Originally published on LinkedIn · January 2016.
As my students, clients, and past audiences know, I think many people make security and fraud out to be something complicated when it is not. The methods of bad actors can absolutely be complicated — which makes chasing them FUN. But the principles, the root cause, the “why” — many times those are quite simplistic.
Whether you are a parent, a Fortune 15 multinational corporation, a small mom-and-pop, a 100-person NGO, or a 35,000-person megachurch, the principles of bad behavior have something in common. Those principles are what is generally known as The Fraud Triangle — developed by the great criminologist Dr. Donald Cressey — which I have studied over 17+ years through the Association of Certified Fraud Examiners (ACFE).
What Is 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.
Black’s Law Dictionary, 5th ed.
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:
- Perceived unshareable financial need (Pressure)
- Perceived opportunity
- Rationalization
From Simple to Complex
When a child sees a cookie jar, the principles behind taking a cookie are rooted in the same principles as the biggest fraud you might see on a show like American Greed.
When you took that pen home from the hotel or that pencil from the office — the principle for why you took it is rooted in the Fraud Triangle.
No different than the typical act we consider fraud: stealing a customer list, confidential information, or money from your employer or organization.
I am not calling your 5-year-old a fraudster. I am using a well-researched concept to focus on the idea of living with Absolute Integrity — and raising the next generation with a healthy fear of the consequences of not striving for it every day.
Why Organizations Fear the “F” Word
A great fraud examiner I had the privilege of working with — Cheryl Davis — always joked about “The ‘F’ Word.” The word “fraud” is so feared it has become almost taboo in many organizations. “What do you mean fraud?” “I don’t consider that fraud.” “That’s just a management issue.”
If you have people that work for you — employees or suppliers — look in the mirror and say it: “I am vulnerable to 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 consequential things.
Preventing Fraud — Fight Fire With Fire
If a fraudster needs opportunity, rationalization, and pressure to commit fraud — how hard is it to prevent fraud by addressing each point directly?
- Open opportunities for employees to be rewarded for finding their passion and creating value — small, ongoing rewards that take the pressure off the wrong paths.
- Replace rationalization with rewards as diverse as your organization — not just the best pay, but the best culture, the best benefits, the best listening. Not perfect — but excellent, inclusive, and real.
- Address pressure directly — through conversation, culture, and rewards for transparency. Post employee recommendations on a wall with a big green checkmark when you have implemented them. Build benefits that reduce the pressures people carry.
Absolute Integrity
Whether it is a note on the mirror in your bathroom, a daily calendar reminder, or a foot mat next to your bed — 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.
Start with your daily effort to live with absolute integrity — and then become contagious.