Developed by criminologist Donald Cressey, the Fraud Triangle remains a foundational conceptual framework for understanding the behavioral mechanics that drive internal corporate fraud. The model establishes that for a non-shareholder fraud event to occur within an enterprise, three distinct environmental and psychological elements must be present simultaneously.
[Pressure: Financial or Performance Drivers]
│
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[Opportunity: Weak Controls] ──► [FRAUD TRIANGLE] ◄── [Rationalization: Justification]
The three components of the Fraud Triangle require careful assessment by risk managers: [1]
- Pressure: The initial motivator that triggers an individual’s desire to commit fraud. This pressure can stem from personal financial challenges, such as unmanaged debt or personal issues, or from corporate environments that enforce unrealistic sales metrics and performance targets. [1]
- Opportunity: The structural control gap that allows an individual to execute and conceal their fraud scheme. Opportunity is the only element of the triangle that an organization can control directly through the implementation of internal controls, system validation loops, and segregation of duties matrices. [1]
- Rationalization: The psychological coping mechanism that allows the perpetrator to justify their dishonest actions to maintain their self-image as an ethical individual. Common justifications include thoughts like: “The company underpays me, so I am just taking what I deserve,” or “I am only borrowing this money to handle an emergency and will pay it back next month.” [1]
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