Covid Shift in Rationalization of Fraud

Rationalization. One of the 3 Legs of the unchanging Fraud Triangle. Fraud is still committed based on the dynamics of three main factors:


1) Needs—financial hardships or pressures in life


2) Opportunity—chance to take money or benefit financially


3) Rationalization—the ability to justify actions


Over a year of global trauma. A year of global unknowns, fears, and frustrations. And while the experience has been global, the personal ramifications are isolating and deep.


1) Financial pressures and needs. I’m

not sure a single person has come

through these harrowing months

without at least one added financial pressure or stress. Many have been thrown multiple

curve-balls and trials. And we know it isn’t over yet.


2) Opportunity. When any changes are made, procedures and policies can become

obsolete. Most organizations have not updated policies and procedures at all, though

the landscape of their staff and routine look completely different. The gaps and

vulnerabilities created are vast and widening. Opportunity to commit fraud is rampant.


3) Rationalization. We all rationalize. We all have the ability to look at hypothetical

situations and explain how unethical and even illegal actions can seem like the right

thing to do. Hypothetically justify things long enough, and you desensitize from reality

and translate those actions to real fraud.


Rationalization: From Trying to Remain a Part of Community to Just Trying to Survive


Rationalizations before Covid were very private, very individual. Employees with unspoken or hidden needs sifted through choices and acted on fraud based on very unique situations:

I’m not taking that much; no one will be hurt.

I helped build this company; I deserve more.

I can’t let anyone find out about my struggles; stealing will help keep up appearances.

Sometimes taking a little extra is just how business works; it’s a perk.

I just have this temporary need; I will pay it back as soon as things stabilize.


Before Covid, rationalization centered around justifying morality. In each of these rationalizations, the individual explains why it isn’t wrong. The goal is to survive a temporary crisis. A person can endlessly justify choices, especially if they plan to make it right again. They fall into a belief that what they are doing isn’t wrong at all, just a means to an end.

While this type of rationalization is still wrong, it feels as though most people in this mindset are at least attempting to connect to a moral center. Individuals rationalize to stay undetected and connected to morality.


But we are seeing a shift.


Rationalization is moving from “How can this feel like the right thing?” to “Every man for himself; just survive somehow.”


The Covid Truth: Rationalization becomes easier and easier based on the level of disconnection the employee feels with the organization.


We are experiencing global trauma, not isolated crisis.


We are surviving public, desperate circumstances, not private, hidden matters.


We are isolated and disconnected, not maintaining a sense of community in the

workplace.

“Disconnected” is one of the defining words that emerges through the trauma of 2020 and the continuing experience of Covid-19. Rationalizations now articulate “Me vs. The Company”


I need resources to survive this unpredictable global crisis.


Who knows if I will have a job next month (week? tomorrow?)


I can’t believe they’re making me work at home. I need more money to make this home

office work.


I can’t believe they’re making me RETURN to the office. I am losing so much

productivity and wasting time.


My partner lost a job. Everyone is losing jobs. We need to take what we can get when

we can get it.


The company just got a bunch of PPP money; they will be ok.


I don’t have definite hours. I’m technically available for work ALL the time. I deserve

more for this extra time being demanded of me.


None of this is fair. I have to take care of myself and my own.


Potential fraudsters are shifting their mental rationalizations and justifications from a position that allows them to remain a part of the community, “Me vs. My Temporary Secret Problem”, to a position of survival, “Me vs. Covid Fallout”.


The first step in solving any problem is recognizing the problem. We must recognize the change in atmosphere and deterioration of connection. We must regroup, re-evaluate our policies, and recreate the heart of our communities within the workforce.


Empowering small businesses to develop strong Anti-Fraud Programs is our mission. We provide consultations to design, evaluate, and improve your anti-fraud program. You can also get a step-by-step guide to design a program that can be tailored for your specific needs by purchasing Steve Dawson’s book, Internal Control/Anti-Fraud Program Design for the Small Business.


If you think there may already be fraudulent activity in your company, contact us today through our website.

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