New Report Offers Insights on Occupational Fraud

01.12.2011
HR & Safety

The median fraud loss for U.S. organizations is $105,000, according to a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2008 and December 2009.
The Association of Certified Fraud Examiners (ACFE) published the results of the survey in its 2010 Report to the Nations on Occupational Fraud & Abuse. For the first time, the report includes global data among the 1,843 cases of fraud that were studied. The ACFE has published the report every two years since 2002.
The 2010 study found that billing schemes (e.g., submitting invoices for fictitious goods or services or for personal purchases) and corruption schemes (e.g., an employee’s inappropriate use of his or her influence in business transactions, including bribery and extortion) were the leading types of fraud reported in the U.S. and worldwide. Billing schemes were present in 27.6% of cases examined, while corruption was reported in 21.9%.
Other key findings from the 84-page report include the following:
Fraud committed from the top of an organization is the most damaging. Although a large percentage of U.S. frauds in the study were committed by lower-level employees (46.2%) and caused a median loss of $50,000, it was frauds committed by business owners/executives (17.1%) that did the most damage, with a median loss of $485,000. Frauds committed by managers (36.7%) had a median loss of $150,000.
Perpetrators were likely to be found in one of six departments. More than 80% of the frauds in the study were committed by individuals in accounting, operations, sales, executive/upper management, customer service, or purchasing.
More than half of all cases in the study were committed by individuals between the ages of 31 and 45. Generally speaking, median losses tended to rise with the age of the perpetrator.
Only 7% of the perpetrators in the study had been previously convicted of a fraud offense.
Fraud perpetrators often display warning signs that they are engaging in illicit activity. The most common behavioral red flags displayed by the perpetrators in the study were living beyond their means (43% of cases) and experiencing financial difficulties (36%).
More frauds are detected by tip than by other means. In a trend reflected worldwide, the impact of anonymous fraud hotlines is clear, as 37.8% of the U.S. frauds in the study were detected by tip, followed by management review (17.1%) and internal audit (13.7%).
The report also details findings on the effect of fraud on organizations based on industry and how the implementation of controls affected exposure to fraud.
Click here to read the entire ACFE 2010 Report to the Nations.

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