2.3 Fraud Diamond

We’ve looked at the main components of the fraud triangle i.e. pressure, opportunity and rationalisation.

Do you think the fraud triangle is incomplete?

In Fraud Diamond, there’s obviously an additional component that makes up the 4th corner.

What do you think it is?

Figure 2. Fraud Diamond (Wolfe and Hermanson, 2004)

In 2004, a fourth factor i.e. competence, was added to the fraud triangle to form a fraud diamond. It asserts that fraud can be committed only by someone who has the expertise and capability to exploit an opportunity. Pressure and opportunity to commit fraud may allow fraudsters to identify fraud possibilities without being caught and rationalisation helps fraudsters to justify why they are commiting the fraud. But importantly, the fraudster must have the capability or competence to recognise the opportunity and the technical knowledge or skills to carry out the fraud. Table 2 identifies the criteria for determining risk of food fraud based on the four root causes of fraud.

Motive/Incentive/ Pressure

Rationalization

Opportunity

Capability

  • Type of perpetrator e.g. people with no connection to the organization; those with a contractual relationship such as suppliers and contractors; those who work for the organization

  • Product characteristics g. product has been processed and is difficult to distinguish (e.g. mincemeat)

  • Impact i.e. foods that are widely disseminated or distributed in the population will increase impact or the target is an ingredient that is used in a multiplicity of products e.g. Sudan I incident

  • Organizational profile i.e. profile and culture of the organization, brands, or individuals within the organization

  • Personal pressure/integrity e.g. financial gain or social pressure

  • Employment pressure e.g. corporate or management derived e.g. low staff morale or performance demands that are difficult to deliver using existing norms and behaviors

  • External or environmental pressure e.g. business, stakeholder demands, financial, social, political or market pressure
  • Low risk of detection

  • Lack of anti-food fraud countermeasures

  • Limited consequences to individual e.g. lack of strong deterrent (legal or market)

  • Acceptability of behavior i.e. personal or group acceptance of criminal or non-criminal behavior

  • Role in criminal network i.e. rationalization process will be different for different roles organizers, guardians, specialists etc

  • Financial gain overcoming considerations of personal integrity
  • Low risk of detection i.e. likelihood of routine QC/QA procedures to detect criminal activity

  • Lack of anti-food crime countermeasures e.g. lack of unique identity at product, lot and batch level; weak level of formalization of business, supply chain and national controls; physical, electronic and personnel security procedures

  • Vulnerability e.g. variability in border controls, gaps, hotspots or vulnerabilities in the supply chain, expanding global markets and pressures on services; multiple boundary interfaces in a complex supply chain; vulnerable points at which criminal activity might take place

  • Location: premises located in a politically or socially sensitive area; premises or services accessible to potential perpetrators; product contain ingredients or other material sourced from sensitive or insecure areas

  • Environment e.g. hazardous materials or potential agents are stored on the production site; inadequately sealed transport and limited tamper evident containment; challenges with zoonotic animal diseases in areas where there are poor controls or knowledge
  • Capacity i.e. sufficient resources, partnerships, knowledge

  • Channels exist to perpetrate the crime

Adapted from Croall 2009a; EPRS 2014; Everstine et al. 2013; Gbegi and Adebisi 2013; NAO 2013; Osterwalder and Pigneur 2010; PAS 96 2014; Spink et al. 2014; Spink and Moyer 2011c; Williams 2001; Wolf and Hermanson 2004)