IN my career I have investigated fraud committed at every level. One element that I have found common to most offenders, from top executives to the entry level employees, is that almost none of them took their jobs for the purpose of stealing.
In fact, the 2008 ACFE report shows that 87% of fraud is committed by people without a previous criminal record.
I have also observed that, typically, the employee who steals from his or her company is a long-term trusted employee who, for a variety of reasons, crosses the line into illegal conduct. Facing that fact, one must ask the logical question: Why then do good people commit fraud?
If your company is victimized by employee fraud, the new employee who keeps to himself, the one who seems a little shady, probably won‘t commit it. Chances are the one who steals from you will be the highly trusted employee, the hardest-working person in your company, the one who‘s been with you ten years and knows your children’s ‘names.
After a fraud has been discovered, the most commonly repeated sentiment is, “I never would have thought it would be him/her”.
The biggest hurdle for most people to get over in terms of understanding occupational fraud is to realize that anyone can commit fraud; it may be even your spouse. Once we understand that fraud can be committed by anyone, the obvious question is, why do they do it?
Most people would say fraudsters are motivated by greed, but generally speaking, greed is not the primary motivator.
In fact, it is almost never one single factor that predisposes a person to fraud. Instead, it is typically a convergence of circumstances that leads to the fraudulent act. According to Dr. Donald Cressey, there are three factors that must be present in order for an ordinary person to commit fraud.
The three factors are referred to as: Pressure, which is what motivates fraudsters to commit fraud, say immediate financial need.
The second factor is perceived opportunity which enables the fraudster to commit the fraud e.g. the lack of proper segregation of duties or authorization and lastly, rationalization which is the ability for fraudsters to justify crime in their mind e.g. “everyone does it”.
How to remove the three factors to prevent fraud
Many of you may recall a Bunsen Burner in secondary school.
The teacher would put a flammable material and oxygen together and you had fire, and if you took one of those elements away you would not have the fire.
The same holds true with fraud prevention, to prevent fraud, you must be able to take away one of the three legs of the fraud triangle. By taking away one of the legs of a fraud triangle then you stop fraud before it happens.
Any fraud prevention program to be successful, it must seek to reduce the perceived opportunity to commit fraud, reduce the pressures on employees that might push them into committing fraud and dispel rationalizations for engaging in fraudulent conduct through organization fraud awareness and specialized fraud trainings.
Derick Kirunga is the Executive Director of the Institute of Fraud Prevention & Forensic Studies