Fraud Triangle – Cookies, Pencils, & Stealing

fraud cookieFraud Triangle


fraud pencil

Fraud Triangle-Cookies, Pencils, & Stealing From Your Employer

As my students and clients and past audiences know, I think many make security and fraud out to be something complicated when its not so here is another view of The Fraud Triangle.  The methods of the bad actors can absolutely be complicated, which makes chasing them FUN.  The principles, the root cause, the why, many times are quite simplistic.

Whether you are in a parent, a Fortune 15 multinational corporation, a small “mom & pop”, a 100 person NGO, or a 35000 person megachurch, the principles of bad behavior have something in common. The principles are what is generally known as The Fraud Triangle by the great criminologist, Dr. Donald Cressey.   I learned about The Fraud Triangle over the last 17 years from the amazing organization called The Association of Certified Fraud Examiners (The ACFE / @theacfe).

Intro to Fraud and The Fraud Triangle

Fraud

All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.

Source: Black’s Law Dictionary, 5th ed., by Henry Campbell Black, West Publishing Co., St. Paul, Minnesota, 1979.

The Fraud Triangle

The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components which, together, lead to fraudulent behavior:

1. Perceived unshareable financial need

2. Perceived opportunity

3. Rationalization

Simple to Complex

When a child is in your home and there is a cookie jar, the principles behind taking a cookie is rooted is the same principle as the biggest fraud you may hear about on a show like American Greed.

When you took that pencil or pen home from work or the hotel, the principle for why you took it, is rooted in the The Fraud Triangle.

No different than the typical act we consider to be fraud, like stealing a customer list or other confidential information or money from one’s employer/organization.

But Jim, really, my 5 year old is not a fraudster and how dare you call me a fraudster for this pen from the Hotel California….like you never committed fraud as your describe it.

Ah, but I didn’t, I am purely using a well researched concept of The Fraud Triangle to focus on the concept of living with Absolute Integrity and bringing up the next generation with a healthy fear of the consequences of not striving for Absolute Integrity everyday.

If Spade=Spade, then Fraud=”Fraud”

We are _________, We don’t __________, We have ________, so we don’t have fraud. Wow.  I am amazed at how scared organizations are at using the word ‘Fraud’.  A great fraud examiner that I had a privilege to work with for too few years recently, Cheryl Davis, always joked about “The ‘F’ Word”.  I didn’t fully grasp her wisdom until recently.  The word ‘fraud’ is so feared that is has become almost part of the “bad four letter word group” in many organizations.  “What do you mean Fraud?”, “I don’t consider that fraud”, “That’s just a management issue”, “That’s just a petty issue”.  There are no fraudsters in my house, church, organization, how dare you. Hey if you have people that work for you as employees or suppliers/vendors, look in the mirror and say it, “I am vulnerable to the ‘F’ Word”…I mean, Fraud.

Stop being a wimp.

If your 5 year old can justify stealing the cookie, you and your fellow workers can justify many other more malicious things.

Preventing Fraud – “Fight Fire With Fire”

If a fraudster (or child) needs opportunity, rationalization, and pressure to commit fraud (or take the cookie), how hard is it to maybe prevent fraud through simple things like:

  1. OPEN OPPORTUNITIES for the fraudster or child to be rewarded for finding their passion and providing small, ongoing rewards for creating new opportunities for you, your organization and the next generation.
  2. REPLACE RATIONALIZATION with rewards that are as diverse as your organization. Not just the best pay, but the best benefits, the best culture, the best place to work, the best listening skills. The best doesn’t mean perfect, the best means don’t do it unless you can do it with excellence that involves everyone.
  3. PURSUE PEOPLE’s PRESSURE with conversations and culture and rewards for transparency. Don’t put the employee recommendations box over the top of the trash can.  Post them on a wall with a big green check when you have implemented them.  Develop benefits that pops the pressures of the world.  Tell your story of the pressures you are under and how you handle them.

Absolute Integrity

Whether it is a note on the mirror in your bathroom or office or car or a foot mat next to your bed or a daily calendar reminder or all three, create a daily “stop” in your life that forces you to challenge yourself, “I will operate my life with absolute integrity today.  I will reflect absolute integrity without using words.  I will challenge my family to absolute integrity through love and example”. Okay Jim, I will ‘try” to no longer take the cookie…..

yoda there is no try

Start with your daily effort to live with absolute integrity and not as a fraudster and then become contagious.

A Great Read on the Topic from Joe Wells

Jim

Fraud Triangle – Cookies, Pencils, & Stealing was last modified: January 9th, 2016 by Jim McConnell