The Fraud Triangle & Red Flags

The Fraud Triangle – A Global Framework

Developed by criminologist Donald Cressey, the Fraud Triangle outlines three factors that must coexist for a fraud to occur:

Pressure

• Financial debt, unrealistic targets, addiction, lifestyle inflation
• Employees feeling financial or performance stress

Opportunity

• Weak controls, lack of oversight, access to sensitive systems
• Override of controls by senior staff

Rationalization

• “Everyone does it” / “I deserve it” / “It’s just temporary”
• Ethical justification used to commit or conceal fraud

These apply across industries, from procurement fraud in real estate to revenue inflation in software companies.

Red Flags to Watch For

Behavioural Red Flags

• Reluctance to take leave or share responsibilities
• Sudden lifestyle upgrades not matched by income
• Defensive attitude when questioned
• Strong control over a specific process with no cross-check

Transactional Red Flags

• Duplicate or round-number invoices
• Invoices just below approval thresholds
• Frequent reversals or manual journal entries
• Vendors with incomplete documentation or matching employee addresses

Why This Matters in the UAE Context

• Fraud Triangle awareness helps fulfil SCA and CBUAE expectations around governance and risk culture.
• Recognizing red flags is critical for AML compliance and suspicious transaction escalation.
• Fraud pattern recognition supports readiness for corporate tax audits and forensic investigations.

Practical Applications of Fraud Awareness

How Crowe Can Help You Act on Red Flags

We support organizations with:

• Red flag detection training for staff and management
• Automated transaction monitoring tools
• Design of anti-fraud and whistleblower controls
• Internal audit programs focused on behavioural indicators
• Rapid fraud risk assessments during high-risk periods

Coming Next Week:

Next week, we’ll dive into Fraud Risk Assessments (FRA) - how to identify, score and prioritize fraud risks across your business processes.