We very often hear that an employee who was found to have defrauding or stealing from his/her employer was “the last person they expected this from”.
Employers often ask: Why did this happen? Why did this trusted employee who I never expected to do something like this, misappropriate assets from the company that pays his salary?
One theory that aims to explain this, is the “fraud triangle”. This triangle says that when an employee is under some form of “pressure”, when an “opportunity” to enrich them arise, and if they are able to “rationalise” their actions, fraud and other self-enriching conduct may occur. Let’s have a brief look at these 3 concepts:
Pressure (or need) – Pressure may be real or perceived. Pressure is usually created by the circumstances of the perpetrator and may for e.g. involve personal financial pressures such as a spouse who loses a job, incidents such as accidents or even not qualifying for debt or loans.
Opportunities – Opportunities to commit fraud or other financial crimes can manifest themselves in different ways, but most often involve poor internal controls, inadequate segregation of duties or safeguarding assets, etc. This may make it relatively easy for a perpetrator to record fraudulent transactions or steal assets.
Rationalisation – Rationalisation is the process by which a person committing these irregularities legitimises or justifies his/her actions. This often includes an attitude or feeling of entitlement and/or a belief that “the company can afford it”, or “I am worth much more than what they pay me. In some public sector environments, we often even hear “everybody is doing it”!
The message to employers is that they should be aware of the 3 aspects that may lead to the risk of falling victim to these crimes, while they should also prevent “opportunities” to present themselves by implementing financial and other internal controls.
Forensic practitioners can assist by performing a risk assessment for your company, which would indicate if any of these risk factors are present.