The Fraud Triangle – explaining WHY.

The Fraud Triangle – explaining WHY.

February 23, 2019 Basics 0

The Fraud Triangle is a model of why fraud occurs. It was originally developed by Donald Cressey in 1951. It is still used as a simple and clear way to understand why people commit fraud.
Fraud Triangle

From his 1953 book, Other People’s Money, A Study in the Social Psychology of Embezzlement (published by Patterson Smith), he writes,

Trusted persons become trust violators when they conceive of themselves as having a financial problem that is non-sharable, are aware that this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their contacts in that situation verbalizations which enable them to adjust their conceptions of themselves as users of the entrusted funds or property. (In other words, they’re able to rationalize their dishonest actions, and so they aren’t — in their minds — inconsistent with their personal codes of conduct.)

The person committing the fraud initially took the job in good faith. But they come under severe pressure, and are tempted when they see a way to use church money to relieve that pressure. They don’t succumb to that pressure immediately, though. What they do is rationalize their actions first. They convince themselves, for instance, that they’re not being a crook, but rather they are merely using the church credit card for personal purchases to right the wrong of being underpaid.

The three parts of the fraud triangle are instructive from a fraud prevention standpoint

  • Pressure: if you run a credit check on the staff and volunteers who handle money, you might find someone who might be a better fit as a groundskeeper, prayer warrior, or soup kitchen staff.
  • Opportunity: that’s what our whole business is about. If we can help you tighten things up, temptation will be reduced. Even if someone is under pressure, he won’t see a way to get to the money without being caught.
  • Rationalization: here is where it’s hard. This is all between someone’s ears, and we can’t hear what he says to himself. Some of this can be forestalled by ensuring that your paid staff is indeed compensated appropriately. But most is likely to be addressed from the pulpit and in discipleship: you need to grow your people so they tell the truth about themselves – and run to God when they begin to hear the devil’s whispering. “Hath God indeed said?” Actually, yes: He has spoken and His word is authoritative. We need to recognize from where our strengths come as we resist temptation.

So – your job is to preach and disciple, to help your people avoid financial pressure and to tell themselves the truth. My job is to ask questions and analyze your responses so I can help you reduce the opportunity.