Fraud 101

Understanding what drives fraud and the principles of effective prevention are key to counter fraud efforts.

Fraud triangle

The fraud triangle is a useful framework for understanding the conditions that can lead to fraudulent or corrupt behaviour. Rationalisation, pressure and opportunity increase the risk of fraud occurring, so identifying when these factors are present is key to designing effective countermeasures.

^{The fraud triangle of rationalisation, pressure and opportunity.}

Rationalisation: Individuals justify their fraudulent behaviour, convincing themselves it is acceptable or deserved.

Pressure: The motivation for people to commit fraud. These pressures might be personal, financial or work-related.

Opportunity: A gap or weakness in a system that can be exploited.

Guiding principles of public sector fraud

There are five key principles for the prevention and control of fraud and corruption in the public sector. These principles can be used as a foundation to help develop a consistent approach to prevention initiatives.

1. There will always be fraud

It is a fact that some individuals will look to make fraudulent gains where there is an opportunity. Organisations need robust processes in place to prevent, detect and respond to fraud and corruption.

2. Finding fraud is a good thing

If you do not find fraud you cannot fight it. Identifying fraud should be viewed as a positive and proactive achievement.

3. There is no single solution

Addressing fraud needs a holistic response incorporating detection, prevention and response , underpinned by a strong understanding of risk. It also requires collaboration and cooperation between organisations.

4. Fraud and corruption are ever-changing

Fraud and counter fraud practices evolve very quickly. Organisations must be agile and adapt their strategies to respond.

5. Prevention is the most effective way to address fraud and corruption

Preventing fraud through effective counter fraud practices reduces loss and reputational damage. While detection and prosecution remain important, prevention requires fewer resources and delivers greater long-term value. Investigation and prosecution will still be required for those fraudsters who are not stopped by countermeasures.