When we talk about fraud in forensic accounting, most people immediately think of the Fraud Triangle—which explains why people commit fraud. But there’s another important concept: the Triangle of Fraud Action, which focuses on how fraud is carried out.
This model was introduced by Steve Albrecht and highlights the three essential elements that enable fraud to happen: concealment, conversion, and act.
Breaking Down the Triangle of Fraud Action
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| Triangle of Fraud Action |
The first step in any fraud scheme is the action of committing fraud. This is the moment when the fraudster intentionally violates rules to gain an unfair advantage. The act can take various forms, such as:
- Misappropriating assets (e.g., an employee stealing cash from a company register).
- Falsifying financial statements (e.g., inflating revenue figures to show higher profits).
- Engaging in bribery or corruption (e.g., an employee accepting kickbacks for awarding contracts).
Without this step, there is no fraud—only an opportunity or temptation. The act itself is what turns intention into deception.
2. Concealment – Hiding the Fraud to Avoid Detection
Once fraud is committed, the perpetrator must cover their tracks to avoid being caught. Concealment is what allows fraud to continue over time, making it difficult for auditors, managers, or investigators to detect. Some common concealment techniques include:
- Manipulating records – Falsifying invoices, receipts, or financial statements.
- Altering digital data – Changing transaction logs, email records, or system timestamps.
- Creating fake approvals – Using forged signatures or unauthorized system access to approve transactions.
- Destroying evidence – Shredding documents, deleting files, or tampering with surveillance footage.
Concealment is a critical part of fraud because, without it, the fraudster risks immediate exposure. This step is often the most complex and deceptive part of the scheme.
3. Conversion – Using the Fraudulently Obtained Benefits
The final step in the fraud process is turning stolen or misappropriated assets into personal gain. This is known as conversion—where the fraudster benefits from their crime. Examples include:
- Spending stolen cash – Using embezzled funds for luxury purchases or personal expenses.
- Selling misappropriated assets – Converting stolen inventory into cash by selling it online.
- Laundering money – Moving illicit funds through multiple transactions to disguise their origin.
- Transferring fraudulently gained funds – Shifting money to offshore accounts or shell companies.
Without conversion, fraud remains incomplete. If a fraudster cannot use or benefit from their illegal actions, the motive behind committing fraud diminishes.
How It Differs from the Fraud Triangle
While the Fraud Triangle explains why people commit fraud (pressure, opportunity, and rationalization), the Triangle of Fraud Action explains how they actually do it. Both concepts are crucial in forensic accounting and fraud investigations.
In my previous post on the Fraud Triangle, we explored why people are motivated to commit fraud. Now, this model takes it a step further—showing the mechanics of fraud execution.
Key Takeaway
Fraud is rarely a single act—it follows a structured process. Understanding the Triangle of Fraud Action helps forensic accountants, auditors, and investigators identify fraud at different stages:
- Act → What fraudulent action was committed?
- Concealment → How was it hidden?
- Conversion → How did the fraudster benefit?
By recognizing these three stages, we can better detect, prevent, and investigate fraud in businesses and organizations.
🔗 Read more about the Fraud Triangle here
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