How Honest Are We? The Role of the Fraud Triangle in Understanding Human Behavior

It has been suggested to me—and I would tend to concur—that 10 percent of our society is inherently honest, and 10 percent is inherently dishonest. This leaves the remaining 80 percent to be as honest as the situation dictates. Therefore, arguably, there is a large potential pool out there who could, at some point, “turn to the dark side.”

This premise paints a fascinating, albeit concerning, picture of human behaviour. The inherently honest minority are those rare individuals who, regardless of circumstances, maintain their integrity. They are the pillars of trust in society, upholding ethical standards even when faced with temptation. On the flip side, the inherently dishonest are constantly looking for opportunities to exploit others, driven by self-interest without regard for the moral or legal consequences.

The remaining 80 percent of people fall into a gray area, where their honesty is primarily influenced by the situation. These individuals are not intrinsically dishonest, but their actions can be swayed by circumstances, pressures, and perceived opportunities. This substantial middle ground suggests that many people could engage in dishonest behaviour if the conditions were right, such as financial strain, lack of oversight, or perceived low risk of getting caught. It's like finding out your sweet, old grandma is a poker shark—circumstances can reveal surprising sides!

This is where the concept of the fraud triangle becomes particularly relevant. The fraud triangle, developed by criminologist Donald Cressey, explains the three elements that must be present for an individual to commit fraud: pressure, opportunity, and rationalization.

Pressure:

This is the motivation or incentive to commit fraud. It could stem from financial difficulties, personal or professional pressures, or unrealistic targets set by employers. For the 80 percent of individuals who are situationally honest, encountering significant pressure can push them towards dishonest actions. Think of it as the equivalent of being on a diet but having a chocolate cake waved in front of your nose.

Opportunity:

Opportunity is the element that allows fraud to occur. This typically involves weaknesses in internal controls, lack of oversight, or access to assets and information. Even inherently honest people might succumb to fraud if they perceive the opportunity is low-risk or undetectable. It's like leaving a jar of cookies unguarded in a room full of five-year-olds—you’re just asking for trouble!

Rationalization:

Rationalization is the justification of fraudulent behaviour. Individuals need to reconcile their actions with their personal ethics. Common rationalizations include believing that they are underpaid, that they are only "borrowing" the money, or that everyone else is doing it. This mental process is crucial for the 80 percent who might otherwise consider themselves honest but justify dishonest behaviour under certain conditions. It’s the mental gymnastics of "I’m not stealing; I’m just... uh... reallocating resources.”

Moreover, while the vast majority are trying to make an honest living, we need to be mindful that there are people who fill their days thinking about ways to enrich themselves at the expense of others, rather than being productive members of society. These individuals prey on our complacency and lack of attentiveness in the hope that we will let our guards down just once to fall victim to their scams.

The reality is, scams and fraudulent schemes are as diverse as they are pervasive. They range from sophisticated cyber attacks to simple yet effective social engineering tactics. These malicious actors often play on human psychology, exploiting our desires, fears, and trust. They craft scenarios that seem too good to be true, knowing that some will take the bait.

“If it's too good to be true, it's probably a scam—hook, line, and sinker.” This old adage serves as a crucial reminder. Scams often promise extraordinary benefits with minimal effort, appealing to our desire for quick and easy success. Recognizing the warning signs of such schemes is essential. Be wary of unsolicited offers, pressure to act quickly, requests for personal information, and deals that deviate significantly from market norms.

In conclusion, understanding the spectrum of honesty in society helps us grasp the potential for dishonest behaviour under certain conditions. The fraud triangle provides a valuable framework for identifying and mitigating the risks that lead to fraudulent actions and preventing the 80% from moving to the "dark side." It underscores the importance of vigilance, robust internal controls, and a strong ethical culture in preventing fraud. By staying informed and attentive, we can better protect ourselves from those who seek to exploit our trust for their gain. So, keep your cookies guarded and your chocolate cake hidden—just in case!