Association of Certified Fraud Examiners Uganda Chapter

ACFE Uganda Fraud Newsletter Part 1

Written by  Tuesday, 29 May 2012 07:29

Why do good staff commit fraud? Part 1

Do you know that many companies spend more to increase fraud than to reduce it? According to the Association of Certified Fraud Examiners, if one has pressure, opportunity and rationalisation, they will commit fraud.

These factors are summarised in the fraud triangle, below:


Source: ACFE
You realize that one of the biggest challenges in Uganda is a tendency of people trying to live beyond their means. This leads to financial pressures as they have to borrow to keep up their lifestyles. Somebody gets a loan to finance a short term liability; it is not a good decision.

For example, you get a three year loan to finance a wedding, this means that you are spending money which you have got from the bank and there are no corresponding cash inflows to be used to offset the loan repayments. The first, maybe six months, you may pay. However, as time goes on, you don't have income to support this repayment you find that you are struggling to pay the loan. Now that gives you significant pressure to want to survive, to want to steal and service the loan, it becomes a big problem.

Some of the people also are gambling addicts. There is an increase gambling businessesin Kampala and East Africa as a whole, many people are trying to place their odds but hey have very minimal chances of winning, if any. If you studied probability in mathematics at University, you know what I am talking about. For example, you look at a dice, to win you have to get one face up, the other company has the opportunity of getting five faces down. So who has more chances of winning?

This kind of gambling places the odds against the person gambling and you will not likely win. You find that you are placing so many bets, maybe you win once in a while but then you keep spending and spending a lot of money.

So the question is where do you get the money to spend? Probably you are stealing, probably you are borrowing from your friends until now you cannot get any more and yet you need to continuously keep gambling so this gives you a lot of pressure to want to gain more income which is not genuinely owned and that's how people may end up stealing. People forget that gambling is a game of the rich. They enjoy spending their money that way. So, don't go gambling to become rich. Do so to spend good time with friends!

And many other variations for example pressures of you trying to live a high expensive lifestyle which we call keeping up appearances. Now if you are trying to keep up appearances, you are trying to live in an apartment which you cannot afford based on your income, that is salary and other small businesses you could have this means that you have to stretch to get money to pay rent. Now things like these whereby you have to continuously be surviving as a person gives you pressure.

We have also seen situations where by people have got too much anxiety, people do not do things at the right time and then all of a sudden they find that their friends have left them who they started with and their age mates and then they want all of the sudden to attain the kind of assets and resources their colleagues have and that gives you significant pressures to want to gain quick while spend less which becomes a big problem.

To be continued.

President ACFE Uganda

Mustapha B. Mugisa, CFE is the President of the Association of Certified fraud Examiners uganda Chapter. He is one of those rare people who provides consulting and advisory to professionals and corporate entities who demand the very best. He provides tools and proven methodologies to remarkable results through making people appreciate change. For more information, visit my LinkedIn profile here.



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