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:

1. Perceived unshareable financial needThe Fraud Triangle

2. Perceived opportunity

3. Rationalization

The fraud triangle originated from Donald Cressey’s hypothesis:

Trusted persons become trust violators when they conceive of themselves as having a financial problem which is non-shareable, are aware this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.1

1Donald R. Cressey, Other People’s Money (Montclair: Patterson Smith, 1973) p. 30.

The Fraud Triangle.


See also my post on the MCI Worldcom scandal, Integrity Ebbs by Inches.



Integrity Ebbs by Inches



Cynthia Cooper MCI Worldcom

I was very pleased to be invited to a meeting with former MCI Worldcom internal auditor, Cynthia Cooper, sponsored by Accelerent. She is the employee who discovered and “blew the whistle” on the $11 billion financial fraud that, along with Enron, changed corporate governance in America. Unfortunately, similar frauds continue to be perpetrated. Her story, also told in Extraordinary Circumstances, illustrates an important principle of business integrity.

Business crimes are seldom committed by evil people searching for opportunities to lie, cheat, or steal. Most misdeeds, from pilfering pens and misusing the copier to billion-dollar stock frauds, are carried out by regular people who have rationalized small steps over the line. At MCI Worldcom, accountants reclassified some reserves into revenue because the CFO said (more…)