Not just greed

WE do not need the experts to tell us that fraud stems from greed. But to better understand the circumstances that lead to fraud (and thus have a better chance of deterring it), we have to be acquainted with an idea developed by criminologist Donald Cressey.

 

He came up with the Fraud Triangle model, which says that for fraud to occur, three elements – opportunity, pressure and rationalisation – have to be present. Here is a look at the trio of factors:

● Pressure

It is pressure – alternatively labelled as incentive or motive – that prods a fraudster into engaging in misconduct.

There are a variety of reasons (see chart) that may push an individual towards committing fraud, and they naturally become more compelling in a difficult economic environment, owing to worries over matters such as job security and the inability to meet performance goals.

Generally, these factors relate to financial needs. The perpetrators believe that the burden of fulfilling these needs rests on their shoulders alone and that there are no legal solutions available to them.

● Opportunity

This is essentially the ability to commit fraud, often arising from the organisations’ poor internal controls and weak management. As such, this is the element of the Fraud Triangle over which the organisations can have the most control, that is, by tightening their processes and procedures.

In a downturn, the opportunity for fraud rises because amid the downsizing and cost cutting, internal controls and fraud detection often become less of a priority.

● Rationalisation

Fraud happens because the perpetrators are able to rationalise or justify their misdeeds. For example, they may convince themselves that they are underpaid and they are therefore only taking what is due to them. Or they may tell themselves they have no choice but to steal to save a loved one or to avoid losing everything.

Others may argue that the sum involved is relatively small or that they will return the money eventually.

Rationalisation is linked to pressure; the greater the pressure, the easier it is to justify the fraud.


-- by thestar.com.my