Inside the Fraud Triangle: Chapter 2

The Role of Opportunity in the Fraud Triangle

Maya Collins: Alright, welcome back to another episode of Fraud Examination Chapter 1. I’m Maya Collins, here with David Miller, and today’s episode is all about cracking open the classic Fraud Triangle. David, as a compliance guy in the Midwest, I gotta ask—when you first heard about the Fraud Triangle, did it just click, or was it like, wait, what on earth is this?

David Miller: You know, Maya, when I first saw the Fraud Triangle—I think it was plastered on the wall of my first corporate compliance training back in, oh, late eighties, I believe—I had to double-check what each corner meant. But once you dig into it, it makes a ton of sense: you need perceived pressure, opportunity, and rationalization for fraud to actually happen. But opportunity, to me, is really the engine—if there’s no gap or weakness, people just can’t pull it off, no matter how pressured or desperate they are.

Maya Collins: Absolutely! Like, opportunity is kind of the doorway. I know folks always talk about pressure first, but without that actual opening, nothing gets off the ground. And it turns regular, otherwise honest people into fraudsters. Jerry Schneider’s story at Pacific Telephone Company—he was this employee who actually accessed stolen computer code books and his programming skills gave him unmonitored system access. That was the opportunity, right? Even if he had pressure and a wild rationalization, he needed that window.

David Miller: Exactly, Maya. And, what’s interesting is, even people who don’t set out to commit fraud get caught up when they realize the controls aren’t there. There was a case—we studied this in our training, too—about check kiting at a bank. This guy was just trying to cover rent, so he wrote checks between two accounts, buying himself float time. He didn’t start out wanting to defraud banks, but the system gave him that gap. And hey, once he realized he could get away with it, well, it just snowballed.

Maya Collins: And it’s wild that a lot of people think, oh, fraudsters are these monsters, or born criminals—but actually, as we talked about last episode, they’re basically like everyone else. Their psychological profiles are closer to college students than hardened criminals! Usually ordinary folks who just see an open door and walk right through.

David Miller: I’ve actually got a story on that. Years ago, in the Midwest, I worked with a manufacturing firm. Their inventory controls were…let’s say, optimistic. There was this one employee who managed to walk off with parts—like significant amounts, honestly—for years. No one noticed because there was no robust audit trail. The controls were so relaxed, and it wasn’t until we rolled out a new inventory tracking system—finally!—that we uncovered it. It’s like, if you leave the keys in the ignition, you can’t act surprised when the car gets stolen.

Maya Collins: (Laughing) Seriously! And even people who think they’re totally honest can get caught up in it, especially if that ‘perfect storm’ is there—enough pressure, a nice loophole, and a story they tell themselves so they sleep at night.

David Miller: Yeah, and it’s not that simple to spot who’s likely either. Sometimes it’s the last person you’d suspect. I always say, never underestimate what someone will do if the opportunity is handed to them. Where was I going with this? Oh right, the triangle really makes it clear: opportunity is the lynchpin.

Controls That Prevent and Detect Fraud

Maya Collins: So, speaking of open doors, let’s talk about shutting them. Controls! I love this part. How do we actually prevent or catch fraud? What are the best ways you’ve seen organizations keep opportunity low?

David Miller: There’s a reason accountants always harp on segregation of duties, audit trails—those classic detective and preventive controls. It isn’t just academic. Management’s role is huge—if the top folks set a bad example, nobody’s following rules. But you need clear structure, proper hiring, and oversight. Make sure no one person has unchecked authority. I had this case once—a staff accountant, super reliable for years, or so they thought. But over time this person enabled $1.5 million in vendor overcharges, pocketing kickbacks. The control gap? He had too much solo approval power and management just wasn’t looking.

Maya Collins: Yikes! That’s so much money just slipping through poor oversight. And you see that basic stuff all the time—like, nobody checking the person who signs checks, no double sign-off, and not enforcing vacations. Actually, a lot of banks have this OCC rule where employees are required to take five straight days off. Supposedly, if someone’s running a scheme, it falls apart when they’re gone and someone else handles their work. But David, do you ever run into downsides with super-stringent controls? Like, people get so bogged down they can’t do their jobs?

David Miller: Oh, for sure. Sometimes you end up with controls that paralyze operations—you get bottlenecks, morale tanks, and honestly, if folks feel micromanaged, they might start rationalizing bad behavior themselves. So, it’s this balancing act. Good controls—like dual signatures, strong documentation, audit trails—discourage most fraud. Segregating duties, of course, is key. Like, don’t let the same person write checks and reconcile the accounts. Sounds obvious, but you’d be amazed.

Maya Collins: Totally, and those audit trails are awesome because even if they can’t prevent, they let you detect fraud after the fact. But then you gotta review them! Otherwise, it’s just files collecting dust. And just...requiring people to have vacations, so another employee handles their tasks, can bring fraud to light so quickly. But yeah, too many hurdles and you could slow business to a crawl or frustrate employees. It feels like you always have to walk that line.

David Miller: Exactly. Strong controls don’t just catch fraudsters—they make regular employees feel secure and clear on expectations. But overdo it, and you create new pressures. Sometimes the answer is more communication than checkpoints. Even simple stuff, like managers modeling honest behavior. Honestly, if the leadership is cutting corners, you can have all the audit trails you want, but it won’t matter much.

Maya Collins: Couldn’t agree more. Controls aren’t just paperwork—they’re how a company sets the tone, right? And a good mix of preventive and detective steps is the key to actually shutting that fraud triangle down, while still keeping people happy and productive.

Non-Control Factors and Why We Rationalize Fraud

Maya Collins: But here’s where it gets tricky, right? Even with all the controls in the world, sometimes opportunity hangs around because of non-control factors—like, just not being able to judge if you’re overpaying, or people simply not caring enough to act. Or honestly, just missing audit trails entirely. What non-control risks have you seen, David?

David Miller: Oh, I’ve seen plenty. Sometimes companies just can't judge how good a vendor really is, or they don’t give employees access to information that would let them spot problems. Then there’s failing to discipline previous fraudsters—I mean, if someone gets a slap on the wrist and a glowing reference, they’re probably repeating the fraud at their next job. Had a case, actually—a staff accountant let vendor kickbacks fly because he’d been working fourteen-hour days, no pats on the back, nothing. When he eventually talked about it, he said the company “owed” him for all the unrecognized overtime. He basically rationalized himself into thinking it was justified.

Maya Collins: That mindset is so...dangerous. And a lot of times, like with the Jim Bakker ministry—the people involved had these wild rationalizations. You know, “it’s for a good cause” or “I’ll pay it back later.” That’s how fraudsters justify stealing millions right under everyone's noses. And, as the research points out, most of these people aren’t classic criminals—they look a lot like college students in terms of risk factors and psychology. Completely ordinary!

David Miller: Yeah, that blew my mind the first time I saw the data. I think most people genuinely believe their fraud is victimless, or temporary, or that somebody somewhere deserves it. It's easy to believe ‘it’s not that serious’ when you’re stressed, overlooked, or feel that management isn’t paying attention. And if management ignores red flags—or just doesn’t have time to check—those non-control factors just amplify the opportunity.

Maya Collins: And if there’s no paper trail, like with those expense accounts that get closed every year—well, you might never catch on, or only realize years later someone’s been siphoning money. It makes you wonder: how much fraud goes undetected just because no one’s looking, or because controls aren’t matched with people actually caring enough to enforce them?

David Miller: Probably more than we want to admit. But that’s why it comes back to culture, right? Make people feel recognized, have some basic transparency, and actually follow up on violations. Otherwise, all the controls in the world can only do so much.

Maya Collins: Exactly, and I guess that’s what keeps us both sticking around in this field! There’s always more to learn and new ways to fight fraud—and more stories for our listeners, too. So that’s all for today, folks. David, thanks for sharing your insights—my brain’s spinning as usual.

David Miller: Always great talking with you, Maya. Can’t wait for next time—there’s always another fraud story to unpack. Take care, everyone!

Maya Collins: See you next time on Fraud Examination Chapter 1. Keep your eyes open and your controls tighter! Bye, David.

David Miller: Bye, Maya!