Applying the fraud diamond theory to public financial crime: An empirical assessment of causal factors

Abstract

Fraud, as a non-violent crime, is a threat to all types of organizations and industries. In fragile states, public sector fraud signifies a systemic failure that undermines institutional integrity, driven by clannism and maladministration, exacerbating national instability, poverty, and human suffering. This is evident in Somalia, which exemplifies a failed and corrupt state, where poor governance and inadequate public service delivery have severely eroded public trust. This quantitative cross-sectional study collected primary data from 237 public employees to examine how elements of the fraud diamond theory (FDT)—perceived pressure, opportunity, rationalization, and capability—impact the incidence of fraud behavior in the Somali public sector. The results demonstrate a moderate correlation between perceived opportunity, pressure, and capability, while rationalization demonstrates a weak correlation. As the results show, opportunity has the highest correlation, which highlights critical practical implications for improving preventive mechanisms such as internal control environment, governance, and hiring processes practiced in public sector organizations in fragile states. To address these findings, the study recommends strengthening the control environment through digitalized financial systems and strict segregation of duties to minimize structural opportunities for malfeasance. Furthermore, implementing merit-based recruitment, regularizing public salaries, and establishing robust whistleblower protections will mitigate pressure and capability, effectively dismantling the systemic foundations of fraud in Somalia. The study provides practical guidance for anti-corruption initiatives in developing and fragile countries, characterized by poor institutional quality, limited anti-fraud awareness, and insufficient legal and policy frameworks.