The Fraud Triangle:
Most people who commit fraud at work are not career criminals and often are trusted staff with no criminal history. The famed criminologist Donald R. Cressey says there are three factors that must be present for an ordinary person to commit fraud. They are Motivation, Rationalization, and Opportunity. Cressey calls it the Fraud Triangle.
- Motivation or pressure may include financial problems, addictions like gambling, shopping or drugs, pressure to show good performance or results, or just the thrill of being able to get away with something.
- Rationalization is when individuals think they are justified because they are underpaid, or it's for their family, or they need it now but they'll pay it back before anyone notices.
- Opportunity is created when there are weaknesses in controls. Individuals think they won't get caught because nobody is looking, or reviewing, or performing reconciliations and reviews.
Even the best systems of internal control cannot provide absolute safeguards against fraud or irregular activity, but to help reduce the risk of fraud we need to diligiently perform control responsibilities and limit access to property, systems and information except where necessary to perform job duties.