The fraud triangle is used to explain reasons behind an individual’s decision to commit fraud. Typically, the reasons are classified into three, namely:
- Pressure
- Opportunity
- Rationalisation
Pressure: many people that commit fraud because of external or internal pressure to meet certain obligations. These obligations are usually identified as serious; serious enough for the protagonist to be willing to commit fraud to settle them. Externally, the obligations might be being pressured by an external body to do certain things, else certain consequences might follow. It might also be peer or social pressure to meet certain standards and demands. Good examples are:
- A blackmail situation where a protagonist is forced to find a certain amount of money or valuables, else certain consequences might follow. This situation forces the protagonist to take steps that, all things being equal, they’re less likely to have taken.
- Social, peer pressure to meet expected standards. This kind of pressure comes from social groups and expectations from people. If the protagonist allows themselves to be pressured, they’re likely to make irrational decisions like fraud.
Internally, pressure might come from personal or immediate circle demands. Perhaps, the protagonist has personal obligations to meet. It might range from health expenses to rent to other demands. When these demands are not met as at when due, the protagonist might seek illicit means like fraud to meet them.
Opportunity: this is also another reason why people commit fraud. Usually, opportunity stems from a place of privilege, not need. So the protagonist might not be in dire need of the benefits from the fraud, but they’re privileged to be in a position that allows them to do such. Hence, when an opportunity arises to commit such fraud, they take it. Decent example scenario might be:
- A staff member in a bank is granted access to the vault. He ceases such opportunities to cart away large amounts of money.
- An entrepreneur in possession of valuable customer data uses the data to defraud unsuspecting customers
Usually, protagonists of this type of fraud are driven by the belief that they can get away with them. So, the coordination and execution is planned especially in the absence of notable pressure.
The third reason why people commit fraud is rationalisation. This is the most thought-through reason. It’s attributed with an effort to justify such fraud in a logical manner. Many times, it is driven by the thought that there’s a void in the system that should be filled, hence, such actions should not be classified as fraud. Another attribute is the thought that since there’s a logical explanation for such action, it should not be classified as committing fraud. Examples scenarios include:
- A businessman underpaying his levies with the justification that “others also are not paying it full, why should I?”
- This justification is logical because the businessman assumes he’s being cheated. However, it does not take away the fact that underpaying your levies is fraud. So, whether or not others are cutting corners should not affect such responsibilities.
- A civil servant padding costs with the justification that “it has been budgeted for already. If I do not take it, it’s just going to waste”
- This line of thought and justification is popular in government offices where people justify fraud with “it’s not my father’s money” or “everyone does it” or “you’re doing yourself a disservice by not joining”. These justifications, similar to the first scenario, does not take away the fact that it’s still fraud and should be avoided.
Lastly, most fraud situations can be classified under these categories and it puts a lot of perspective to analysing fraud. Though not limited to this, the fraud triangle is mostly used in explaining occupational fraud.
