Start understanding the human element behind the fraud triangle.

The Three Sides to the Triangle

All three components of the fraud triangle need to be present in order for fraud to occur.

Pressure is what motivates an employee to commit workplace fraud. Majority of the time pressure comes from non-shareable problems which include, spouse losing a job, child/spousal support payments, employee is already involved in civil/criminal proceedings, employee has a drug, alcohol, or gambling addiction, etc. Pressure can also come from the workplace itself, such as making an earnings quota, the threat of being fired due to underperformance, etc.

Opportunity is how easily and by what method an employee can commit fraud. Examples include using corporate credit cards, changing company data, or having control over the budget. Also having indifferent management, ineffective monitoring of management, and no separation of duties are examples of opportunity. 

The majority of the time the fraudsters are first-time offenders so they require a way to justify the crime. Rationalizations can include: being underpaid and overworked, “borrowing” money from the company and “promising” to pay the company back one day, the company does not need the money or will not miss the assets, the company “deserves” the money stolen because of bad acts against employees, and believing fraud is victimless. 

Trust Violations

Trust violations are the basis of the fraud triangle. A trust violation happens when a person believes a “behavior as a solution to a financial problem that cannot be shared with others, and at the same time as compatible with his usual standards of conduct” (Schuessler, 1954). Donald Cressey, a criminologist, and creator of the fraud triangle described the employee’s decision to commit workplace fraud as:

“Trusted persons become trust violators when they conceive of themselves as having financial problem which is non-shareable, are aware this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as uses of the entrusted funds or property” (Other People’s Money, Montclair: Patterson Smith, 1973, p. 30).

Non-Shareable Problems

A non-shareable problem is a situation that an individual believes that they cannot share with a peer or coworker because it is shameful or embarrassing. Financial problems, loss of status, admitted guilt, or lack of judgment can all lead to non-shareable problems (Dellaportas, 2013, p. 30). This is how fraud begins in the workplace. An employee believes that they have a problem that will cause them to lose face amongst their friends and colleagues, therefore they need to resort to crime to help solve it. 

Ivis has developed a comprehensive solution that addresses the fraud triangle.