We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Criminal

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Fraud Triangle?

By J. D. Kenrich
Updated: May 16, 2024
Views: 38,525
Share

The concept of the Fraud Triangle was developed by American criminologist and sociologist Donald R. Cressey, renowned for his extensive research into the minds of white-collar criminals. Frequently referred to as Cressey's Triangle, the theory articulates three critical elements that must be simultaneously present for a typical individual to engage in fraud. According to the Fraud Triangle construct, one necessary condition is that the prospective criminal must be under personal financial pressure that he or she cannot or will not disclose to others. Opportunity to commit the contemplated crime is a second key element of the triangle. A third and final prerequisite for fraudulent employee financial conduct, according to Cressey, is that the criminal must have the ability to rationalize his or her dishonest actions.

The Fraud Triangle's pressure element is defined as the problematic personal financial circumstances that motivate an individual to commit a fraud crime. In a typical case, the potential criminal feels unable or unwilling to disclose his or her situation to others or to seek assistance. Substance abuse, gambling debts and unmanageable personal financial obligations are all examples of the sorts of pressures encompassed by Cressey's theory.

The opportunity element in Cressey's Fraud Triangle refers to the potential criminal's access to the literal and logistical means to commit the fraudulent act. This generally requires the offender to identify some way to exploit their insider status within a corporate or business environment and to act accordingly. White-collar criminals might take advantage of their heightened knowledge of internal operations or their access to important accounts or assets to facilitate their schemes. In many cases, such individuals are under the impression that their detailed personal knowledge of internal operations and corporate procedures greatly minimizes the danger of being caught.

Rationalization is the third and final part of the Fraud Triangle theory, and it refers to the failure of those who commit white-collar fraud crimes to assume guilt or culpability for their actions. Instead, such individuals tend to see themselves as victims of unfair circumstances that are beyond their control and that justify the decision to abuse their position of trust within the employer's organization. The type of rationalization involved in a given case might stem from the criminal's belief that he or she has not been properly compensated for work performed or perhaps from a misguided belief that he or she is somehow entitled to borrow or appropriate company funds to fulfill personal financial obligations.

According to Cressey's Fraud Triangle theory, for a typical person to engage in financial fraud crimes, all three of the above conditions must be present. Should any of the elements be absent, fraudulent activity is far less probable. Fraud and embezzlement prevention techniques typically focus on the opportunity element by enacting strict screening processes for employees who are likely to be granted access to sensitive information and assets. Background investigations of the finances, employment records and criminal histories of potential employees are seen by many employers as critical weapons in the war against internal, white-collar fraud.

Share
MyLawQuestions is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By Logicfest — On Feb 12, 2014

Cressey was brilliant for including the third element of the fraud triangle. What do almost all criminals have in common? They'll rationalize the heck out of whatever they are doing. Jails are full of people who view themselves as victims of circumstance.

Share
https://www.mylawquestions.com/what-is-a-fraud-triangle.htm
Copy this link
MyLawQuestions, in your inbox

Our latest articles, guides, and more, delivered daily.

MyLawQuestions, in your inbox

Our latest articles, guides, and more, delivered daily.