John Gill, Esq: As discussed in other segments of this course, ordinary people can sometimes find themselves in extraordinary circumstances and do things they might never think themselves capable of doing. These are generally honest people who commit fraud because they have a financial need. There is another category of fraud perpetrator that is more cunning. These are people who steal, not because they need the money, but because they think they can get away with it. These people are predators. They don't commit fraud because the opportunity suddenly drops in their lap. They are on the hunt looking for any weakens in an organization that could lead to a dishonest payday. This segment will discuss how to design your anti fraud efforts around this type of fraudster. The classic model for understanding why people commit fraud is what is now referred to as the faud triangle. It is based on research by Dr. Donald Cressey in the 1950s. Cressey attempted to explain why seemingly honest, trusted individuals would steal from their employers. In the cases Cressey studied, he found that for a large number of people, they commit fraud because they have a financial need. They are under financial pressure. Second, they see a way to relieve the pressure through fraud. This is perceived opportunity. If I steal these funds, I can keep my home, for example. And finally, because these individuals are normally law abiding citizens they feel the need to rationalize their conduct. They have the need to justify their behavior so they don't feel bad about themselves. For example, some may say that they will pay the money back or that they deserve it. But the fraud triangle doesn't attempt to explain all categories of fraud perpetrators. There are some individuals who are actively looking to commit fraud. These are predators. Unlike the accidental fraudster who needs money and sees the opportunity to relieve it, the predator slinking through the organization looking for weaknesses and vulnerabilities. He has no need to rationalize his actions. He simply wants the money any way he can get it. Research has shown that sometimes accidental fraudsters can turn into predators. Occasionally the fraudster who first steals to relieve financial pressure can then become addicted to the lifestyle and extra money. At that point, the accidental fraudster can turn into a predator. ACFE's report to the nation's survey has shown repeatedly that very few frauds occur within the first year of the perpetrators employment. This means that predatory fraudsters can be patient. Large frauds can't be accomplished right after a person is hired. It may take time to move to a point within the company where the fraudster has sufficient trust and organizational opportunity to steal. Anyone can potentially be a fraudster, even your most long serving and trusted employees. In designing anti fraud controls, the traditional fraud triangle must be modified. Since predators don't commit fraud because of need, this element is no longer important. Likewise, since these individuals aren't trying to justify their actions to themselves, there's no need to come up with elaborate excuses or rationalizations for their conduct. The only element left is opportunity. Predators spend their time and energy looking for opportunities
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to commit fraud.
