The Fraud Triangle is a model that explains the three key factors that contribute to fraudulent
behavior, especially in organizational or financial contexts. It was developed by criminologist
Donald Cressey in the 1950s to understand why people commit fraud. These three factors are:
1. Pressure (or Motivation)
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Definition: The individual feels some kind of pressure or need that makes them feel they
have no choice but to commit fraud. This could stem from personal financial problems,
high debt, addiction issues, or job-related pressures.
Examples:
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An employee is facing financial hardship and trying to pay off debts.
A salesperson under intense pressure to meet targets or quotas.
A business owner is under pressure to report favorable financial results.
The pressure typically comes from external or internal demands, and it can cause someone to
rationalize breaking ethical or legal boundaries to relieve this burden.
2. Opportunity
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Definition: This refers to the ability of the individual to commit fraud without getting
caught. Opportunities often arise from weaknesses or deficiencies in controls, policies, or
oversight in an organization.
Examples:
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ii.
iii.
A lack of internal controls, such as no segregation of duties, which allows an
employee to manipulate financial records.
Weak or absent audits, making it easy for someone to hide fraudulent activities.
Opportunities for theft or embezzlement, such as having unsupervised access to
cash or company accounts.
Opportunity can be influenced by the structure of the organization, its internal controls, and
whether people feel they can take advantage of those weaknesses without facing consequences.
3. Rationalization
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Definition: This is the process by which people justify their dishonest actions to
themselves. They convince themselves that what they are doing is not wrong, or they
create a set of circumstances where their actions seem acceptable.
Examples:
i.
ii.
iii.
"I’m just borrowing the money. I’ll pay it back."
"The company owes me this because I’ve been underpaid for years."
"Everyone else is doing it, so it’s not that bad."
Rationalization is a key part of why people who might normally have high ethical standards can
still commit fraud. They find ways to downplay or justify the behavior to avoid feeling guilty or
immoral.
The Interaction of the Three Elements
Fraud typically occurs when all three elements—pressure, opportunity, and rationalization—are
present. For example:
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Pressure could be financial strain.
Opportunity might be access to unmonitored funds.
Rationalization could be thinking, "The company won’t miss this small amount of
money."
If any of the three factors are eliminated or mitigated, the risk of fraud can be significantly
reduced. For instance:
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Strengthening internal controls reduces opportunity.
Offering employee assistance programs can help with financial pressure.
Cultivating an ethical workplace culture can reduce rationalization.