Understanding the Fraud triangle

 

 

To give us an understanding of why people commit fraud, the fraud triangle provides a simple model and also helps us understand the fraudsters mind. Fraudsters come from all age groups, backgrounds, walks of life and ethnicities.

Identifying a typical fraudster is no straightforward task, although what we can do is to think about those forces that induce a person to commit fraud. A detailed explanation of those forces is reflected in a theory developed by Donald Cressey, a sociologist in the 1950s.According to him, three factors must be present for people to commit fraud. 

 

 

 

 

Pressure motivates the crime in the first place and is usually based on some "unsheareable" needs. For example, a fraudster might have financial problems, hence begin to consider committing an illegal act such as stealing cash or falsifying financial statements in order to fulfil his/her need.

 

Opportunity presents itself when an organization has weak internal controls or someone having power to override systems or has privileged access to resources. A potential fraudster will perceive an opportunity when he believes he can commit fraud with a small risk of being caught.

Most people who commit fraudulent acts are fully aware of what they are doing. This is where the third leg of the fraud triangle comes in: rationalization. Rationalization is the reason fraudsters come up with to justify their actions. “I did not take too much.”I had to steal to provide for my family."  “Everyone is doing it”.

If you would like to learn more about the fraud triangle, or other areas of fraud, I invite you to get in touch with me via email (contact@emgfraudconsulting.co.uk).