For centuries, ships have signaled messages of distress to each other through colored flags arranged in specific positions. Your business may be sending you signals of distress, including catastrophic employee dishonesty. If you can read the signs, you can head off disaster, but first you need to be able to recognize the red flags of fraud.

In his 1973 book, “Other People’s Money,” Donald R. Cressey wrote, “Trusted persons become trust violators when they conceive of themselves as having a financial problem which is non-shareable, are aware this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.” His analysis led to the development of the fraud triangle: pressure (or motivation), opportunity and rationalization. Like a stool absent one of these legs, most frauds will collapse.

Pressure

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