Examining the Bigger Picture in a Fraud Investigation

By Jamey Waters,

As an experienced corporate investigator, having investigated hundreds of various types of fraud cases, it’s really not hard to come to the conclusion that where there is smoke there is usually fire and often times in more than one place. When a client or an individual is alerted to suspicious behavior by an employee/contractor, the investigation generally must focus on the specific allegations. However, it is also important to use the initial investigation opportunity to open a broader review into the suspect for two main reasons:

  • To look for motivating factors (a motive); and
  • To determine, if he/she may be committing fraud or deviant behavior in other areas not specific to the case. After all, if the individual is involved in some form of fraud or deviant behavior that we are aware of, it is highly probable this extends to other areas as well.

According to the widely accepted Fraud Triangle model developed by Donald Cressey, “…individuals are motivated to commit fraud when three elements come together: 1) some kind of perceived pressure, 2) some perceived opportunity, and 3) some way to rationalize the fraud as not being inconsistent with one’s values.” One of the reasons for opening a broader investigation and not just focusing on the specific allegations is to look for motivating factors or pressure(s) the person may be under that might drive him/her to commit the fraud. People often say “I would never do that” but when faced with varying degrees of perceived pressure, it is difficult to determine the lengths people will actually go to in committing fraud. … Continue reading

The Fraud Triangle [Infographic]

By Lowers & Associates,

According to ACFE estimates, fraud costs organizations fully 5% of annual top-line revenue. This enormous cost is serious enough, but it is compounded by the fact that fraud is a hidden crime that erodes an organization’s capacity from within.

Consequences can go beyond monetary losses to inflict damage on morale, trust and transparency. These kinds of costs endure far beyond the triggering event.

Recognition is the First Step in Fighting Fraud

In 1973, criminologist Donald Cressey first published his theory about fraud, highlighting the now famous “fraud triangle”, which says fraud occurs when the fraudster feels financial pressure, his or her organization presents an opportunity, and the person can rationalize the theft.

The first few words of his hypothesis capture the essence of this crime, and why it is difficult to confront: “Trusted persons become trust violators…” In other words, there is an internal conversion that turns an employee (at any level) into a thief.

The value of the fraud triangle is that it helps us to look at the objective factors that have to be present for fraud to occur. Recognizing these objective factors helps to define actions you can take to help prevent fraud, partly through organizational policy controls and partly through managing the relationship with employees to encourage openness and trust.

Our latest infographic summarizes the factors that must be present for fraud to occur, and gives you a few ideas about how to combat it.

fraud triangle

Click to view full version and download PDF.

For more information, explore our fraud investigation and loss prevention services, or contact us for a fraud prevention consultation.