U.S. law states that fraud requires specific intent— you have to know that
you are intentionally violating a law or regulation. That’s why lying about
your weight is not fraudulent, but lying about the capability of a product in
order to entice someone to buy it is.
Motivations for fraud .........................................................................
One motivation for fraud is pretty obvious: garden-variety greed. However,
there are others. When people are in a desperate situation — needing to pay
for healthcare for their aging parents, for example — they might deliberately
act in a fraudulent way at work to get the needed funds. This doesn’t mean
that they are greedy or bad, but that they are desperate and that the lack of
controls in the work environment has created an opportunity for them to
commit fraud.
The second situation is Cover Your, um, Assets (CYA) Syndrome. Someone
makes mistakes at work, takes risks she shouldn’t take, and then doesn’t
want to get caught, so she cooks the books and covers her trail. The basic
motivation in this case is fear.
Sowing the seeds of fraud .................................................................
Just like certain weather conditions promote hurricanes, certain corporate
practices create just the right conditions for fraud to occur, including
Complexity:Allowing the proliferation of unique roles. Roles are meant to
simplify access control (and management) by standardizing the system
access given to people in certain kinds of jobs. But pretty soon, Susan in
accounts payable needs special privileges for year-end and Ralph in pro-
curement needs some other permission and all the orderliness is gone.
These “special” privileges are never revoked, opening the door for segre-
gation of duties violation and — you guessed it — fraud
Letting users do too much: Concentrating power in one employee so
that an employee can commit fraud by, for example, creating a phony
vendor and cutting a check to themUnrealistic expectations:Encouraging employees to meet unrealistic
goals, especially when teamed with financial compensation that inadver-
tently places pressure on people to achieve these goals in any way
possible
Lack of oversight:Providing opportunities for employees to test the
waters for fraud, resulting in weaknesses that go unnoticed by others