Introduction:
Fraud, a deceptive act that sows seeds of mistrust and wreaks havoc on individuals, businesses, and society, is a phenomenon as old as human history. The question of why fraud happens delves into the intricate web of human psychology, financial pressures, and the allure of gain. From the allure of financial gain to the pressures of modern life, understanding the underlying reasons behind fraud is crucial in developing effective strategies to prevent and combat this pervasive issue. In this exploration, we unravel the motivations that drive individuals to breach ethical boundaries and engage in fraudulent behavior.
Why do people commit fraud?
People commit fraud for a variety of reasons, often driven by personal motivations, financial pressures, or the desire for gain. Some common reasons include:
- Financial Gain: The most straightforward reason is financial benefit. Fraudsters may see fraudulent activities to acquire money, assets, or resources they wouldn’t otherwise have access to. This can be especially tempting when facing financial difficulties or personal greed.
- Desperation: Some individuals may resort to fraud out of desperation, often due to overwhelming debt, unemployment, or other dire circumstances. They might believe that fraud is their only way to alleviate their financial woes.
- Greed: Greed can lead individuals to commit fraud even when they are not in dire financial straits. The desire for excessive wealth, luxury, or an extravagant lifestyle might drive some to engage in fraudulent activities.
- Personal Gain: Fraud isn’t always about money. Some individuals commit fraud to gain advantages such as promotions, job opportunities, or access to resources. This can occur in professional settings where deceit might seem like a shortcut to success.
- Addiction or Compulsion: Addiction or compulsive behavior, such as gambling, can lead individuals to commit fraud to fund their habits. The pursuit of their addiction may override ethical considerations or fear of consequences.
- Peer Pressure or Social Influence: In certain cases, individuals may become involved in fraudulent activities due to pressure from friends, family members, or associates. The desire to fit in or avoid social isolation can lead people to make unethical choices.
- Sense of Entitlement: Some individuals may feel entitled to resources, benefits, or opportunities that they perceive as rightfully theirs. When they believe they are being denied these privileges, they may resort to fraudulent means to obtain them.
- Overconfidence: Overestimating one’s ability to deceive others without getting caught can lead to fraudulent behavior. Some individuals may believe they can outsmart others and evade detection.
- Lack of Moral Compass: A lack of moral values or ethical principles can make individuals more susceptible to committing fraud. If someone does not feel guilt or remorse for their actions, they might be more inclined to engage in fraudulent behavior.
- Opportunity: Sometimes, individuals come across situations where they perceive an opportunity to commit fraud without getting caught. Weak internal controls, a lack of oversight, or vulnerabilities in systems can encourage people to exploit these situations.
It’s important to note that not everyone who faces financial difficulties or personal challenges resorts to fraud. Many people choose honest and ethical means to overcome their problems. Understanding the underlying motivations can help us address the root causes of fraud and work towards prevention and mitigation strategies.
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.
