Motivation to commit fraud; the woes of employers
Fraud is an intentional act of deception, false representation or concealment of the truth used to secure an unfair advantage, unlawful gain or to deprive victims of their legal rights. Globally, organizations lose billions of dollars annually to occupational fraud.
Fraud is assessed as a major threat to economic growth and therefore has the potential to significantly impact the country’s reputational risks. This is evidenced by the findings of the 2024 money laundering risk assessment. Fraud emerged at the apex of the risks the country is exposed to. These include investment scams, romance scam, identity theft, ATM Card fraud, Momo fraud, embezzlement, misappropriation of public funds among others.
Fraud often becomes complicated when committed by professionals working in organizations. Some of these professionals consider it their right to explore the avenues and loopholes within the organization to commit the fraud. It is therefore important to understand the psychological and environmental factors that drive employees to engage in internal fraud that financial risk exposure and the reputational risk of the organization.
The link between the work environment and internal fraud.
A favourable work environment undeniably enhances job satisfaction and therefore prevents employees from engaging in fraud. Management has a responsibility to ensure that the work environment is safe; setting the tone at the top, establishing a strong ethical culture, implementing robust internal controls, ensuring fairness, monitoring employee lifestyles among others.
According to the fraud triangle developed by criminologist Donald Cressey, employees are usually motivated to commit fraud through a combination of three factors; perceived pressure, opportunity and rationalization.
Perceived Pressure
This is where an employee has a high personal financial commitment, some form of addiction (gambling, drugs or womanising), personal or family medical expenses, unrealistic demands from parents, high-performance targets and other financial obligations.
Opportunity
An employee may take advantage of existing gaps in security infrastructure, lack of oversight, poor enforcement of policies and the lack of segregation of duties to commit fraud. This is where key and technically skilled employees who are motivated by greed abuse the system by committing fraud.
Rationalisation
This is where an employee convinces himself that he is not a criminal but accepts that he will pay back any time he is caught or thinks he is justified to commit the act because he is being underpaid for his hard work. Employees are also motivated to commit fraud when they perceive that management turns a blind eye to fraud. Most professionals are unaware of the specific findings of fraud investigation and this presents fertile grounds for future occurrences.
There is yet another school of thought who believe that employees are motivated to commit fraud through perceived unfairness, motivation from greed and pressure from management.
Perceived unfairness
Dissatisfied employees who feel underpaid or being treated unfairly may steal from the organisation to take what they feel is owed to them. Employees who are resentful over being passed over for promotions, inadequate compensation, demotion or lack of recognition are potential candidates for internal fraud. Some employees may engage in internal fraud as a form of revenge to a demotion or the fear of being made redundant.
Motivation from greed
Greed is driven by the desire to accumulate wealth from whichever means possible, maintaining an elevated lifestyle or achieving status symbols among colleagues and peers within the society. In the first instance, an employee may commit fraud without being caught, then rationalises to satisfy the impending financial pressure. Once the financial pressure is satisfied, the motivation then shifts from solving an initial financial need to an ongoing pursuit of illicit personal enrichment to fund lavish lifestyles, expensive vacations or luxury items among others.
Pressure from management
Management may instruct or put pressure on employees to falsify records, creating a feeling of loyalty-driven or fear-driven fraud within organisations which intends to force employees to soften ethical values. Although some employees may commit fraud to survive or keep their jobs, these employees may also be beneficiaries of the fraud.
Employees may engage in fraudulent acts including backdating contracts, manipulating employment and financial records, hiding regulatory violations, coordinate digital breaches and systemic attacks, destroying or amending decisions of meetings. Employees are likely to feel a misplaced sense of loyalty or face coercion if they refuse to adhere to instructions.
Mitigation measures
Organisations are to understand the vulnerabilities associated with its operations, know their risk exposure to internal fraud and to take effective steps to minimize the impact should it occur.
The following safeguards may be considered for implementation by organisations:
• Tone at the top: Management has the responsibility to set the tone for anti-fraud in every organisation. Employees are to understand that management has a very strong message against fraud.
• Anti-Fraud Policy: Management should develop and effectively implement an anti-fraud policy within organisations. Implement and communicate explicit Anti-Fraud Policy fairly, transparently and equitably.
• Reporting: Create a whistleblowing system to empower employees to report suspicious activities without the fear of victimisation.
• Review of Internal Controls: Regularly audit accounts, transactions and departmental operations, specifically focusing on key and high-risk units.
• Fraud Training – Sensitise staff on the provision of the Policy, provide regular training on fraud awareness and other emerging trends of internal fraud.
• Fraud Risk Assessment: Conduct fraud risk assessments to identify and address operational gaps within organisations.
BY RITA YEBOAH QUAYSON
The writer is a Financial Crime Specialist
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