For several decades, most discussion on financial fraud has centered on the fraud triangle, which has evolved over time through various extensions and re-interpretations. While this has served the profession well, the articulation of the human side of the act is indirect and diffused. To address this limitation, this research develops a model to explain the role of human desires, intentions, and actions in indulgence of, or resistance to, the act of financial fraud. Evidence from religion, philosophy, sociology, neurology, behavioral economics, and social psychology is integrated to develop and support an alternative fraud model, called the disposition-based fraud model (DFM). To articulate the model, its two primary components, disposition and temptation, are further developed and extended. Although the DFM is generally applicable to any act of fraud, this paper focuses on executive fraud. The similarities and differences between the DFM and extant fraud models are discussed. Importantly, in light of the DFM, a re-interpretation of the fraud triangle is made to improve our understanding of the human element in it. Additionally, potential implications of the model for corporate governance are discussed, suggestions for further research are offered, and the DFM's strengths and limitations are noted.

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Purpose This paper aims to analyze the attributes of Ponzi schemes (“Ponzis”) to determine whether they are a unique class of financial fraud. Design/methodology/approach The authors apply the disposition-based fraud model to classify and differentiate the attributes of Ponzis. This classification exercise helps comprehend the distinct drivers of Ponzis. Findings Fraud risk factors of Ponzis are different from those involved in other financial frauds. Four propositions about risk and risk mitigation measures are developed. Research limitations/implications The research approach used is conceptual, not empirical. However, the insights from this exercise should inform how different Ponzis are from other financial frauds and why they should be treated as a separate class for prevention and enforcement. In turn, this may trigger an interest in empirical research focused on the unique risks of Ponzis. Practical implications Knowledge of risk factors unique to Ponzis will permit a consideration of customized risk mitigation measures to prevent or detect Ponzis. Enforcement actions can also become more effective because of a distinct risk-based classification of Ponzis. Social implications The prevention of damage from Ponzis hinges upon how well prospective victims are educated to become aware of signs of Ponzis. This should lead to the more effective protection of investors from victimization from Ponzi schemes. Originality/value The implicit understanding that all financial frauds are alike and that the risk-factors involved are substantially the same across all classes of fraud is challenged. This revelation opens opportunities to add value through focused research on Ponzis as a distinct class of fraud.

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