F – 12 | THE PSYCHOLOGY OF A FRAUDSTER: WHAT DRIVES PEOPLE TO COMMIT FRAUD?

The Psychology of a Fraudster: What Drives People to Commit Fraud?

Fraud is often thought of as a crime of opportunity, and in many ways, it is. But behind every fraudulent act is a person making the decision to deceive, manipulate, and exploit. Why do people who appear normal, educated, and often well-employed commit acts of fraud? What drives them psychologically to cross ethical lines?

Understanding the psychology of a fraudster isn’t just an academic exercise. It’s essential for prevention, detection, and recovery efforts in organizations and institutions vulnerable to deception. In this blog, we’ll delve into the mindset of fraudsters, explore the psychological theories behind their behavior, and look at real-world factors that push people toward dishonest conduct.

 

The Fraud Triangle: A Psychological Framework

The most well-known model for understanding fraud is the Fraud Triangle, developed by criminologist Donald Cressey. According to this model, three elements must be present for someone to commit fraud:

1. Pressure: A perceived need or incentive, often financial.
2. Opportunity: A situation that allows the person to commit fraud without being caught.
3. Rationalization: A personal justification for why the act isn’t wrong.

Each component of this triangle taps into fundamental psychological processes, stress, temptation, and moral reasoning, providing a useful starting point for understanding fraudster behavior.

1. Pressure: When Circumstances Push the Edge

The most common driver of fraudulent behavior is pressure, especially financial pressure. Individuals may feel trapped by debt, lifestyle expectations, or family obligations. Others feel immense pressure to meet performance targets, win contracts, or achieve bonuses.

A small business owner facing bankruptcy may misreport earnings to secure a bank loan. A mid-level manager under pressure to meet unrealistic KPIs may inflate sales figures. A family provider may siphon off client funds, believing it to be a “temporary loan” to make ends meet.

But pressure isn’t always economic. Emotional stress, workplace culture, and peer comparison can all build the internal tension that makes fraud more appealing as a solution.

2. Opportunity: The Open Door to Deception

Even with pressure, most people won’t commit fraud unless they believe they can get away with it. Weak internal controls, lack of oversight, and blind trust create environments where fraudsters feel emboldened.

Psychologically, this taps into our capacity for risk assessment and impulse control. If a person believes there’s little chance of being caught or punished, they’re far more likely to rationalize a wrong act.

Opportunity doesn’t just mean gaps in systems. It can also mean knowledge. A payroll employee who understands how to manipulate accounting software might see a “victimless” opportunity. Or an IT manager might know how to exploit digital access to steal customer data.

3. Rationalization: Justifying the Unjustifiable

Perhaps the most fascinating component of the fraud triangle is rationalization, the mental gymnastics fraudsters use to justify their behavior. Few people see themselves as “bad,” so when they commit fraud, they develop narratives to protect their self-image.

Common rationalizations include:

• “I’m just borrowing the money — I’ll pay it back.”
• “They don’t pay me what I’m worth.”
• “Everyone else does it.”
• “This company makes so much money; they won’t even notice.”

This aligns with what psychologists call cognitive dissonance, the discomfort we feel when our actions contradict our values. Rationalization is how fraudsters resolve this inner conflict, reshaping reality to suit their choices.

Cognitive dissonance is a psychological theory developed by Leon Festinger in 1957, describing the discomfort people feel when they hold two or more conflicting beliefs, values, or attitudes, especially when their behavior contradicts those beliefs.

In the context of fraud, cognitive dissonance occurs when someone who views themselves as honest and ethical engages in dishonest behavior. This internal contradiction creates mental tension. To resolve this discomfort, the fraudsters will often adjust their beliefs or reinterpret the situation, not their behavior.

Instead of acknowledging the act as unethical, they change the way they think about it to align with their self-image. This rationalization soothes conflict but also lowers the psychological barrier to future fraudulent acts.

1. Over time, this can evolve into a slippery slope:
2. Small unethical actions build up.
3. Justifications grow more elaborate.
4. The individual becomes desensitized to wrongdoing.

In this way, cognitive dissonance can transform a “good person” into someone who regularly commits fraud, while still believing they are fundamentally decent.

Beyond the Triangle: Other Psychological Drivers

While the fraud triangle explains much of the behavior, other psychological theories help us understand the deeper motivations and personality traits behind fraud.

1. The Dark Triad: Narcissism, Machiavellianism, and Psychopathy

Some fraudsters display traits associated with the “Dark Triad” of personality:

1. Narcissists believe they are superior and entitled, often justifying fraudulent behavior as something they deserve.
2. Machiavellians are cunning, manipulative, and focused on self-interest, often willing to deceive others to get ahead.
3. Psychopaths lack empathy and remorse, making them particularly dangerous in positions of power.

While not every fraudster fits this profile, these traits are overrepresented in large-scale corporate scandals involving prolonged deceit.

2. Slippery Slope and Incrementalism

Fraud doesn’t always start with a grand plan. Often, it begins with small unethical decisions that escalate over time, what psychologists call incrementalism or the “slippery slope” effect.

A junior accountant might start by rounding up expenses. Then they pad the budget. Eventually, they’re creating entirely false invoices. Each step feels minor compared to the last, desensitizing the individual to wrongdoing.

3. Social Pressure and Group Dynamics

Sometimes fraud is not the act of a single “bad apple”, but a group behavior reinforced by toxic corporate culture. Employees may feel pressured to bend the rules to meet goals or may fear retaliation if they speak up. In such environments, unethical behavior becomes normalized, even expected.

Prevention: How Understanding Psychology Can Help

Recognizing the psychological roots of fraud is crucial for prevention:

1. Create Ethical Cultures: Promote transparency, openness, and integrity. When employees feel safe to speak up, fraud is less likely to flourish.
2. Design Smart Systems: Strong internal controls, audits, and whistleblower policies limit opportunity.
3. Support Employees: Offering financial education, mental health support, and reasonable performance targets can reduce pressure, a key fraud driver.
4. Training and Awareness: Teach managers and employees about rationalization and warning signs. Awareness is the first step toward resilience.

 

Conclusion

Fraud doesn’t happen in a vacuum. It emerges at the intersection of pressure, opportunity, and personal justification, and sometimes through a long, subtle slide into unethical behavior. By understanding the psychology of a fraudster, we can better design workplaces, policies, and systems that prevent deception before it starts.

After all, the most dangerous fraud isn’t the one committed in secret, it’s the one committed in plain sight, disguised by excuses and enabled by silence. Understanding the mind behind the fraudster gives us the tools to change that.

Dieudonne (Neetje) van der Veen is a financial and management business advisor. His work and experience are mainly in the field of financial management and structuring of companies in distress and Governance on Planning & Control cycles.

Mr. van der Veen has a master’s degree in business economics (Erasmus University Rotterdam), is a Registered Accountant (Royal Dutch Professional Organization of Accountants), CFE (Certified Fraud Examiner) and CICA (Certified Internal Control Auditor).

Mr. van der Veen writes articles about Governance and Fraud, and actively contributes to the ACFE-DCC community for knowledge-sharing.