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Fraud Prevention in a Cost of Living Crisis
March 3, 2022
Fraud prevention is always important but never more so than when we are in the midst of a cost of living crisis as we are now in 2022.
The rising cost of living is outpacing salaries and this is likely to lead to an increased risk of fraud by employees against their employers, sometimes known as insider fraud.
Most employees who commit fraud against their employers are not career criminals; so what triggers their fraudulent behaviour?
The Fraud Triangle model helps us to understand.
Let’s look at each of these points in a little more detail:
- Pressure/Motivation – For fraud to occur the perpetrator (your employee) must have a motivation. This may be a financial problem, caused for example by debt, relationship breakdown, or an addiction. The cost of living crisis is likely to increase pressures on employees as household budgets are squeezed, this may motivate otherwise loyal staff to seek opportunities to commit fraud.
- Opportunity – An employee motivated to commit fraud must then have the opportunity to do so. There is some evidence that crimes such as fraud are often committed to maintain social status so employees motivated to commit fraud will often look for opportunities where there is a low perceived risk of getting caught. Whilst the cost of living crisis may not directly affect the opportunities to commit fraud, it may increase the number of employees looking for weaknesses in internal controls and drive them to look for ever more inventive ways to commit fraud.
- Rationalisation – An employee who is motivated to commit fraud and who has the opportunity to do so will then seek to rationalise their behaviour. Common examples include trivialising their actions, i.e. 'it’s only a few hundred pounds from a big company', or 'everyone else does it'. They may also feel undervalued or a sense of aggrieved entitlement, i.e. 'I give so much to this company and get nothing back'. The cost of living crisis may result in more employees rationalising their behaviour through their sense of being undervalued, particularly as many are enduring pay cuts in real terms.
Please get in touch to find out how SAFE can help your organisation break the Fraud Triangle through the development of:
- Robust internal controls,
- Fraud prevention training,
- Proactive fraud detection exercises, and
- Promotion of staff welfare and support programmes.
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