An estimated 5% of business revenues are lost to scams and fraudsters. Fraud is deliberately hidden so, unless you turn every stone, you cannot know you are clean. If you’ve already suffered company fraud, you’ll want to avoid a repeat performance; if you’ve not yet suffered, you probably haven’t found the fraud!
The Fraud Triangle helps us get inside the heads of fraudsters and, therefore, helps us prevent or detect fraud. It was conceived in the 1950s by Donald R. Cressey (1919 – 1987), who was an innovator in the study of organised crime and created the term ‘white collar crime’. He explained how a combination of three circumstances can lead to somebody committing fraud: 1) a financial problem (pressure) that a person feels unable to share, 2) an opportunity to relieve the pressure through fraud, and 3) a rationalisation for committing the fraud (eg just borrowing the money, deserving extra money anyway).
This blog deals with the Fraud Triangle, its interpretation and its application. If you are looking for the latest news and commentary on the world of fraud, please visit the Fraud Academy.
Read my post, The Naked Fraud Triangle , for an introduction to the magical triad!