The 10-80-10 Rule For Fraud

Sometimes called the Fraud Triangle, it equates the probability of someone committing fraud. It predicts behavior for individuals in certain situations.

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When it comes to protecting your business or even your personal finances, understanding human behavior is half the battle. One concept that really helps break down that behavior, especially when it comes to fraud, is the 10-80-10 Rule.

It’s not a new law or some complicated math formula. It’s actually a behavioral theory that helps organizations, managers, and fraud investigators get a better grasp of how likely someone is to commit fraud. So, let’s dive into it casually but seriously because, hey, this is fraud we’re talking about.

So, What Is the 10-80-10 Rule?

The 10-80-10 Rule is a general guideline that splits people into three behavioral categories when it comes to ethical behavior, specifically in the context of fraud, theft, or dishonesty in the workplace.

Here’s how it breaks down:

• 10% of people will always do the wrong thing – These are the folks who will commit fraud or steal regardless of the circumstances. They don't need a reason. It’s just who they are.
• 80% of people are situational – These people won’t go out of their way to commit fraud, but if the situation is tempting enough, poor controls, low risk of getting caught, financial pressure—they might bend the rules.
• 10% of people will always do the right thing – These are your ethical rockstars. Even if no one is watching and they’d never get caught, they wouldn’t commit fraud. It’s just not in them.

This rule was popularized in the context of workplace ethics and fraud prevention by experts in criminology and behavioral psychology. It’s often attributed to Donald R. Cressey’s Fraud Triangle theory, which explains why people commit fraud based on opportunity, pressure, and rationalization.

Why Should You Care About the 10-80-10 Rule?

Whether you’re a small business owner, an HR manager, or just someone trying to avoid being taken advantage of, this rule gives you insight into how people think and behave when faced with temptation.

Think of it this way:

• The first 10%, the “bad apples,” are going to find a way to cheat the system no matter what. Your best move is to catch them fast or not hire them in the first place.
• The middle 80% are your battleground. These people are mostly honest, but if things get rough (like company layoffs, stagnant wages, or personal financial struggles), they could slide down a slippery slope.
• The last 10% are people you want to promote, trust with sensitive information, and maybe even model your company values after.

So the goal for most organizations is simple: minimize risk, control temptation, and influence the 80%.

Real-Life Example: The Temptation Factor

Imagine you run a small retail business. You have 10 employees who handle cash. You’ve got cameras, a register that logs everything, and daily till checks.

• One employee, let’s call him Jake, finds a way to skim a few bucks a day. He’s part of that first 10%—the “always shady” group. No matter what safeguards you had, Jake would’ve tried to beat the system.
• Another employee, Maria, notices you’re super lax with register controls. She’s normally honest, but her rent just went up, and she’s behind on bills. One day, she “borrows” $20 from the till, intending to pay it back. She never does. Maria is part of the 80% situational group. A better control system or even an anonymous reporting line could’ve helped prevent that.
• Then there’s Erica. Erica once found a $100 bill on the store floor and turned it in, even when no one saw it fall. She’s part of the last 10%—the “always honest” crew.

Now imagine if you had 100 employees. Based on the 10-80-10 Rule, about 10 will always be dishonest, 80 could go either way depending on the situation, and 10 are beyond reproach.

How Do You Influence the 80%?

Since the middle 80% can go either way, you have to influence the situation. Here’s how:

1. Strong Internal Controls

Implement checks and balances. Require approvals, log access, and monitor transactions. Most people won’t risk fraud if they think they’ll be caught.

2. Regular Training

Help employees understand what counts as fraud and what the consequences are. Many people in the 80% don’t even realize what they’re doing is wrong until it’s too late.

3. Ethical Leadership

People mirror what they see. If managers or executives bend the rules or fudge numbers, it sends a message that it’s okay. Lead by example.

4. Whistleblower Protections

Create a culture where employees feel safe reporting unethical behavior. This can deter both the dishonest 10% and the tempted 80%.

5. Praise Integrity

Don’t just punish bad behavior but reward good behavior. Highlight employees who demonstrate honesty and integrity, and make those values a part of your culture.

The Fraud Triangle + 10-80-10 = A Full Picture

Remember the Fraud Triangle? It’s a model that says fraud usually happens when three things come together:

1. Pressure (e.g., financial problems)
2. Opportunity (e.g., weak systems)
3. Rationalization (e.g., “I deserve this”)

The 10-80-10 Rule helps you understand who is likely to commit fraud, while the Fraud Triangle helps explain why. Combine the two, and you’ve got a powerful lens for preventing problems before they start.

But Wait—Is It Always 10-80-10?

Not necessarily. The 10-80-10 Rule is more of a framework than a rigid formula. Some workplaces might have more ethical staff, shifting the balance to 5-90-5. Other high-risk industries might see a different curve. But the takeaway remains:

So rather than spending all your time trying to weed out the "bad 10%," focus on creating systems, culture, and policies that support and protect the 80%.

What About Outside of the Workplace?

The 10-80-10 Rule isn’t just for businesses, it applies to schools, nonprofits, even family dynamics. Think of it as a general truth about how people behave:

• 10% of people will cheat in relationships no matter what.
• 80% are faithful but could cheat under the right (or wrong) circumstances.
• 10% will never cheat, even if they had the perfect chance.

Same logic applies to cheating on taxes, cutting corners on home repairs, or abusing return policies at stores.

Understanding this helps you become more aware of risk and better prepared to manage it in all parts of life.

Final Thoughts: What Should You Take Away?

The 10-80-10 Rule isn’t about being cynical, it’s about being realistic.

• Know that you can’t eliminate all fraud, but you can reduce it significantly.
• Focus on creating systems that deter the 80% from sliding into bad behavior.
• Promote ethical leadership and reward integrity just as much as you penalize dishonesty.

Fraud prevention isn’t about surveillance, it’s about culture. You want to build an environment where people don’t want to cheat, not just one where they can’t get away with it.

And if you're the one in charge whether of a team, a business, or even a family, the responsibility starts with you. Set the tone, and the rest will follow.

Bottom Line:

The 10-80-10 Rule for fraud is simple, but powerful. It tells us that most people are influenced by circumstances, not just character. So if you want to protect your business, your money, or your peace of mind, focus on shaping those circumstances. That’s where real prevention begins.