What are Some of the Common Causes of Workplace Fraud?

- Wednesday, November 02, 2016



When it comes to workplace fraud, it can be tempting to boil down the cause into simplistic statements, such as saying the fraudster was just “greedy and dishonest.” 

But of course things are generally not quite that simple, and just as plane crashes usually require at least two or three things to go wrong, in most cases of fraud, there needs to be a number of factors involved for it to occur. 
It’s widely considered that there are three main factors for fraud – motivation, opportunity, and lack of surveillance. 
1. Common motivation factors
There are a number of possible motivations for committing fraud. These include:
  • Financial pressures: A person might commit fraud due to financial difficulties. This can be a result of unfortunate circumstances, such as in the case of a relationship breakdown, or more strongly self-inflicted, from living a lavish lifestyle beyond their means or getting into serious gambling debt. 
  • Peer pressure: A person might be pressured to collaborate in a fraud at work, and go along with it to be accepted in the ‘in group’ or to avoid harassment. 
  • Personality traits: According to the Australian Institute of Criminology (AIC), certain personality types may be more inclined towards committing fraud – such as opportunists, narcissists, or people who like to lord it over or manipulate other people, and who enjoy the challenge of beating the system and fooling others. 
  • Disgruntlement: In some cases, resentment can be involved – such as where an employee feels overlooked for a promotion or pay increase they feel they deserved, or where they feel victimised or treated unfairly (whether real or imagined). 
Rationalisation can also play a part, with a perpetrator justifying their actions to alleviate guilt. This might include thinking “I deserve it” or “it’s not hurting anyone” or “the company can afford it and won’t even notice the loss.” 
2. Opportunity
Of course fraud can’t happen if the opportunity to commit it isn’t there! Examples might include where a worker is put in charge of company assets such as cash or supplies, or where they are given a company credit card to use without rigorous oversight. The opportunity for fraud might come along in small chunks – where the perpetrator steals cash just a bit at a time to avoid detection, or in one big hit. In some instances, the fraudster may not have set out to commit crime, but becomes tempted when the opportunity pops up. 
3. Lack of surveillance
Lax internal controls increase the opportunity for fraud to be committed. For instance, where one person is given authority to process and make payments without a second authoriser and so on. 

This is where clear separation of duties is required, as well as strong internal controls, and other safeguards such as regular internal and external audits. 
Detecting fraud
Since fraud is all about secrecy and deception, it is not always easy to uncover. Surprise audits, anonymous hotlines, and continual monitoring can help in detecting fraud. At Wise, we offer a whistleblower hotline service that can help organisations to detect fraud. Get in contact with us for more details. 


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