kamay sensitive, unpublished ABS main economic indicators using his mobile phone. This included labour force, retail trade, building approvals and private expenditure data. Kamay used the information, which was not generally available to the wider public, to influence the price of foreign exchange derivative contracts. Their plan was to make around $200,000 profit using the market-sensitive information. Although Kamay concealed millions more in accounts that Hill did not know about. Greed got the better of Kamay and he ended up making over $7 million. Kamay was sentenced to seven years and three months imprisonment with a non-parole period of four and a half years. Hill was sentenced to three years and three months with a non-parole period of two years.
What is your opinion on fraud against the Commonwealth?
Fraud against the Commonwealth is unfortunately inevitable as the government provides funding on such a large scale. This is because the administration of funding programs is often complex and capable of manipulation, and resources for fraud control are sometimes inadequate to deal with the scale of the problem.
The experience of supporting the community and providing stimulus to the economy during the current pandemic is a clear example of how difficult fraud control can be in times of an international crisis. Unfortunately the parallels with fraud risks that occurred during the 1919 Spanish Flu pandemic are clear and many fraudsters are simply replicating tried and true strategies once again through the help of digital technologies.
Why do you think the AIC Fraud Census is important?
One of the best ways to respond to fraud is by undertaking detailed monitoring of frauds that have come to light in the Commonwealth. The annual census, first developed in 1995 by the Attorney-General's Department and conducted since 2006 by the AIC, is one way in which fraud trends can be discerned and analysed. However it is a massive task to gather consistent information from the 180 or so Commonwealth entities on such a complex topic. The annual census has gone through a number of changes and continues to evolve to meet the needs of the government.
How could the AIC Fraud Census be improved in the future?
Maintaining an annual data collection is essential to identify trends in fraud against the Commonwealth, but other research activities could be used to supplement this in the future. Targeted fraud research projects using a mixture of quantitative and qualitative methods could be developed to examine new and emerging fraud risks, and to analyse the motivations of offenders, their personal decision-making patterns, and the effectiveness of fraud controls, including deterrence through criminal justice responses.
To help entities provide consistent data for the census, fraud monitoring software could be developed that the government could provide across all Commonwealth entities. This could lead to improved fraud controls that would save far in excess of the costs of software development and implementation.
In addition, alternative regulatory responses to public sector fraud could be tried and evaluated. The use of novel financial sanctions, and non-custodial penalties could be used. Restorative justice approaches that could entail adverse publicity and appropriate forms of community service for fraudsters who, despite their offending, often retain skills that could be beneficial to the public service and the community. Simply dismissing those found to have committed fraud, or subjecting them to lengthy and costly criminal proceedings, may not be the most effective way in which to change behaviour and to deter others from acting dishonestly.
Finally, the time is rapidly approaching when the Commonwealth will need to develop a more expansive approach to dealing with corruption. Although the current census gathers some data on corruption, much more could be done to explore risks of corruption against the Commonwealth, including quantification of exactly how much corruption takes place and its economic impact.
What advice would you give to those countering fraud?
My main advice for those working in fraud control is to make sure you have the best available training. Not only in fraud investigation but also in theory of fraud control, risk management and, if possible, in criminology. If you can't acquire all these skills yourself, then work closely with others who have the necessary abilities. Understanding how people go about choosing to act dishonestly is an important first step in responding to fraud. Once you have identified opportunities, motivations, rationalisations and how people plan to avoid detection and conceal the proceeds of their crimes, it is then possible to devise interventions to prevent offending by responding to each of these elements.
And finally, what are your plans for retirement?
Luckily, I've decided to retire from the AIC in just enough time to embark on a major research project in my newly-acquired spare time. It will be 50 years since the AIC was established on 6 November 2022 and, with the agreement of the AICs Executive, I'll be embarking on research for a book to mark this important milestone. The book will be called Public Sector Criminological Research: The Australian Institute of Criminology, 1972-2022, and the aim is to explore how this kind of research is conducted within the public sector. It will draw on the history of the AIC as the primary example, but also consider comparable organisations internationally. I know quite a lot about the last 25 years at the AIC and am looking forward to learning about its first quarter century as well.
Author: Commonwealth Fraud Prevention Centre