General Patterns in Insider Fraud Crimes

The starting point for describing patterns of insider fraud, including the MERIT fraud model, is the Fraud Triangle, developed by the criminologist Donald Cressey in the early 1950s [Cressey 1974].⁵ The Fraud Triangle evolved through Cressey’s interviews with imprisoned bank embezzlers. His observation that many of these formerly law-abiding citizens had what he termed a “non-sharable financial problem” led to his development of the Fraud Triangle. As depicted in Figure 4-1, the Fraud Triangle involves three dimensions: pressure, opportunity, and rationalization. As the theory goes, all three elements must be present in order for fraud to occur.

5. At the time we were writing this book, our insider fraud case files did not have sufficient data to support strong conclusions about the dynamic over-time nature of the crime, as is required for our modeling efforts. We therefore thought it was even more important to start the modeling efforts off in the existing, fairly well-established theory of the Fraud Triangle. Our current work expands insider fraud case data and we hope to validate these foundations as we move forward in refining the MERIT insider fraud model.