Fraud Triangle Analytics, 12 years later

Back in 2009 and 2010, I collaborated with two of my colleagues at EY, Dan Torpey and Mike Sherrod, along with ACFE Chief Training Officer John Gill, J.D., CFE, and several other talented individuals from EY and the ACFE to demonstrate that the behavior described in the Fraud Triangle, developed by Dr. Donald Cressy in the 1950s, could be observed in electronic communications such as email and online chats. In a Fraud Magazine three-part series, we outlined a methodology and a mathematical algorithm we termed “Fraud Triangle Analytics (FTA).” (See “Exposing the Iceberg,” “Fraud Triangle Analytics” and “Breaking the Status Quo in E-mail Review,” by Dan Torpey, CPA, CITP; Vince Walden, CPA, CFE; and Mike Sherrod CFE, CPA; Fraud Magazine, May/June 2009, July/August 2009, and May/June 2010.)

It’s been well over a decade since we completed our research. At the time, we were in the throes of the global financial crisis, which was creating a perfect storm for fraud risks at organizations struggling amid a dire economic downturn. Massive layoffs and the broader uncertainty in the business environment put many executives under considerable pressure and heightened the temptation to rationalize fraudulent activity. While the current environment is not as dire as it was a decade ago, pressures are mounting and risks increasing. High energy prices stemming from the conflict in Ukraine, supply disruptions, a tight labor market and concerns about a recession in the U.S. as the Federal Reserve battles inflation with rate hikes all point to a new perfect storm. Against that backdrop, it’s perhaps time to dust off that old FTA methodology and see how it applies amid the latest advancements in technology, more robust analytics and easier deployment models.